www.osservatori.net
Electronic invoicing: models, integration level and benefits
Conference Conference –– Electronic Invoicing in EuropeElectronic Invoicing in Europe
Madrid Madrid -- 2727thth April 2010April 2010
Alessandro Perego Alessandro Perego Politecnico di MilanoPolitecnico di Milano School of ManagementSchool of Management
www.osservatori.net27th April 2010A. Perego – Electronic invoicing: models, integration level and benefits
ICT & Management Observatories Observatory on eInvoicing and Dematerialization
ICT & ICT & Management Management ObservatoriesObservatories
q31 ObservatoriesqMore than 60 individuals involved
(researchers + staff)qOver 3,000 companies analyzed
(by both case studies and surveys)q87,000 unique contacts on CRM databaseq2 newsletters: Knowledge (approx. 20,000
members); “PMI” (approx. 30,000 members)
“Spin-off” of the B2b Observatory, analyzing the impact of ICT on customer-supplier relationships since 2001
Identify and assess real potential of solutions in terms of Value Value creationcreation for user companies
OriginOrigin
Main objectiveMain objective
Deeply analyze themes related to electronic invoicingelectronic invoicing and more in general the integration andintegration and dematerializationdematerialization of company processes
MissionMission
Observatory on eInvoicing and DematerializationObservatory on eInvoicing and Dematerialization
www.osservatori.net27th April 2010A. Perego – Electronic invoicing: models, integration level and benefits
Cliente
Fornitore
Alli
neam
ento
dat
i
Consegna PagamentoFatturazioneOrdine
SistemaBancario
The new perspective: electronic invoicing as “a competitiveness lever”
Electronic invoicing is not first and foremost a question of compliance with fiscal rules and regulations…
Value
Benefits
Technology
Change management
Contracts
Standards
Costs
Legal constraints
Rules & regulations
Viewed mainly as a set of Viewed mainly as a set of rules & regulations,rules & regulations,standards, standards, constraints, constraints, and costsand costs
www.osservatori.net27th April 2010A. Perego – Electronic invoicing: models, integration level and benefits
Value
Benefits
Technology
Change management
Contracts
Standards
Costs
Legal constraints
Rules & regulations
Viewed mainly as a set Viewed mainly as a set of rules & regulations,of rules & regulations,standards, standards, constraints, constraints, and costsand costs
Cliente
Fornitore
Alli
neam
ento
dat
i
Consegna PagamentoFatturazioneOrdine
SistemaBancario
The new perspective: electronic invoicing as a “competitiveness lever”
Viewed as Viewed as true valuetrue valueConstraints
Technology
Rules & regulations
Costs
Standards
Contracts
Change management
Benefits
Understanding value
…but rather a tremendous opportunity to optimize both company andinter-company business processes
www.osservatori.net27th April 2010A. Perego – Electronic invoicing: models, integration level and benefits
The mathematical model -The structure
Profitabilityassessment
model
Servicefruition mode
Adoptionparadigm +
Elementarycosts
Contextdata
Elementarytimes
Output
Effectivenessindexes
Profitabilityindexes
Investments
Currentcosts
BenefitsNon-conformity
Perfectcycle
View by player
We developed a mathematical model to assess costs, benefits and profitability ...and validated it with dozens of companies in many sectors
www.osservatori.net27th April 2010A. Perego – Electronic invoicing: models, integration level and benefits
The scope of the analysisThe B2b trade process
Invoicing is the pivotal phase of a more extended process starting with business data alignment and ending with payment reconciliation
Customer
Banking System
Supplier
Order Delivery Invoice Payment
Dat
a al
ignm
ent
www.osservatori.net27th April 2010A. Perego – Electronic invoicing: models, integration level and benefits
Storage of receivables – Electronic storage of invoices issued to clients, substituting paper storage in accordance with fiscal norms
Digitalisation and storage of payables - Electronic storage of invoices issued by suppliers, substituting paper storage in accordance with fiscal norms
Electronic invoicing – Agreement between trade partners for the exchange of invoices generated, send and stored exclusively in electronic formatq Unstructured format: invoices are image files (TIFF, JPEG) and
cannot be directly alteredq Structured format: the invoices contain data able to be altered
through computer applications
The main adoption paradigms considered
Exchange of documents between clients and suppliers taking placein structured electronic formatq Integration of the order-to-invoice cycle – exchange of logistics-
trade cycle documentsq Integration of the invoice-to-payment cycle – exchange of
administrative-financial document cycleq Complete integration and dematerialization – integration of all
phases of the cycle + electronic invoicing
Full trade process integration
Electronic invoicing
Substitute archiving
Customer
Bankingsystem
Supplier
Order Delivery Invoice Payment
Dat
a al
ignm
ent
Customer
Bankingsystems
Supplier
Order Delivery PaymentInvoice
Dat
a al
ignm
ent
Customer
Banking System
Supplier
Dat
a al
ignm
ent
Delivery PaymentInvoiceOrder
www.osservatori.net27th April 2010A. Perego – Electronic invoicing: models, integration level and benefits
From net benefits of 2-3 € per invoice – with less than one year as the average payback time – in the case of adoption of the substitute archiving solutions…
The benefitsThe models of substitute archiving
Accounts receivable archiving
• Gross benefits between 2.3 and 3.2 €/cycle• Net benefits: between 1 and 2 €/ cycle• Payback time: generally < 1 year• Source of benefit: space, transmission
Accounts payable digitalization and archiving
• Gross benefits between 1,6 and 2.4 €/ cycle• Net benefits : between 0.5 and 1.2 €/ cycle• Payback time : generally< 2 years• Source of benefit : space
Customer
Bankingsystem
Supplier
Order Delivery Invoice Payment
Dat
a al
ignm
ent
www.osservatori.net27th April 2010A. Perego – Electronic invoicing: models, integration level and benefits
…to net benefits between 4 and 12 € per invoice in the case of VAT-compliant electronic invoicing…
The benefitsThe models of electronic invoicing VAT-compliant
Customer
Bankingsystems
Supplier
Order Delivery PaymentInvoice
Dat
a al
ignm
ent
Structured electronic invoicing
Un-structured electronic invoicing
• Gross benefits between 9 e 12 €/cycle• Net benefits : between 5.5 and 8.5 €/cycle• Payback time : generally< 1 year• Source of benefit : productivity of personnel
• Gross benefits : between 3.6 and 5 €/cycle• Net benefits : between 0.6 and 4 €/cycle• Payback time : generally< 2 years• Source of benefit : space, transmission
www.osservatori.net27th April 2010A. Perego – Electronic invoicing: models, integration level and benefits
…to net benefits of up to 65 € per cycle in the case of the full integration of the trade process
The benefitsThe model of full integration and dematerialization
Customer
Banking System
Supplier
Dat
a al
ignm
ent
Delivery PaymentInvoiceOrder
Full integration of the trade process
• Gross benefits between 30 and 80 €/cycle• Net benefits : between 25 and 65 €/cycle• Payback time : generally< 1 year• Source of benefit : productivity of personnel
www.osservatori.net27th April 2010A. Perego – Electronic invoicing: models, integration level and benefits
The super-additional ruleThe benefits related to the improvement in accuracy
0 10 20 30 40 60
Accounts payabledigitalisation and archiving
Accounts receivablearchiving
VAT-compliant electronic invoicing
Integration ofthe invoice-to-payment cycle
Integration ofthe order-to-invoice cycle
Integration of the order-to-payment cycle
Full integration of the trade process
50[€/cycle]
The choice of the most advantageous servicefruition mode for each scenario is considered
In collaboration with:Indicod-ECR
Consumer goods
Costs reduction of:Perfect cycle Non conformities
The super-additional rule is due mainly to the reduction in non-conformities coupled with the reduction in cost of the interfaceactivities between the phases (e.g. settlements)
www.osservatori.net27th April 2010A. Perego – Electronic invoicing: models, integration level and benefits
The “maximum” benefits in the different sectors can vary from 30 to 80 €/cycle and can represent from 1 al 3% of turnover
The benefitsSpecific industry differences
Initial accuracy of the projectInitial accuracy of the project
HighHighLowLow
Doc
umen
t ch
ain
effi
cien
cyD
ocum
ent
chai
n ef
fici
ency
Low
Low
Hig
hH
igh
Home appliances
Consumer goods
Pharmaceutical
Electrical equipment
Building materials
2.8%
1.7%
3%
0.6%
2.1%
-84%
-82%
-82%
-80%
-67%
www.osservatori.net27th April 2010A. Perego – Electronic invoicing: models, integration level and benefits
Barriers toadoption
External
Internal
Regulatory confusion
Lack of standards
Poor awareness of value
Fragmentation of the order-to-payment cycle
Difficulty collaborating with “the Outside”
The barriersA classification of the perceived barriers
The barriers (actual or perceived) which hinder the spread of electronic invoicing and integration of the order cycle projects, can be traced back to 5 main types
Lack of clarity of the regulatory framework leads to a high perception of reacting in a “non-confirmative” manner
The difficulty in developing B2b integration projects, due to lack of interoperability tools
The obstacle preventing immediate consideration of the topic with the proper attention and perspective
The presence of parcelization both in the organisation as well as in the supporting information systems
The difficulty in collaborating with other companies – the competition or just suppliers, client and service providers
www.osservatori.net
Electronic invoicing: models, integration level and benefits
Conference Conference –– Electronic Invoicing in EuropeElectronic Invoicing in Europe
Madrid Madrid -- 2727thth April 2010April 2010
Alessandro Perego Alessandro Perego Politecnico di MilanoPolitecnico di Milano School of ManagementSchool of Management