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- March 27, 2014
- Finance & AP
In an earlier post, Terry Kohn, director at the Hackett Group and a consultant specializing in e-invoicing and e-procurement strategy for companies in the $1- $15 billion range, shared his insights on crafting a successful e-invoicing strategy. As a self-described e-invoicing geek, he watches the market and helps companies get up to speed on the options available. Here he shares his thoughts on some of the new tools that are enabling better strategic approaches, and new e-invoicing benefits, chief among them the cloud.
Coupa: Paystream Advisors recently published a ‘state of the state’ paper on e-invoicing. One of their significant findings was that as the economy has recovered, there’s been a jump in the number of companies, particularly SMEs, planning to implement e-invoicing. Can you talk a little bit about some of the changes and tools that are enabling more companies to move in this direction?
Terry: Sure. There are a couple of things in the marketplace that are changing the way this is accomplished, versus five or ten years ago. The first thing is the advent of intelligent OCR. It used to be that OCR required almost a one to one match up with your suppliers.
You can imagine the ERP overhead for having ten thousand templates that an OCR engine would have to sort to find the proper one in order to ingest an invoice. Companies became aware very quickly that that was not the optimal way to go. Intelligent OCR, which uses artificial intelligence to identify specific characters and do a geographical search around them
to adopt and learn the templates, is pretty innovative advance.
Second, the tools are advancing very quickly in form factor, user interfaces, and general ease of use. They look good and work well. Adoption is becoming easier as these advances occur and the possibility
to easily achieve better results comes into play.
Lastly, there’s the Cloud. The Cloud is changing a lot of this. The Cloud allows you to go to a single e-invoicing format and have a black box approach to the identification and importation of invoices. Of course, the challenge with the Cloud is that you are one step removed from the AP and GL coding of the organization..
Those challenges notwithstanding, I think the single biggest thing to realize right now is how the Cloud is going to take over on-premise. I think it's going to come quicker than most people do, and there could be some real benefits to taking advantage of what’s happening with the cloud. It's a very interesting development.
Coupa: Do you want to talk about that, and how ?
Terry: Yeah. In general terms, I think the Cloud model is transforming the way e-invoicing is costed out to organizations. Cloud providers are recognizing that the best way for them to increase adoption and move people from on -premise to the Cloud, or just directly to the Cloud, is by being very compelling in their business models.
In the e-invoicing space, that boils down to lowering per-invoice cost for processing of invoices. They're getting very aggressive and prices are falling. I think prices are going to fall even lower and much quicker as the companies in the Cloud start to put new strategies in place.
Their business models are evolving from being paid for processing invoices to be being paid for providing the data that is on the invoice to the organization for further purposes, such as spend analysis and cost reduction.
On the flip side, they’re providing suppliers with banking and short-term loan support so that they get their money immediately and don't have to hassle, and suppliers will pay a small fee for that. They'll take that money from the supplier base and stop charging as much for e-invoicing to the organizations themselves.
Coupa: What is the trend line on this?
Terry: This is developing rapidly. It started quite recently, within the last six months or so. There have been some acquisitions and some shifts in strategy. It's a change in the business model, a change in the economic proposition for the corporations and they need to keep their eye on that if they want to understand this and make the most effective decisions for their companies.
Coupa: If you were in an e-invoicing transformation process today or thinking about one, this a big enough development to make you say, "Wait a minute! Maybe we need to think about this before we make our final decision?”
Terry: The Cloud is not going to be for everybody. If anyone said to you, "The Cloud is the way to go. Everybody should go that way," that would not be a very well-informed point of view. But the Cloud is out there, and Cloud models are changing. People need to know about it and they should factor into their thinking. Absolutely.
Cloud providers can do a really, really good job in what I call e-invoices that are supported by the perfect P.O. But if the P.O. is not perfect or is there is no P.O., and you have unsupported invoices or you have some issues even with your own approach, or how your ERP is established, going to the Cloud makes it a more difficult invoice process.
That's been my observation and I think people who have gone to the Cloud will agree with it. On the other hand, if you're a high volume manufacturer or you're using a lot of P.O.s and you have really good ERP support and you have really good discipline on how you establish your processes and your supporting documents, I think this is a wonderful extension and certainly an advance over EDI, in many regards. It's moving forward into the future.