How E-Invoicing in Logistics Contributes to a Streamlined Supply Chain

November 14th, 2023 Sienna Johns Leave a comment

Efficiency is paramount in logistics and supply chain management—and accurate and timely invoicing is the glue that holds everything together.

Invoices serve as a documented record of the products and services delivered, as well as the corresponding payments due. But invoicing in logistics goes beyond financial record-keeping—it also plays a vital role in the seamless functioning of supply chains.

Any errors in invoicing can have significant consequences. Think payment disputes, strained supplier relationships, and logistical disruptions. All of which may ultimately cause supply chain delays. This not only affects the bottom line but also tarnishes your company’s reputation within the industry.

In this guide, we’ll discuss e-invoicing‘s impact on logistics—and how you can implement a reliable system to streamline your supply chain.

What Is Invoicing in Supply Chain?

Invoicing is particularly important in today’s world of global commerce and logistics, where dependability and reliability are of utmost importance.

Imagine if there’s a mistake in an invoice—it can cause a lot of problems. For example, if you clear your invoice late, it may lead to arguments about the payment, which may upset suppliers. This causes trust to waiver, leading to cascading effects that may eventually falter the supply chain.

Here’s a quick rundown of the main advantages of accurate and prompt invoicing in the supply chain:

Verification of your goods and services: Invoices are tangible proof that a procurement is done. Without proper invoicing, you’ll find it harder to track and verify the exchange of goods along the supply chain, especially when operating on a large scale.
Keeping track of money: Invoices provide a detailed account of the cost of goods or services, payment terms, and any applicable taxes or discounts.
Payment processing: Buyers use invoices to initiate payments for invoices requested by suppliers. This results in seamless payment processing, ensuring timely payments, and positive supplier relationships.
Solving disputes: In case of disagreements or discrepancies in the supply chain, invoices can serve as a reference point to reconcile differences and come to a mutual agreement.

What Is E-Invoicing & How Does It Work in Logistics?

E-invoicing or electronic invoicing is the process of sending digital invoices, aimed at replacing paper-based invoicing or even email attachments. It involves creating, transmitting, receiving, and processing invoices through digital means, often using a specialized software or platform.

E-invoicing provides a structured format to transfer a digital invoice, also called an e-invoice, from supplier to customer electronically—and since both the sending and receiving systems use the same standardized format, they can easily share and recognize data.

E-invoicing vs. Traditional invoicing

Traditional invoicing is a time-consuming process, involving several manual steps like invoice creation, printing, sending, reviewing, approving, and archiving. This makes it prone to potential errors, bad data management, and cash flow delays and incurs additional associated costs such as printing, postage, and filing.

In contrast, e-invoicing is more streamlined, reducing the average processing time to a few days, thanks to electronic transfers and automation. Sending invoices digitally also results in substantial cost savings, eliminating most of the additional costs.

Moreover, traditional invoicing is prone to security issues, including billing scams, fake invoices, and fraud. This is because the document formats are easily alterable, and invoices can be intercepted or sent fraudulently. On the other hand, e-invoicing uses the secure Peppol network, which requires certified access points for secure sending and receiving. Every invoice has an unchangeable format, improving security and audit trails.

The Impact of E-Invoicing on Logistics

Looking ahead, 54% of senior supply chain and procurement executives agree that organizations should be ready to make significant changes to successfully manage supply chain destructions over the next years.

Introducing e-invoicing can be a positive step in this direction—and we don’t say this lightly.

On-Time Payments

E-invoicing significantly contributes to on-time payments within the supply chain and logistics. Automated payment systems provide flexibility, allowing for early payments to benefit from supplier discounts or strategically timed payments to ensure operational capital availability. This punctuality not only enhances cash flow but also strengthens relationships with suppliers, fostering trust and collaboration.

Real-Time Visibility

Real-time visibility is another advantage of e-invoicing, offering precise insights into cash flow and data-driven decision-making. This empowers businesses to meet demands, scale their supply chain efficiently, and preemptively address potential issues, ultimately enhancing fulfillment and customer satisfaction.

In contrast, manual invoicing lacks this 24/7 visibility, making it challenging to gauge workflow status accurately. Plus, since humans handle the process, there’s far more potential for errors, especially in multi-stakeholder processes.

Error Reduction and Process Efficiency

E-invoicing streamlines the invoicing process, reducing the manual effort required in data entry and invoice processing. This not only ensures timely payments but also enhances overall operational efficiency by minimizing administrative overheads, leading to greater cost savings and freeing up resources for strategic tasks.

How To Implement a Reliable Commercial E-Invoicing System

Implementing a reliable commercial e-invoicing system in the logistics sector is a transformative step, but you need to plan and execute it carefully. Failure to do so may result in challenges such as ineffective data storage and complications with ERP systems.

To successfully navigate this transition, consider the following steps:

1) Assess Your Organization’s E-Invoicing Readiness:

Is your organization prepared to transition to e-invoicing?

Create a checklist to understand if e-invoicing makes sense for your company. Find out if your current ERP system can integrate with the e-invoice schema and if your software vendor supports invoicing integration. Then you need to ensure your employees are properly trained to handle the e-invoicing process and accordingly inform stakeholders about the requirements to gain their support.

Step 2: Understand the E-Invoice Schema

One of the biggest problems of traditional invoicing is format variances. Invoicing introduces a standardized format to accommodate international and industry standards. This includes the e-invoice schema, masters, and invoice templates.

You have to familiarize your employees with this new format, particularly the data fields. Understanding this process, along with the invoice issuance, e-way bill generation, and return filing will pave the way for smoother implementation.

Step 3: Select a Vendor for ERP Alignment

Choosing the right vendor is important for realigning your ERP systems with e-invoicing standards.

Ideally, your vendor should have experience and expertise in e-invoicing and taxation laws in your country. If your company is already familiar with its ERP system, there’s no need to purchase a new one. But if you do, your chosen software solution should offer dynamic updates and ongoing (prompt) support during the transition.

Alternatively, you can find a vendor to reconfigure your existing ERP system according to the new scheme, as well as to provide regular updates and staff training.

Step 4: Integrate E-Invoicing Standards with Your Systems

Generally, your software vendor will start integrating invoicing standards into your ERP systems in advance. If this process hasn’t started, you must take immediate action to prepare for this integration using methods like API-based or utility-based solutions.

When choosing between integration methods, you should consider your budget constraints and invoice volume. For instance, API-based solutions have longer implementation timeframes but offer real-time e-invoice generation. On the other hand, utility-based options like Excel are quicker but involve human intervention.

Step 5: Prepare for a Smooth E-Invoicing Launch

Introducing a new invoicing system can be quite a task, where you need to set up new hardware and software and make changes to how things are done. Getting accounts receivable buy-in is your key to smoothing out this transition.

To start, educate your team about the advantages of e-invoicing and get them involved. Make sure everyone knows what the goals are and update the invoice templates to include things like IR and QR codes. You can also consider creating formal expense policies to further control company spending.

Also, talk to your partners and suppliers about using e-invoicing. And during the early stages, keep an eye on how things are going. Check to see if everything is working as it should and fix any problems that pop up.

Today’s Pain is Tomorrow’s Gain

E-invoicing in supply chain makes invoicing easier, boosts efficiency, and strengthens supplier bonds. This ultimately leads to simplified logistics payments, better supplier collaborations, more predictable cash flow, and increased operational efficiency. While e-invoicing might seem a bit unfamiliar at first, the advantages it brings definitely outweigh any initial challenges.

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Author Bio

Rana Bano is a one-part B2B content writer and one-part content strategist. She uses these parts to help SaaS brands tell their story, aiming to encourage user engagement and drive traffic.

Archives, Banking, Global Trade Daily

3 Reasons You’re Still Manually Entering Invoices (Even with Invoice Automation)

June 20th, 2020 Josephine McCann Leave a comment

The Accounts Payable process continues to require too much manual handling, even after decades of automation efforts. Even the best invoice automation efforts range from 70-90% data extraction accuracy, which leaves overstretched AP teams with a lot of manual data entry.

Why is this the case? There are a few limitations of invoice ingestion technology that inhibit its ability to extract information. Below are a few reasons why you still need to manually enter invoices.

Reason #1 – Invoices need to be in a structured format to be read accurately

Invoice automation can ingest 70-90% of invoices if they come in a standard layout, or are already digitized. However, according to Levvel Research, enterprises on average still receive 22% of their invoices in paper format, which can arrive folded, wrinkled, or get warped when manually scanned, making them difficult for invoice automation systems to read.

Even if the invoices are already digitized, they may not be in a consistent, structured layout that is suitable for general-purpose OCR – particularly invoices from smaller contractors such as catering services, janitorial services, or small businesses. Most AP teams will need to double-check these invoices after ingestion, or manually enter them into their system.

Reason #2 – Invoice automation uses general-purpose OCR technology

Most invoice automation uses general-purpose Optical Character Recognition (OCR) tools to read PDFs and images. These tools are designed to read text in any situation – a novel, a letter of complaint, or a newspaper article.

Just like people who are jacks of all trades but masters of none, technologies intended for general use face trade-offs compared to purpose-built tools. For example, because general-purpose OCRs aren’t trained to specifically read and understand financial documents, it often misreads a British pound symbol (£) with the number 6, or a dollar sign ($) with an S.

It also can’t factor contextual clues into its work. If an invoice is scanned upside-down, general-purpose OCR cannot understand or extract any information because it’s only familiar with a certain layout. Similarly, it would have trouble with wrinkled, creased, or unevenly lit documents. And just as a student can easily recognize an unfamiliar street address from another country, so too can context help a contextually-aware system identify the important attributes of an invoice it’s never seen before, like supplier and recipient, prices, quantities, descriptions, and so on.

OCR technologies specifically tailored and trained on finance use cases, paired with context-aware AI will offer much higher accuracy rates, making it possible to dramatically reduce the fraction of invoices that can’t be automatically read and entered.

Reason #3 – There’s still a lot of manual data entry

Although reducing manual invoice entry from 100 to 30%, 20%, or even 10% is fantastic, for an AP team with a high volume of invoices, 10-30% manual processing is still a large amount of work that drives up processing costs and time.

Depending on the form of the invoice, there can be dozens of different data points that need to be input into the accounting system. This doesn’t just cost the time and resource of the manual entry itself. It also introduces a lot of room for typos, errors, or missing information that slow downstream processing. Maybe someone mistypes an invoice number using the letter “O” instead of a “0” – but with this simple mistake, a unique invoice is created in the system, and now won’t be flagged as a duplicate. This risk is multiplied when there are several people involved in the process, increasing the processing time and delaying vendor payments – even with the most capable and efficient accounts payable teams.

This can increase the time it takes for invoices to be paid out, straining existing vendor relationships. According to a 2019 benchmarking study by IOFM, even many companies with significant invoice automation struggle with this: 53% of them paid at least 10% of their invoices late – very likely the very invoices that required manual processing.

The future of invoice automation

If the invoice process was fully automated, AP teams could drastically shorten their payment cycles and take advantage of early payment discounts for even better ROI. For a large enterprise, this would result in enormous savings. For example, imagine a company that processes $250M in invoices annually, of which 3% is eligible for a 2% early payment discount. Early payment would result in $2.2M annual savings.

Notwithstanding decades of progress and widespread adoption of automation technologies, it’s clear that invoice ingestion still has significant potential for improvement that can deliver huge business value from the automation itself and from unlocking benefits of a faster processing time.

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Josephine McCann is a Product Marketing Manager at AppZen, the leading AI-driven platform for modern finance teams.

Archives, Banking, Global Trade Daily

How to Make the Case for Optimizing Invoice Payments

November 26th, 2019 Kristin Cardinali Leave a comment

What I’ve learned working in sales for a bank and two financial tech companies is that when it comes to payments, there is a clear difference between fintechs and banks. Banks look at business payments as a product, while fintech see them as a process to be optimized.

What does that really mean? Optimization is a term we throw around a lot, usually in relationship to costs or processes. Costs are relatively easy to optimize, because they’re easy to see and measure. The business case is simple to make.

Making the case for process optimization is a lot harder, however, because the costs are hidden and hard to measure. And when we get really good at running a process, we no longer realize just how complicated that process really is. We’ve got something that’s working, so we keep doing it the same way. If we think about optimization at all, we look at pieces of the process and see if we can make them faster or cheaper. But then we often overlook new technology that can radically change or even eliminate part or all of the process.

A serious dent

For example, smart phones have radically changed and/or eliminated the use of alarm clocks, radios, landlines, paper calendars, cameras, feature phones, weather reports, and more. Those all still “work,” but why have all those different pieces and processes for each when you could have a smart phone?

Few people, if any, make the effort to figure out how much time and money they save by switching to a smart phone having all that functionality in a single portable device. You’d have to add up the hard costs, break down each process into its component parts, and then assign a value to the time you spend on each. No one would do that, because by now just about everyone realizes that smart phones offer a faster, easier, more convenient way to do things. But that’s exactly what you have to do to make a case for changing a business process.

To make the case for optimizing the B2B payment process, you need to evaluate three key areas:

Transactional costs. This seems pretty straightforward: what does it cost to send an ACH or wire, or print and mail a check? This cost includes transaction fees, check stock, envelopes, stamps. But there can be additional fees for delivering standard or upgraded remittance information, PositivePay, returned checks, and research on lost or erroneous ACH payments. Be sure to consider all of these when making your business case.

Rebates. This also seems straightforward: how much spend can you get on card, and what’s that likely to yield in rebates? But there are some nuances. First, not all rebates are the same—they vary in terms of rules and payout percentages. Some rebates don’t kick in until you hit a certain threshold, while others pay out monthly, annually, or semi-annually and you must figure in the time value of money as well. Others pay less if you don’t choose to pay your balance off daily or weekly. Then there are exceptions like Level 2 and 3 processing and large ticket charges. I would suggest taking a look back at previous years to see what you actually earned vs. what you remember from the sales pitch.They are often vastly different.

Operational efficiency. This is where you can get sucked down a rabbit hole. But it’s also where you can really transform your business. Let’s take a look at all the pieces of the payments process:

Enabling suppliers for electronic payments. What does your go-to-market strategy look like? Is it phone calls, mailers? Does your AP team participate? Your procurement team? How many vendors accept card? ACH? Who collects, keys in, and updates the banking information? How is it secured?

Creating payment files for transmission. How many different file types must IT work to create and test, and how often are you sending? How long does it take, and who does it? Is the approval built into the system? Or is it manual and paper-based?

Collecting physical signatures on checks. How many people are involved? How much time do they spend? What is their hourly pay rate?

Sending out remittance advice. Is it stuffed in envelopes and mailed? Emailed? Is it automatic or do you need to create, save to desktop, and manually send?

Fielding phone calls asking about payments. How many calls do you get per 100 payments sent? What’s the average time to fulfill a request? Who’s involved, and what’s his or her pay rate?

Tracking down and reissuing lost or erroneous payments. What’s your error rate per 100 payments sent? Who fixes errors, how long does it take on average, and what is his or her pay rate?

Early payment discounts. How often are you able to take advantage of terms offered by suppliers? What is the lost revenue opportunity when the payment process causes you to miss out?

Late payments. How many payments are late? How much are you paying in late fees? What is the effect on your discount and vendor relationship when payments are delayed?

Updating supplier banking and payment information. According to Nvoicepay internal data, suppliers change their banking setup about every four years, meaning you’re updating 25 percent of suppliers annually. But in this day and age, you can’t just accept supplier updates at face value. You have to validate those requests to make sure it’s not fraud or phishing. Who handles that, how long does it take, and how much do they get paid? Do you have a liability policy for fraudulent payments? What has fraud cost your business historically?

Escheatment and unswiped cards. This is the time spent following up on uncashed checks or un-swiped card payments and reissuing them and/or reconciling them back into the accounting system.

How much does it all add up to? Very few organizations really know. There are benchmarking studies out there on the costs of writing checks, and of processing invoices. But no study I have seen recently considers the entire process, beginning with supplier enablement and ending with a reconciled payment.

Processes and sub-processes

Those detailed studies don’t exist because it’s difficult to discern how much time an AP team spends on all the required processes and sub-processes for completing a payment. Those task hours are often dispersed across the team and can be tough to measure.

In accounts receivable, for example, there are staff members that only do cash application. So if you make your cash application process 70 percent more efficient, and you have a headcount of 10, it’s easy to say “Okay. I can assign a savings number to that and reallocate 6 or 7 people.” It’s pretty straightforward.

That’s much more difficult to do on the AP side. For most companies, no role within AP focuses solely on handling errors, enablement, fielding phone calls, or escheatment. Team members need to be pulled from other duties to cover those tasks. I’ve even seen teams pull staff from the manufacturing floor to stuff envelopes during Friday check runs. It’s hard to adequately quantify the time that goes into all these components, let alone understand all of the costs that roll into the payment process. And why would you if you think your method works and there are no viable alternatives?

The Fintech A-ha

There is a better way. Over the past decade, fintechs have made steady progress in optimizing the B2B payments process. Payment automation providers can now offer a single interface for all payment types, eliminating the need for multiple payment files.

Some, like Nvoicepay, use cloud networks to handle supplier enablement and information management securely at scale, taking those tasks off of AP’s plate. We even service the payment on the back end, handling incoming calls and error resolution.

The combination of technology and services radically changes the process, eliminating some of AP’s most time-consuming and unproductive tasks, and freeing up staff time for higher-value work.

And that’s the fintech difference. Slowly but surely, technology companies have surveyed the fragmented financial services landscape and figured out how to knit processes together to replace complex, repetitive, non-value-added manual activities with a few button-clicks. To truly optimize business payments, you need to look beyond stamps and envelopes and consider the entire payment journey. Only then can you truly understand the massive optimization opportunity in front of you.

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Kristin Cardinali is the Vice President of Enterprise Sales in the Midwest Region at Nvoicepay. Her experience in sales and sales leadership spans 16 years, and includes positions held with companies like Capital One and Billtrust. With Nvoicepay, she delivers scalable payment solutions to enterprise companies and other large organizations. Kristin has received several accolades, including Sales Rep of the Year & Quarter, and multiple President’s Awards.