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The Evolution of Electronic Invoicing

The cost of sending an e-invoice is about 40 percent of the cost of a paper invoice

Tempe, AZ, July 11, 2007 – The cost of sending an electronic invoice (e-invoicing) was reduced for one large original equipment manufacturer and services provider that Thomas F. Gattiker, Ph.D., interviewed for CAPS Research. The initiative resulted in a decrease in headcount of invoice processing personnel, and invoice accuracy increased.

E-invoicing removes the need for humans to handle problem-free invoices and shifts the focus of front-line AP personnel from high-volume processing to identifying and eliminating root causes of errors. This role shift from discrepancy resolution to root cause elimination is an important cause of the observed increase in invoice quality – currently less than 2 percent for this organization.

The organization had not achieved significant levels of invoice automation for indirect material vendors or for lower-volume direct materials suppliers, so they began a search for a system fitting these types of suppliers. The system had to be compatible with the existing AP system, require minimal IT requirement for suppliers and meet regulatory requirements in North America and Europe.

The e-invoicing system affects how invoices are received and entered, and does not change the way that they are verified and paid within the organization’s ERP.

The solution offers two pathways for submitting invoices: an invoice generator and file submission. The invoice generator requires only an Internet connection and a Web browser; and primarily supports small or low-volume suppliers. The file submission supports larger suppliers who use a Web portal, EDI or FTP to upload electronic invoice files generated by internal systems.

Suppliers pay the costs of generating and transmitting conventional invoices; therefore this organization sees it fair that they pay the costs associated with e-invoicing. This organization cites a study where costs associated with paper invoices are approximately $5, and estimates the cost of an e-invoice is $2 or less.

To review the CAPS Research Practix Article, "The Evolution of Electronic Invoicing at MRD", click on the following link: http://www.capsresearch.org/publications/pdfs-protected/practix072007.pdf

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CAPS Research is a nonprofit research organization founded in 1986 to provide leading research to our strategic-minded corporate sponsors and to the public. Our mission is to work in partnership with a global network of executives and academics for the discovery and dissemination of strategic supply management knowledge and best practices. CAPS Research is jointly sponsored by the W. P. Carey School of Business at Arizona State University, and the Institute for Supply Management™.

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