E-invoicing is an electronic exchanging of invoice information between businesses. In comparison to the traditional invoicing method, where it is paper-based, labour intensive and prone to human errors.
E-invoicing enables businesses to streamline procurement and payment process by integration between seller’s accounts receivable and buyer’s accounts payable.
What is an e-Invoice?
Structured invoice data issued electronically where receivers can automatically process and record all the relevant information without any manual intervention. E-invoice should be in the below format:
- XML formats
- Electronic Data Interchange (EDI)
- standard Internet-based web forms
Not a true e-Invoice:
- Unstructured invoice data e.g. PDF, MS word, MS Excel
- Paper invoices sent via fax machines
- Scanned paper invoices
Traditional paper based invoice has many challenges:
- Labour and time intensive for both sides (seller and buyer) to generate, capture and reconcile data on invoices
- Once reconciled, payment needs to be arranged and managed manually for each invoice
- Difficult to manage, maintain and retrieve the record. This then results in:Inability to efficiently generate sales and payment report. Low visibility and low transparency of issues to management, and Inability to efficiently resolve invoice dispute
- Prone to human errors
All of the above ultimately lead to higher operational costs.
Advantages of E-Invoicing
With e-invoice suppliers, businesses can automate and streamline processes to help overcome above challenges and ultimately reduce operational running costs. With automation, process can be executed much more efficiently and effectively. Invoice data can be captured, managed and maintain with minimal labour and time required. It allows data to be much more accessible where businesses will be able to:
- implement better operational plan to further reduce costs
- better control of cash flow forecasting and planning
- implement business strategy to generate more revenue
Singapore government recognises the benefits of e-invoicing and has been showing great support. Since 2008, all government suppliers are required to submit their invoices electronically. This has put Singapore as a front leader in the usage of e-invoicing in the Asia Pacific region.Tabulation of benefits of E-Invoicing (Reference: e-InvoicingBasics)
For buyers
- Increased accuracy
- Increased AP productivity
- Faster processing and payment cycles
- Focus on higher value activities
- Enhanced accounts reconciliation
- Improved cash management
- Reduced fraud, duplicates and late payment fees
- Improved dispute handling
- Improved supplier relationships
- Optimised community management
- Reduced costs
For suppliers
- Faster payments
- Reduced costs
- Fewer rejected invoices
- Increased productivity
- Enhanced accounts reconciliation
- Improved customer relationships
- Improved cash management
- Alternative finance options
For managers
- Optimised working capital
- Improved visibility
- Improved compliance
- Improve supplier/customer relationships
- Enhanced IT system optimisation
- Meeting green initiatives
Nalinee Chinowuthichai is the co-founder of InvoiceInterchange, Singapore’s first invoice trading platform, where SMEs can flexibly manage their cash flow by selling invoices to a network of investors who compete to provide cash advances.
