Bill Pugsley is a leading authority on electronic trading and ecommerce of more than 30 years standing. An EDI entrepreneur, Bill was one of the early architects of international EDI standards developed under the auspices of the United Nations.
With the recent publication of the EU cross border procurement regulations, the time has come to analyse the proposals and identify exactly what the aims are, as well as whether the actions set out are likely to meet them.
The EU Commission estimates that the adoption of e-invoicing in public procurement across the EU could generate savings of up to €2.3 billion, with the new Directive now paving the way for the development of a new European standard for electronic invoicing.
In my opinion, the Directive fails to address key issues, without which it will be impossible to achieve real financial and environmental gains for Europe and the business community that serves it.
Whilst I would always welcome all efforts to encourage the use of e-invoicing, in my view this Directive just scratches the surface and leaves many unanswered questions. My fear is that it will actually serve to delay the full economic benefits of e-invoicing, which would make €2.3 billion look like small change.
Standard already exists
Why do we need a new European standard for electronic invoicing, which may take years to develop, when the existing GS1 (Global Standard One) system of standards have been working successfully since the late 1970’s and is the most widely used supply chain standards system in the world?
Implementation of GS1 standards provides a world-wide solution for trading in over 100 countries – not just those in the EU.
Most importantly, these proposals omit the most critical piece of the jigsaw, the one that unlocks the real savings and efficiencies. Sending and receiving invoices electronically is all very well, but it ignores the most crucial part of the trading cycle – the assessment of whether the invoice is for the goods ordered and received, and that the price on the invoice matches the agreed price for the goods.
What is lacking in the European initiative is the ‘perfect order’, where goods are ordered, delivered and invoiced with the only human interaction being the picking, packing and delivery of the items ordered. Sending an invoice electronically without automated reconciliation against order and price merely gets it to the recipient faster. There is no certainty that it is correct!
Only with automated, end-to-end exchange of transactions, with price matching as part of the process, can the invoice be passed for payment. The ability to automatically validate invoices is now available in the marketplace, by my company, Atlas Products International, as well as others. Without the inclusion of this standard feature, there will still be a need for large teams to carry out manual checks, one by one – the very same slow and labour intensive process the EU is trying to eliminate.
This seems to me to miss the point entirely. On its own, e-invoicing is just not enough!