Electronic invoicing is a form of electronic billing and is an invoicing method used by many trading partners, customers, and their suppliers.
Traditional invoicing, like any heavily paper-based processing, takes a lot of manual labour and is prone to human error. This results in increased costs and processing lifecycles for companies. In simple terms, electronic invoicing is sent over the internet, rather than being paper-based. E-invoicing is increasing in popularity as it is a more efficient way of sending invoices from businesses to customers.
Benefits of electronic invoicing for suppliers
Electronic invoicing has benefits for both the supplier and the buyer. Some of these include reduced costs, shortened payment cycles, and improved supplier and customer relationships.
With the use of electronic invoicing, suppliers can avoid going through the steps of using paper or PDF invoices. This process is known to take time and there is also the added risk of the invoices getting lost. In comparison, e-invoicing can be easily accessible on the buyers’ system, this means they can be routed and processed much faster. In turn, payments can be made on time which will improve cash flow for the business.
By using electronic invoicing instead of traditional paper invoicing, suppliers are able to reduce the time and money spent on printing, storage and processing. E-invoicing is done online and is verified by an automatic process resulting in suppliers spending less money on customer services and service calls being required due to mistakes.
Paper invoices often cause disputes and rejections, causing major costs. To rectify these issues it can be time consuming and can lead to late payments. However, with e-invoicing, information and data from the supplier’s system can be transmitted directly to the customer’s account system. Having this process available decreases the risk of errors, therefore reducing the potential risk of invoices being rejected.=
Benefits of electronic invoicing for buyers
Electronic invoicing offers greater efficiency for businesses and their customers. This benefit will automatically help to build and strengthen customer and supplier relationships. It will also make for a more streamlined and trustworthy supply chain, improving overall customer satisfaction.
The final benefit we are going to talk about is the increase in productivity and automation for buyers. When using paper or PDF invoices, all documents have to be stored and re-entered into all AP (accounts payable) systems. These steps are known to be time-consuming and can often cause many errors.
With e-invoices, all data is sent directly to the AP systems, meaning there is no need for manual data entry. Because this data entry is automatic, there is a smaller need for the buyer’s staff to get in touch with the supplier for confirmation or enquiries about details. All of these steps allow for better productivity.
Straight Through Processing (STP)
Straight through processing is a financial process that companies can use to speed up their transaction processing time. The reason behind the creation of STP is to allow companies to have information in a streamlined process across multiple points. This is turn lowers the cost of operations, the true benefit for merchants.
Virtual Account Numbers (VAN)
With electronic invoicing, buyers can use virtual account numbers. A VAN is a one-time virtual card number that manages the settlement for a specific e-invoice using Mastercard or Visa Rails. It is a 16-digit number that can be used to pay suppliers quickly, efficiently and with less risk. A different unique number is used for each payment transaction, making this a safe and secure way to pay and be paid.
From these benefits, we can see that electronic invoicing is the way forward and suppliers and buyers are going to gain large advantages from swapping from paper to digital processes.