How a ‘layered’ approach to AP will help business to flow

Picture this: less than a decade ago, around 30 billion invoices were being sent around Europe annually[1]. Some 90 per cent of them were on paper and most were sent by national postal service. That’s over 60 million invoices circulating around Europe every single day of the year.

It wasn’t until April 2020 that the deadline passed for countries to adopt a new European standard on e-invoicing. The European Commission itself identified potential annual benefits of up to €40 billion across the continent in the business-to-business field alone, so there was plenty of momentum behind the shift to invoice automation.

While a welcomed and proactive approach that helped shine a light on the need for making improvements, the new European standard still failed to address a number of key issues. For example, e-invoices can be produced in a wide range of formats, adhering to different national standards. There still exists the variation in national rules which govern the validity and acceptability of e-invoices in legal, financial and administrative terms, and therefore the possibility of misrepresentation and fraud.

Imagine, then, what the global pandemic did for e-invoicing around the world. What had been a decade-long transition driven by policymakers became an urgent challenge driven by pure commerce.

The change to working practices in almost every business proved to be particularly challenging for Finance functions. Invoice and accounts payable processing in the early stages of lockdown was extremely challenging as teams got to grips with the realities of working from home and those that weren’t already using technology to support their processes felt the pain most.

Put simply, paper invoices require substantial human intervention in a process that must be as efficient as possible. It is very hard to be an agile Accounts Payable (AP) team if you are weighed down by manual processes like keying invoice information into a spreadsheet.

There are many reasons why going paperless makes sense. From simple efficiency to reducing your carbon footprint or eliminating human errors, the case for invoice automation is clear. What the pandemic revealed was how unrealistic it was to expect businesses to completely change their AP processes so quickly.

Once the ‘new normal’ for businesses was accepted, organisations had more time to focus on improving their processes. However, those without the necessary skills or budget to be able to switch either in the short or long term are still struggling now.

In addition, not all invoicing needs to be electronic at source, it is for every business to choose what works for them. What is possible, however, is for all invoices in your supply chain to look the same, or at least to be ‘read’ in the same way by your AP software. This approach allows organisations  to create an efficient and accurate file of invoices that  their system can process and pay.

There is a real conflict in the e-invoicing debate. On the one hand, investment in technology and process is needed to create the efficiencies and strategic benefits most AP teams want to see. On the other hand, focus on process improvements appears to have lessened for the time being.

The pandemic didn't expose the need to end paper invoicing altogether, it made us all realise the need for agility and prioritisation at a time of great uncertainty. What works for one supplier won’t work for all. A flexible AP model – one that can efficiently handle paper, data-layer and image-based pdfs, XML and portal invoices, regardless of how the team is set up – is still the most reliable approach to take.

[1] https://www.ft.com/content/19160848-1c23-11e0-9b56-00144feab49a