The End of Paper Invoices

Feature Article | September 6, 2004 by admin

Mountains of paper invoices appear in accounting departments at companies every day. The invoices wander through the hands of several employees who register, view, and inspect them. Only at the end of this long road do they become available as electronic documents in enterprise resource planning (ERP) systems so that they can provide information on a company’s liabilities and liquidity. On one hand, errors often creep into the data along the way. On the other hand, a great deal of time elapses between time stamping an invoice and paying it. But the most annoying aspect of the process is that the companies that issue the invoice already have electronic invoice data available. But to transport them and meet legal requirements for input tax in the European Union or Switzerland, for example, vendors must issue invoices on paper. This media break has several consequences: paper invoices create significant costs for customers. Maintenance of customer relationships alone is a good reason to create a solution here.

Potential Savings on Both Sides

Numerous individual studies indicate the savings that both issuers and recipients of invoices can achieve with electronic invoice processing. In her thesis on electronic bill presentment and payment (EBPP) in the German market, Ulrike Dähne found an average cost of €9 for creating a paper-based invoice. A market research and consulting firm, Celent Communications, indicated potential savings of €4.80 per invoice for vendors in the United States in 2001. A 2003 study by the Garnet Group, The Big Payoff of Web Billing and Online Customer Service, produced conservative values. The study indicates a potential saving of $3.00. Even with cautious accounting, a typical midsize company that deals with 75,000 invoices every month could save about $2.7 million each year. With electronic invoicing, all manual steps – along with the costs of postage, paper, and printing – disappear. The process of invoice creation is accelerated and transparent; cash management can work with up-to-date numbers. Improved service offerings, such as invoice portals that customers can view, improve customer retention.
The studies also show great potential for savings among invoice recipients. As much as the results might differ, companies can achieve a bottom-line savings of more than 50%. The starting point at a given company is the decisive factor: the volume of invoices, the use of workflow to verify invoices, and the structure of the vendors along with the existing level of automation (EDI), automatic invoice verification, and the orders and goods receipts documents related to invoices. The Celent study notes savings of up to €9 per invoice, but in her study, Dähne calculates a cost of €12.50 per invoice, 50% of which can be saved. Peak values appear in individual cases, especially for invoices with multiple details for various items, but they are clearly at the level of double digits. But dispending with the manual creation of invoices has the greatest effect: it saves time and minimizes errors.

A Comprehensive Solution for Individual and Commercial Customers

Arcor and Sony UK with SAP Biller Direct

Arcor and Sony UK with SAP Biller Direct

SAP enables its customers to achieve these savings with two tools, one tailored to the needs of individual customers and one to the needs of commercial customers. SAP Biller Direct is tailored to the needs of individual customers. This Java application enables companies to present their invoice and account data from their customer accounting systems with appropriate security measures on the Internet. Customers receive an access ID and password so that they can visit the Web sites that concern them. The invoice and accounting portal contains no data itself; it directly accesses the accounting system in the back-end systems of the company. The seamless integration distinguishes SAP Biller Direct from Internet solutions developed in-house at many companies. The SAP solution also enables customers to send comments and observations to clerks in a firm when they make their electronic payments. Most comparable products lack this opportunity for interaction.

Value Proposition SAP Biller Direct

Value Proposition SAP Biller Direct

Several online stores are currently evaluating the option of expanding their offerings to include the details of financial processes by using SAP Biller Direct. Here, the product ideally complements its sister application, SAP Internet Sales. Companies also show strong interest in scenarios that let sales staff use online self-services with SAP Biller Direct to access current information on their customers’ accounts, invoices, and payments. This data helps the sales staff prepare when it deals with customers, but it does so without increasing the workload for customer accounting.

Software for and Invoice Network Between Customers and Vendors

Value Proposition SAP Biller Consolidator

Value Proposition SAP Biller Consolidator

SAP Biller Direct concentrates on business-to-consumer (B2C) or internal company processes. SAP Billing Consolidation, however, is designed for exchanging invoices in the business-to-business (B2B) and end-customer areas. SAP Billing Consolidation involves networking software that runs in the central computer center of a service provider. Every participant in the network uses the Internet to access this central software so that the ERP solutions in all the companies involved are linked to each other. The solutions can then exchange invoice data and process payments. Customers can also administer and pay consolidated invoices from various sources in one portal. This comprehensive service offering unites B2B, B2C, invoice processing, and payment processing in one solution and underscores the special place of SAP Billing Consolidation on the market.
For years, companies have exchanged data electronically with EDIFACT. Those familiar with the effort involved in bilateral formatting negotiation, the setup of point-to-point connections, and error handling understand that this procedure is worthwhile only for companies with leading-edge technology. In addition, the procedure still requires accompanying the data stream with a collective invoice on paper so that the recipient can validate the input tax.
The concept behind SAP Billing Consolidation is rather simple. The invoicing party uses its ERP solution to transmit invoice data in its own format over a secure Internet connection to SAP Billing Consolidation. Drivers convert the data from the sender’s format into the desired format and give it an electronic signature. The recipient is also connected to the platform and thus can download the invoice data or supplementary PDF documents into its own ERP solution:

  • Every party on the platform has only one connection, but can use it to reach several vendors and customers.
  • SAP Billing Consolidation handles formats and VAT requirements. The companies connected with each can focus on their own businesses.
  • The network for invoice exchange is not limited to companies with SAP solutions. Common standards, such as EDIFACT or XML, are supported.

Two German banks Hypovereinsbank and Bayerische Landesbank offer an invoicing portal based upon SAP Billing Consolidation. Among others, German firms, such as Freudenberg AG, Beiersdorf AG, SAP Deutschland AG & Co. KG, and Lufthansa AirPlus, have connected to the network. In Switzerland, Paynet (Schweiz) AG has established itself as a supplier.

Two Paths, One Goal

Whether a given company takes the path of SAP Biller Direct or decides to connect to SAP Billing Consolidation depends upon its specific situation. However, experts assume that the midterm will create a network that consists of direct procedures and consolidation platforms. Today, whether a company begins with a direct solution or prefers to access electronic service is not that important. Both options bring companies and their business partners and customers closer to the goal of dispensing with paper invoices.

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