EDI and e-Invoicing: Where, Why, and How They Go Wrong

Electronic invoicing is often pitched as the panacea for invoice delivery challenges in the wake of the coronavirus pandemic.

On the face of it, this makes sense. Electronic delivery avoids the need to have staff manually print documents, stuff envelopes, and run the risk of postal delays only to have printed invoices languish in customers’ unstaffed post rooms in times of lockdown.

However, the “express delivery” potential of e-invoicing is not always the reality.

The same goes for EDI as a specific mechanism for electronic invoicing. EDI promises even greater efficiency than PDF-over-email approaches to electronic invoicing, such that European countries are increasingly requiring EDI, particularly for public sector transactions.

These shiny promises of one-click delivery and invoicing automation have drawn many businesses to fast-track the deployment of e-invoicing as part of the order to cash cycle.

Given the complexities and nuances inherent in invoice presentment, few businesses have tried to develop e-invoicing capacity in house.  Those who have, quickly realise that getting the right output from their ERP systems, in the correct format, to send electronically, can tie their in-house developers and IT department up in knots… for months.

In our age of plug-and-play, the Software-as-a-Service (SaaS) model has become a popular choice for businesses to sidestep the perceived IT nightmare of developing e-invoicing, or EDI delivery, capacity in-house. However, SaaS technology is typically just a way of gaining access to the technology to enable electronic delivery. The spectre of implementation looms large for businesses who typically have no experience onboarding automation processes.

Technology is only part of the solution. You don’t automatically become a racing driver the moment you buy a Ferrari; so why should e-invoicing software magically bestow AR departments with electronic invoicing expertise?

Electronic Invoicing Failure

The most common type of failure in e-invoicing is perhaps best termed as a soft failure, rather than the total inability to deliver invoices electronically. Businesses have turned to electronic invoicing in this time of lockdown to ensure delivery. The way they see it, any electronic delivery is better than the alternative, the challenge of printing and posting invoices, when your team are working remotely. E-invoicing gets around this challenge, and also ensures invoices reach customers if they are not in their offices to receive and process posted invoices.  But reliable invoice delivery is only part of the picture.

Some of the biggest benefits of electronic invoicing are efficiency gains, automation, and streamlining traditionally manual processes with improved accuracy. Without the correct configuration, deployment, and ongoing management of electronic invoicing, these benefits will not be felt. Furthermore, the associated risk to invoicing delivery can result in poor customer experience, payment delays and cash flow problems.

One example of what can go really wrong, is businesses that instruct AR teams to manually create a PDF for each invoice and then attach that to individual emails. . The slog of manual behaviours is essentially the same. Time saved on print and post is just repurposed for electronic delivery. It’s a little like trying to use an electric toothbrush without pressing the on button.

EDI Invoicing Failure

EDI delivery is an unforgivingly specific process, and mismatch of just one element can result in a Computer Says No scenario. EDI is incredibly powerful, but needs to be thought of holistically, not just as a delivery mechanism. Businesses need to implement the correct mapping and rules to ensure optimal delivery. The setup needs to be 100 percent correct or it simply doesn’t work and can result in delays and the need for problem-solving that nobody has time for right now!

PDFs and other human-readable invoicing types may well be processed by people, where a degree of interpretation can handle poorly-formatted invoices, but EDI invoicing relies on machine-to-machine communication where the recipient machine is expecting data in a specific format − no exceptions.

Systems vendors provide businesses with the tools, but typically leave them on their own to figure out taxonomy, mapping, and solving the array of anomalies that occurs. You may get the most advanced system for EDI, but if you don’t know how to use it, you may as well have an abacus and a courier pigeon.

Why the disconnect?

In a recent survey we conducted across a broad range of senior credit professionals, we found that the majority of AR solution investments (58 percent) are decided by CFOs, FDs, or other non-credit roles.

Whilst 84 percent of senior credit professionals responding to our survey had control over headcount decisions, investment in solutions or outsourced services (which could dramatically reduce headcount costs) was determined outside of the department.

But CFOs and FDs frequently lack the deep operational experience and insight to see how electronic invoicing solutions need to dovetail into existing systems and processes in AR. The assumption too often is that software can be purchased and deployed effectively by in-house teams.

Investment in electronic invoicing, and EDI as an extension of this, needs to be scoped out carefully, with sufficient thought to how this is going to be configured, deployed, and managed for optimal effect.

How to Fix e-Invoicing and EDI Invoicing Failure

As we have already identified, the most common failures in electronic invoicing, and EDI invoicing as a specific subset of this, lie with poor configuration and deployment. When looking at these as technological solutions, it helps to think about service as much as software.

Some of the less progressive, more traditional businesses out there may recoil at the thought of outsourcing such a highly sensitive business process to a managed service provider. However, what is postal delivery if not the outsourcing of the delivery as a process? Few businesses would try to deliver each invoice by hand, so outsourcing electronic delivery needn’t be quite the daunting step some consider it to be.

Embracing electronic delivery in its full capacity affords businesses the ability to automate, streamlining manual repetitive processes and improving accuracy through the reduction in human error.

Whether deploying EDI or other forms of electronic invoicing, the first step needs to be a thorough appraisal of invoicing data sources (ERP systems, etc.) and how these need to be processed, modified, or merged to generate invoicing output of the required format.

EDI invoicing needs to map invoicing data carefully to fields required by the recipient AP system. In many cases, the data needs to be correctly parsed to export to a specific XML schema − such as the Fattura Electronica XML based digital invoice format in Italy.

At Netsend, we help businesses get set up with electronic invoicing, including EDI, quickly and efficiently. Typically, this means there is very little need for IT department involvement, and deployment can progress quickly. Beyond the initial scoping, configuration, and deployment, we manage the ongoing commitment to maintaining seamless invoice delivery − regardless of changes to internal systems (e.g. ERP systems) or evolving EDI formatting requirements.

Find out more about how we can help your business maximise the benefits of electronic invoicing and EDI today.