What is an e-invoice?
“E-invoice” is an abbreviation of “electronic invoice.” The term can refer to any invoice that is created using structured invoice data and issued either in an electronic data interchange (EDI) or XML format or using an internet-based web form. An e-invoice remains in a digital format for its entire journey through an organization’s invoicing process.
E-invoices are issued, delivered, processed, recorded, and stored electronically, as opposed to paper invoices that may be either stored in their physical form or converted to a digital format. E-invoicing is a reliable way for businesses to streamline their day to day workflows, reduce the risk of human error, cut down on invoice processing time, and empower their accounts payable teams to focus on more productive tasks.
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What is not an e-invoice?
It may seem odd to define what something is not, but there is a fair bit of confusion around what does and does not constitute electronic invoicing. For example, invoices submitted via email as PDF attachments are not considered e-invoices because their format prevents them from being easily processed by an automated AP system. Similarly, a paper invoice that is submitted via fax or converted to a digital format with the help of optical character recognition (OCR) is still not considered to be an e-invoice because it was not originally generated electronically.
As accounts payable (AP) departments move increasingly toward more widespread automation, e-invoices will play a larger and larger role in many organizations’ daily operations. The ability to send, receive, process, and store invoices, purchase orders, and other key AP documents in a completely electronic format is an important consideration for any business aiming to maintain a more efficient and cost-effective invoicing process.
What Are the Benefits of Using Electronic Invoicing Solutions?
Using AP automation solutions to upgrade to fully digitize your organization’s invoice data has a wide array of benefits for businesses, vendors, and trading partners across every industry. A few important areas where moving to an e-invoice system can have an especially big impact include:
Reducing Human Errors
A paper-based invoicing system usually requires an organization to rely on manual data entry and processing. That creates many more human touchpoints, each of which raises the risk of avoidable human error. Those errors can lead to a number of potentially damaging situations, including duplicate payments, overpayments, underpayments, and late payments that come with fees and penalties. Even worse, when errors do occur in a manual invoicing system, it is much more difficult to pinpoint the source of the mistake and make the necessary corrections.
Electronic invoicing software eliminates much of that risk by automating data entry, approval routing, and other repetitive or tedious tasks that lend themselves to human error. By ensuring that these functions are performed accurately and consistently, an e-invoicing approach can both cut down on errors and delays and also make it much easier to detect and address the cause when mistakes do occasionally happen.
Routing invoices for payment require teams and employees to work together, but that is often easier said than done in a paper-based system. Getting an invoice approved using older methods usually involves tracking down every person or team who needs to approve an invoice and getting physical signatures from each of them. When someone is out of the office or booked in meetings all day, that can be a time-consuming and frustrating process.
Electronic invoicing solutions make it simpler for teams to collaborate at every stage of the process. E-invoicing software can be easily integrated with both your organization’s and your trading partners’.other business systems. By integrating your e-invoices into your team’s AP automation solution, you can eliminate the need to physically track down signatures and make collaboration between departments and outside organizations faster, smoother, and more efficient.
Speeding Up Processing
If it’s true that time is money, it’s seldom more true than in the field of invoice approvals. Delays in processing can mean late payments, strained relationships with valued customers, further disruptions in an already overburdened supply chain, and other slowdowns that can cost a business a great deal of time and money.
Maybe the biggest knock against manual processing is that it simply takes too long, with tasks such as manual data entry, correcting human errors, and obtaining approvals adding up to needlessly wasted time. Moving to an e-invoice system automates all of those functions and ensures that tasks that might previously have taken hours or days can now be accomplished in minutes. That keeps your invoice workflow on schedule, frees your employees from repetitive tasks, and keeps your business partners happy and your working relationships strong.
Reducing Environmental Impacts
A manual invoicing process uses up a lot of resources for both AP teams and their vendors. Physical invoices and faxes eat up a surprising amount of paper — some researchers estimate that the average office worker goes through about 10,000 sheets of paper every year. That isn’t the only environmental impact, either. Running a paper-based system also requires printers, copiers, paper shredders, and other office equipment, all of which need regular maintenance and materials such as toner and ink. Producing and shipping all of those materials makes a major environmental impact, to say nothing of disposing of that equipment after it wears out.
Moving to an e-invoice system sharply reduces both the amount of paper your accounts payable team requires to operate and all of the equipment needed to keep that paper moving. That not only helps to lessen your organization’s environmental footprint, it also lowers the cost of operations and helps to improve your overall brand reputation.
Delivering and Processing in Real Time
One of the biggest pitfalls of a manual processing system is a lack of visibility. Being able to track invoices at every stage of their journey from receiving to approval to payment is an essential part of building a consistent and effective invoicing process. Without real-time insights into where a particular invoice is at a given time, it becomes much more difficult to troubleshoot or identify slow-downs or mistakes.
An automated system allows your organization to view invoice data in real time at every stage of the process. That allows your AP team to view live delivery and check the status of documents as they’re being processed, whether you’re using a cloud-based platform or viewing from your ERP. That also provides an easily observable audit trail that can be a lifesaver when invoice processing errors do occur.
As outdated manual AP processes become less and less common in the business sphere, moving your invoice processing to an automated software solution is the logical approach. By upgrading to an e-invoice system, your AP department can save considerable time and money, improve accuracy and efficiency, and provide deeper insights into your invoicing process. Ready to learn more about accounts payable automation options from MHC? Contact us today to schedule a demonstration.
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