Also, riding on digitalization and globalization, governments across the world are mandating e-invoicing – electronic billing that tracks end-to-end transactional documents to create a reliable digital audit trail – to strengthen their tax and customs collections. The latest European Commission report states that the tax commission is losing out EUR 137 Billion owing to lack of clear visibility into transactions.
Irrespective of government push, companies are going to eventually face the pressure to adopt digital methods from industry partners and foreign jurisdictions in order to instill confidence among recipients as e-invoices are produced and issued in a standardized manner with minimal risk of human error. No surprise that the e-invoicing market is projected to grow 20% CAGR over next 5 years. By 2025, e-invoicing will be the predominant model of invoice exchange between suppliers and clients.
E-invoicing produces an enormous amount of transparency. That could be a great advantage - except for companies that lack accurate and timely data. If the data itself lacks standardization and is faulty, it exposes the supply chain and accounting to penalty for non-compliance as they are now able to quickly validate or reject tax declarations. This makes data preplanning critical to e-invoicing. That leads us to the big question – how prepared are companies to adopt e-invoicing?
The state of e-invoicing adoption
Currently, more that 50% of finance organizations are involved in transactional work i.e. invoice receipt, scanning, processing and payments. There are additional teams deployed to address supplier queries, which add to the cost of the finance function. Even in early 2020, the P2P processes were highly paper dependent with suppliers sending invoices through post, email and fax. This requires multiple hand-offs from supplier to client. The percentage of e-invoicing until then was low due to:
- Supplier’s reluctance to change the process
- Client’s hesitancy to adopt new technologies
- Unavailability of compliant invoicing systems at appropriate cost
- Regulatory requirements to have hard copy invoices in certain countries
According to Everest, remote working model imposed by the physical distancing during the pandemic has led to accounts payable departments struggling to maintain a fluid “business as usual” approach. As a result, they are unable to manage invoice processes in a timely and cost-effective manner in the absence of sound digitally applied account payable strategies.
The e-invoicing impact and advantages
Adopting e-invoicing helps organizations save costs and stop leakages:
- End-to-end visibility - E-invoicing enables continuous monitoring of transactions.
- Leaner AP teams with overall TCO reduction by 40-50% - Automation improves efficiency and effectiveness of the control environment, enabling cost and resource efficiencies.
- Reduced efforts on audit - Enhanced and timely overview of compliance across the enterprise.
- Efforts focused only on exception management i.e. 20-30% of invoice volume - Reduction in error and waste through exception identification and remediation that streamlines processes.
- Authorized and structured purchases and payments with higher PO penetration - Elimination, prevention and detection of risks, like fraud, bribery, corruption, inappropriate payments etc.
- Reduced costs on paper management (printing/ postage/ storage costs).
- Ability to report more comprehensively on control effectiveness and compliance both internally and with external bodies, thus offering reduced audit fees and internal coordination effort.
- AI-based fraud detection and unauthorized purchase protection.
- Local regulatory compliant invoices with systems configured to automatically calculate:
- Accounting of invoices based on defined commodity structure
- Domestic VS Foreign Invoices and related
- VAT and GST codes
- Withholding tax rates based on local requirements
- Reverse charge calculation based on goods/ services received from foreign suppliers
- Cloud-based technologies provide regular upgrades to meet ever-changing regulatory needs on accounting and taxation
The right approach to e-invoicing
Wipro has invested and built a technology ecosystem through IP solutions and strategic partnerships with market leading product companies like Oracle EBS (Diamond Partner), Ariba (Co-Innovation Partner), Tradeshift (Investor), Coupa (Strategic Partner), Esker (Strategic Partner), Tungsten (Partner), etc. to develop tailored solutions that meet client needs and align with their strategic objectives. Our solutions focus on core business finance requirement i.e. ‘Business Insights’, ‘Compliance and Control’ as well as ‘Operational Efficiency’. With cloud-based solutions, we also ensure a modular/ plug and play approach to ensure limited investment, shorter implementation period with enhanced and quicker ROI.
With the combination of government regulations, technological advancement, and systems adaptability, e-invoicing (touchless invoicing) is here to change the way businesses work. We envisage e-invoicing adoption to rise exponentially for organizations to leverage the benefits at a nominal cost. This will enhance the experience of users and suppliers, enabling organizations to take effective decisions and run efficient business operations.
Want to know more about how Wipro can help make your journey to e-invoicing successful? Contact us now.
