The upside of electronic invoicing requirements is automated receiving processes for efficiency in distribution and supply chain management.
GOVERNMENT REGULATIONS aren’t typically known for helping businesses streamline processes and increase efficiencies, but that’s exactly what’s happening as governments around the globe have begun requiring businesses to implement electronic invoicing. The standardization required is speeding up the introduction of automated receiving processes and creating efficiencies in distribution and supply chain management.
To understand these hidden benefits of mandated e-invoicing, it’s important to first examine the state of e-invoicing globally. Currently, there are three models for invoicing: 1) Traditional, paper-based invoicing with no government intervention (like the United States), 2) government-influenced e-invoicing, in which legislators regulate public sector transactions (primarily found in the European Union), and 3) government-mandated e-invoicing, when tax authorities require strict pro cess es and formats for all business transactions (most notably found throughout Latin America).
Those companies already subject to e-invoicing mandates, as well as those currently using traditional invoicing processes, should take note of the global trend toward mandated e-invoicing. These regulations are spreading rapidly, with 10 countries in Latin America currently enforcing e-invoicing for all business transactions. Other governments worldwide – like Italy, Spain and Portugal – also are exploring the benefits of following suit. Why is mandated e-invoicing so increasingly popular? For governments, it’s all about tax revenues. The visibility into these financial transactions helps governments to ensure they are maximizing their tax collections. The benefits extend to businesses as well, creating process efficiencies and providing the opportunity to automate accounts payable and logistics.
From a distribution perspective, it’s true that these mandates present distinct, complex challenges. In many cases, the ability to ship is tied directly to the e-invoicing process – a copy of the invoice must be on the truck before goods can ship. Manufacturing and distribution executives are frequently left out of invoicing and financial processes, but because seamless transmission and accuracy of invoices is critical to outbound shipping functions, these operations should be closely tied together. In fact, inaccurate or incomplete e-invoices can shut down manufacturing operations for days while goods can’t be shipped.
Brazil, typically the benchmark for e-invoicing mandates, is in the process of enacting the most complex shipping requirements in the world. Already requiring commercial transport and manifest documents to accompany all shipments, Brazil now also requires buyers to match inbound shipments to the government approved e-invoice and acknowledge the receipt and accuracy of the shipment. Soon, the country also will begin enforcing Brazil-ID, using radio-frequency identification technology to track goods from the moment they leave the warehouse to their final destination. Although cumbersome, Brazil-ID offers manufacturers an extraordinary opportunity to streamline distribution, as they will have a holistic picture of the entire distribution process.
The true advantage of e-invoicing for manufacturing and distribution, however, is found in the inbound logistics side of business. Because many governments require a copy of the standardized e-invoice to accompany all shipments, acting as a bill of lading, shipments can be verified immediately upon receipt. What traditionally took hours in terms of inventory management and manual data entry can be managed with a single scan-and- click process.
Additionally, since invoices are standardized and shipments can be immediately verified, the accounts payable processes can be streamlined as well. Collection, validation and processing of invoices can all be automated, and since invoices can be marked “okay to pay” as soon as goods arrive, the accounts payable team can focus on discrepancies instead of manual data entry. Automated accounts payable processes also pave the way for supply chain finance offerings, with buyers automating payments and suppliers having the option to get paid on their own terms. Ultimately, this streamlined cash flow strengthens and stabilizes buyer-supplier relationships – especially important in the emerging markets where mandated e-invoicing currently has the strongest foothold.
Because e-invoicing so significantly affects manufacturing and distribution processes, it’s essential that these executives be a part of the decision-making and e-invoicing implementation processes. The risks of getting it wrong are heavy – fines, penalties, operational shut downs, missed shipments and deadlines – but the rewards can be significant, with companies reducing inbound receiving costs by up to 40 percent and increasing employee productivity up to 50 percent. With e-invoicing requirements continuously expanding, manufacturers operating in Latin America and beyond should examine their current invoicing processes to ensure they are taking full advantage of these operational efficiencies and not ignoring the critical role of e-invoicing in their supply chains.
Invoiceware International standardizes complex compliance regulations in Latin America for the world’s largest companies, including Pfizer, Sigma-Aldrich, Qiagen, Medtronic, Siemens and The Coca-Cola Co. As the largest regional business network, Invoiceware reduces the risk and cost of maintaining compliance, empowering clients to capitalize on government standardized e-invoicing to improve supply chain efficiency and optimize cash flow. Atlanta-based Invoiceware International’s operations cover Brazil, Mexico, Chile, Peru, Colombia, Ecuador, Uruguay and Argentina. Visit invoicewareint.com or follow @InvoicewareInt on Twitter.