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April 19th, 2021
Implementing e-invoicing within an organization is no small feat. You will inevitably encounter many obstacles along the way that you will have to overcome. Therefore, good preparation and the right solution provider at your side is essential for success. Here, you can learn about some of the challenges that you are most likely to encounter during your first steps towards supply chain digitalization. That is, the challenges you might come across on your move to e-invoicing:
1. Lack of a Compelling Business Case
2. No Clear Plan
3. Wrong Requirements for the E-Invoicing Solution
4. Underestimate the Difficulty of Trading Partner Onboarding
5. Complications with Onboarding as a Result of the 4-Corner Model
6. Failure to Convince Internal Teams of Change
Indeed, with an eye to the future, it is no longer a question of if you will switch to e-invoicing, but when you will switch to e-invoicing.
1. Lack of a Compelling Business Case
As an organization, you naturally want to know how a new technical solution will benefit you before you invest in it. We often see that this is not a very big task for large, corporate companies; so many invoices are exchanged that they cannot ignore the cost and time savings alone. Small and medium-sized companies, on the other hand, often find it a little trickier. That's a shame, because SMEs can also enjoy the many benefits of e-invoicing.
To build a convincing business case, you will need to make several calculations. The expected costs, ROI (Return On Investment), and payback time should always be considered. The first step is to calculate your current (average) costs for invoice processing.
From there, you can begin to work with a solution provider to look at financial projections. Through practical experience, solution providers can provide you with reliable information and give you a realistic representation of the savings you can achieve with e-invoicing.
2. No Clear Plan
Good preparation is half the battle. If there is no clear plan beforehand, all parties involved will not know where to begin. In order to draw up a feasible plan, a number of components must first be identified:
Make an “inventory” list of every party that is (or may be) affected by the implementation.
This can be customers, suppliers (see #4), and even different departments within your organization (see #5).
Examine the current state of e-invoicing in your organization.
What are the opportunities, and what are the threats? How many trading partners are already prepared to send and/or receive e-invoices? At the moment you switch to e-invoicing, will doors open or close for you? Don’t let these questions (and many more) go unanswered.
Research many solution providers.
You can read about what to look for when selecting a solution provider in challenge #3 (below).
Once you have identified the points listed above, you have a financial forecast and a convincing business case. From there, it is important to draw up a phased plan. At this point, if all has gone according to plan, you now know how many invoices you can start exchanging electronically. You have also inventoried which trading partners already work with e-invoices.
In terms of your phased approach, you should first identify the low-hanging fruit. Often, these are the trading partners who can already send and/or receive e-invoices and the trading partners with whom you exchange the most invoices. You should also look for different subcategories of invoices based on different criteria, such as invoice format or industry guidelines. Then, create an implementation timeline so that you can gradually, and in stages, begin e-invoicing with more and more trading partners.
3. Wrong Requirements for the E-Invoicing Solution
Selecting the right solution provider is extremely important. You don't want to have to switch providers on the short term, because that ultimately results in a lot of wasted time and money. The solution you choose must therefore be future-proof and in line with your objectives. It should also integrate seamlessly with your current processes and be easy for your trading partners to adopt.
Whatever e-invoicing solution you choose, it should check the following boxes (at the very least):
Seamless integration with current processes
The EDI solution must be able to integrate not only with your ERP system, but with all ERP systems. It should also be possible to integrate with various other systems for accurate forecasting and planning, and much more. Think: Integration with your Warehouse Management System (WMS) and third-party logistics (3PL) service provider.
Facilitate exchanges regardless of document formats and standards
All document formats and standards must be supported so that you can always exchange invoices with your trading partners, even when circumstances change.
Provide multiple, secure communication methods and simple network options
Your solution provider should always be a certified Peppol Access Point, especially when international business is involved. It should also provide access to any other country- and/or industry-specific networks that may be relevant for your organization.
Trading partners of all shapes and sizes should be able to participate
This should be a given, regardless of your trading partners’ technical capabilities. This means that your solution must offer multiple means to an end. That is, it should offer flexible options for electronic invoice processing so that no trading partner is left behind. So in addition to EDI, it’s good to have a solution for PDF conversion (PDF to any other type of format), as well as an online portal for manual entry.
Provide secure archiving capabilities
Especially if invoice archiving is mandatory in your country, your e-invoicing solution must be able to fulfill that need. Even when archiving is not mandatory, it’s still convenient to store original records for invoices and other business documents. You never know when your organization may face an audit. E-archiving provides an easy solution.
Information protection
Data protection and overall IT security are hugely important. Make sure to choose a solution provider that complies with GDPR legislation and is ISO 27001 certified. The latter is becoming even more important, as some countries (like the Netherlands) require all services providers that serve as Peppol Access Points to have ISO 27001 certification.
Infinitely scalable, from e-invoicing to e-procurement
We’ve been building up to this one with the previous points. The main point is, your solution must be able to grow with you. If you change internal systems, invoice formats or networks, or simply want to exchange more types of documents electronically, you need a cloud-based solution. Otherwise, you have to start from square one all over again.
4. Underestimate the Difficulty of Trading Partner Onboarding
The harsh reality is, if you can’t connect with your trading partners, it doesn’t make sense to invest in an e-invoicing solution. After all, the majority of your trading partners (not just a few) must be willing to send and/or receive electronic invoices in order for you to fully realize the benefits.
For the trading partners that are already set up with an e-invoicing solution of their own, onboarding you’re off to a good start. But for the trading partners that are used to doing business with you in a certain way and aren’t too technically advanced, you can’t assume that one phone call will convince them to start sending e-invoices.
In the second instance, make sure to give your trading partners early notice that you want to start e-invoicing. That way, they have plenty of time to learn about the topic. Highlight the benefits it can have for both parties and patiently answer any questions. Then, make it as easy as possible for all types of trading partners by offering multiple invoice processing options, as mentioned earlier.
5. Complications with Onboarding as a Result of the 4-Corner Model
Expanding on the above complications with onboarding for trading partners that aren’t already capable of sending and/or receiving e-invoices, there can also be complications with the trading partners that have an e-invoicing solution of their own. This is often overlooked, as the majority of trading partners are, in most cases, small and mid-size businesses that lack e-invoicing capabilities. However, it’s very possible to experience difficulties with larger partners, too.
This can get quite complicated, but we will do our best to explain it as simply as possible: In an ideal world, a direct connection between the ERP systems of the invoice sender (supplier) and invoice receiver (buyer) would be possible. This, of course, is not the case; both parties need an e-invoicing (EDI) solution to translate the data and ensure that the receiving system can accept and process it.
This is where the 4-corner model comes in. Until recently, this term has mainly been used internally by solution providers, but maybe you have heard of it! The 4-corner model got its name because four parties are involved in a typical e-invoice exchange. They are:
- Supplier (sender of the invoice)
- Service provider of the supplier
- Service provider of the buyer
- Buyer (receiver of the invoice)
In the 4-corner model, the invoice goes from party 1, to party 2, to party 3, and finally to party 4. Depending on who sits where in the 4-corner model, different business situations may arise:
Party 2 = Party 3
In some cases, party 2 and party 3 may be the same service provider (e.g., TIE Kinetix). In this case, connecting the supplier (party 1) and the buyer (party 4) is quite simple; the business rules are adapted for party 1. Technically, this is a 3-corner model, but many will still refer to it as a 4-corner model instance.
Party 2 ≠ Party 3
This is where things can get complicated. If party 2 and party 3 are not the same service provider (maybe even direct competitors), it becomes more difficult to complete necessary onboarding steps, namely mapping. That is, connecting systems so that they can accurately exchange information without manual intervention.
For example, a typical situation is that the buyer (party 4) requires certain information on the invoices they receive while that information is not standard on the invoices their supplier sends. In most cases, this information not a usual invoice requirement, but it is necessary for the buyer to accept and correctly process the invoice. The supplier’s service provider (party 2) must then work on new business rules and validations to adjust the mandatory information on the standard invoice. This ensures that the supplier complies with the specific buyer requirements.
This type of situation regularly gives rise to discussions, as it creates a lot of work for the service provider and ultimately takes time. This is especially time consuming when the above instance applies in more than one instance, with not only one buyer but thousands of buyers, all with different mandatory requirements for their invoices.
The point is, onboarding involves much more than meets the eye. Unsurprisingly, many companies choose to outsource onboarding to the service provider so they don’t have to deal with this on their own.
6. Not Convincing Internal Teams of Change
In addition to getting your trading partners onboard, you will also have to make sure all internal teams are prepared for the change (and supportive of it). Your IT team, accounting team, EDI team, and other internal stakeholders are used to working according to a certain process. When this process suddenly changes, it requires a significant change in behavior. You should, therefore, expect backlash. It’s only natural—humans do not like change by nature.
However, this is something you can prepare for. There are many reasons people may not accept change, so here are a few things to keep in mind:
- It should be extremely clear why the change must take place- The employees should see the added value for their own benefit
- If many previous attempts to change have failed, the plan should be clearly communicated to show that this time will be a success (and that it involves everyone’s support)
- Clear explanation on the new way of doing things
- and more!
That being said, it is important to make the internal transition to e-invoicing as smooth as possible with careful planning. HR can play a surprising role in this process.
