In times where we are reminded – normally via our smartphones – on a daily basis that the world has gone digital, why does the dinosaurian paper-based invoice still roam the earth?
Well, the simple fact is that, although the evolution of e-invoicing is making an impact around the globe, its popularity and integration has yet to amount to the catastrophic capacity that is needed to bring about the absolute extinction of Papersaurus Checks and their paper-based brethren once and for all.
Manual invoicing, billing, and check-writing takes time. These are increasingly outdated, expensive, and flawed practices in a computerized world where technology exists to improve these processes, speed them up, and make them more reliable.
You may remember our blog post in March – ‘Brazil, Mexico, and Chile Still The Greatest Adopters of Invoicing: An International Market Overview’ – where we considered the international e-billing and e-invoicing market as reported by Billentis. As we noted – although it is certainly true that electronic invoicing is making significant disruptions, there is still a long way to go. While paper-based invoicing still exists, companies will continue to deal with paper invoices alongside electronic ones until – hopefully – one day we see all Papersauruses wiped out for good.
Billentis have now released an updated report on the global state of the market, and so we are bringing the updated figures from the report to you here so you may see how things have progressed. All images and statistics are taken from the report.
E-Invoicing / E-Billing: Entering A New Era, Billentis (June 2015)
Cost-reduction continues to be the main driver for the adoption of e-invoicing. Typically, electronic and automated invoice processes can result in savings of 60-80% compared to traditional paper-based processing. Companies who make the switch to e-invoicing can normally expect a payback period of between 6 and 18 months.
E-invoicing is most certainly on the rise, but there is still much potential to be exploited.
Estimating The Global Volume Of Bills/Invoices
Whereas the volume of paper and electronic invoices in Europe and Latin America is relatively well known, figures for other continents may just be guessed. Based on research and various global indicators, Billentis estimate the global invoice/bill volume to be around the 500 billion mark.
This can be broken down as follows:
- 500 billion – global number of invoices in 2015
- 42 billion – global number of these expected to be paperless in 2015
- 25 billion – Latin America’s contribution to electronic volume
- 7 billion – Northern America’s contribution
- 7 billion – Europe’s contribution
Invoice Volume Increases 2-3% Every Year
There are several indications that the bill/invoice volume increases 2-3% every year:
- Increase of the population, the number of households, and enterprises
- Suppliers improve their working capital and are no longer willing to give credit to their clients due to low billing/invoicing frequency; by sending bills/invoices every two months instead, they do it after each delivery
- Legal reasons; some countries (especially within the European Union) are mandating suppliers to send bills/invoices within 15-30 days of their performance or goods delivered
- Electronic invoices are cheaper and allow suppliers to send invoices more frequently
Invoice/Bill Volume In Europe – B2C
Approximately half of the invoice volume in Europe is sent to consumers (B2C), while the other half to enterprises and the public sector (B2B/B2G/G2B). It is likely that the total volume of invoices in Europe will have passed 35 billion already, a figure that could rise to 36 billion in 2016.
Savings Potential Of E-Invoicing In Public Sector
With at least 10% of the market invoice volume, the public sector belongs to the “Top 3 industries”. Measured by the number of trading parties, it is the clear leader: 45-65% of all companies in a country are suppliers to the public sector and send invoices to it. 100% of enterprises and households receive invoices from the public sector. That is why e-invoicing initiatives by the public sector are key for the development of the whole country.
Many countries recognize this savings potential, but exploiting it is another matter entirely. The public sector is by nature extremely fragmented, which means that there are many stakeholders that have to be convinced in order for e-invoicing projects to get the go-ahead.
The Billentis report gives the full breakdown of e-invoice volume in the Danish and Swiss public sector:
Using these figures as a model, the saving potential for other countries in Europe could look like this:
The above estimate is based on the assumption that 40% of the e-invoices are exchanged in unstructured format (PDF) and 60% with structured XML invoices (fully automated processes). Many administrations insist on just structured invoice data. Their potential is higher than the figures above.
As attractive as e-invoicing in the public sector appears, it is far more challenging to implement. The public sector is not one homogenous segment. The state administration forms one part, and in addition there are regions, cities, and municipalities. Many countries have a federalist structure with high autonomy for each entity.
However, Brazil and Mexico have proved that it is possible to establish e-invoicing country-wide, even with a federal structure (see ‘Brazil, Mexico, and Chile Still The Greatest Adopters of Invoicing: An International Market Overview’), and we will consider these countries alongside the rest of the world in the second part of this post, which will be following shortly.