Sunday, January 23, 2011

Look in this Treasure Chest

We have been working some time on opening the lid to a true European Treasure Chest. The lid is migration to structured business messages – and the key – e-invoicing -  is held by every enterprise and consumer (or rather human user in employee and private role).  As often happens in innovation processes the real value of what can be achieved opens up on the way – so now is time to summarize the treasures so far found:

1. Harmonization of structured e-invoicing and other business messages across EU opens up for example accounting and VAT automation on a grand scale. What other measure could further the development towards a Single Market more than this? Especially as e-invoicing drives SEPA-adoption in a natural way.

2. Cost savings from the combination of a bag-full of measures: automated simplified accounting, automated VAT, automated tax returns, simplified salary administration, automated invoice financing, e-invoicing with automated payment processes, e-orders and so forth makes it possible to easily upgrade the EC cutting 25% of administrative burden costs by 2012 – to 50% by 2015. What other competitiveness enhancements could possibly be even nearly as important? Especially as the investment needs are small and implementation could be fast – subject to resolute decisions.

3. In addition to cost savings, the ability to follow financial progress in real time, have cash flow estimates automated, get automated risk mitigation tools, access to lower credit risk margins and clearly lower fraud risks are adding substantially to process cost savings. What other measure can lower both costs and risks and produce a real time view of financials – in any size of enterprises?

4. Even more important than the cost saving is to liberate employees from causing-cost-only manual work to customer service, sales, product development and other top-line activities deploying their full capability. What could be more important in face of the rapidly decline of population in working age? Especially as we have seen that mass immigration is not problem free.

5. Many order-, invoice and other message receivers have already declared that only electronic ones are accepted. The obvious danger is that the gateways will be enterprise specific and force suppliers to use a different tool with each buyer. This closed model is both costly and can prevent competition – making suppliers dangerously dependent on fewer buyers. E-invoicing and also generic e-ordering should therefore be made into just-like-payments services. Sign up with one service provider and with the 4-corner model reach any customer or supplier in EU and later globally.

6. The VATGap in EU amounted to 118,6 billion in 2009. With the e-invoicing enabled automated split-payment model recommended in the EU-report the discounted benefit (after to us high-looking investments) would be 966bn. Can anybody see a reason for not moving to this as fast as possible (it is our – the tax payers, money)? Especially as this method is estimated to save at least 13 workdays in a small enterprise and massively in the public sector.

7. A paper- or PDF-based business process has been estimated in a recent study to produce 300g more CO2 than an electronic one. On EU-level in the b2b e-invoicing aspect only this would mean over 4,2m tons a year. Are not all sense-making CO2 reductions needed?

We keep finding more treasures in the chest all the time – so the list is getting longer. The important thing now is to open the lid fully – and there are some springs in place that makes it easier – the VAT-directive, the global ISO20022 e-invoicing message standard, the rulebook work done in EBA and starting in CEN and the DG Taxud Green Paper on VAT-collection with split payment.

Heavy lifting it still takes – as change resistant sits on the lid – in many forms. Some just do not want innovations, others see a Single Market as a threat, others have vested technology interests, the information overflow makes it difficult to get the message through, banks are not yet taking their responsibility widely enough and so forth.

But we will get there – big changes always take time.

1 comment:

James R. Clawson said...

All indications are that e-invoicing is here to stay and should be a part of every accounts payable department in one form or another!