Electronic invoicing could save public sector €40bn

Companies pay around €1.40 for a paper invoice, whereas an e-invoice costs only around €0.40 - says company executive

The eurozone crisis has generated unprecedented social and political upheavals that have left many organisations in both the private and public sectors under extreme pressure to find new ways to reduce costs in already lean operations. In response to the critics, public sector budgets are shrinking and cost savings are top of the agenda. At the same time, European organisations are being urged to meet the aims of the European Union Digital Agenda, which sets out to deliver economic and social benefits across Europe through smarter use of information technology.

A new report from Billentis identifies electronic invoicing as one area that is able to deliver substantial savings to the public sector. The report reveals that adoption of e-invoicing could save the public sector in Europe at least €40bn annually. This is critical, since the public sector is one of the largest sectors in terms of invoice volume, with between 45-65 per cent of all businesses supplying goods or services to the sector.

However, the report also states that while the proportion of business and government invoices sent electronically this year is predicted to be around 30 per cent higher than in 2011, penetration is still low - with only around 18 per cent of all invoices likely to be sent in this way. This is despite the European Commission's aim for e-invoicing to be the predominant method of invoicing by 2020, and actions being implemented through the Digital Agenda to remove the barriers to its widespread adoption.

According to the European Commission, companies pay around €1.40 for a paper invoice, whereas an e-invoice costs only around €0.40. Taking the billions of invoices sent in Europe each year into account, this makes the successful roll out of e-invoicing a potential economic game changer for the public sector. Our process efficiency index sheds further light on the inefficient ways organisations are currently managing their documents, showing that on average 42.5 per cent of all business critical information is still stored in hard copy format. There is no doubt that invoicing contributes significantly to this statistic, given the number of invoices sent each year.

Using technology and expert services to improve critical business processes like invoicing not only helps to cut costs but to improve the efficiency of the entire supply chain. With e-invoicing, organisations face fewer payment delays, save money from printing and postage costs, and establish an automated, integrated system for efficient processes. Furthermore, there are huge environmental improvements that can be achieved, not only by using less paper but also by cutting out the energy costs from the transportation of invoices. According to the Mid-Term Report by the Expert Group on e-invoicing, up to three million tonnes of carbon emissions can be saved each year through e-invoicing alone.

However, one of the biggest challenges to widespread adoption of e-invoicing is making the switch from a predominantly paper-based system to an electronic one. For the public sector, doing business with thousands of suppliers and citizens, it is crucial any changes are well planned, communicated, and managed. Outsourcing the entire process - paper and electronic - to an expert service provider can help to overcome these barriers, providing a hybrid approach to total invoice management by making a gradual transition to electronic invoicing; based on buyer and supplier preferences.

In these challenging times, the public sector is understandably wary of criticism over the use of its budgets and resources. European governments can lead by example to realise not only substantial public sector savings, but also act as a model for private sector organisations to benefit from the full advantages of a digital economy. They can also embrace the EU Digital Agenda, and in the process increase their positive contribution back to the European economy.

Martin Hurley is vice-president of outsourcing services at the Ricoh Europe consultancy firm