global development of electronic invoicing
DESCRIPTION
Global tangible benefits to E-InvoicingTRANSCRIPT
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Global Development of Electronic Invoicing
Karri Lehtonen
Vice President, APAC
Basware Corporation
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Global Invoice Volumes
• Global annual invoice volume is ~350 billion,
mostly in paper
• In industrialised countries, invoices represent
~16-30% of the total (addressed) letter volume
and up to 50% in less industrialised countries
• Economical cycles do not have a noticeable
impact on the invoice volume
• Approximately half of all invoices are in B2C
sector and the other half to the B2B sector
(including B2G)
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B2B/B2G sector invoices
• B2B/B2G sector is completely fragmented in terms of the invoice senders and
receivers
• Only a few industries receive very high invoice volumes
• The organisations with the highest inbound invoice volumes are:
Industries with high inbound volume Share of all invoices
Retail 10%
Healthcare 5-13%
Public sector 9-15%
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Electronic Invoicing
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The definition of an E-Invoice
• Strict definition of E-Invoicing:
– Invoice files that are transported and archived fully
electronically from end-to-end in a tax compliant
manner
• Not considered are:
– Invoices which are transferred electronically, but
violate legislation for some reason
– all "semi-electronic" invoices:
• Electronically sent invoices, but printed and
archived by recipients as paper invoices
• Scanned paper invoices
• Invoices, which are transferred and processed
electronically, but supported by paper summary
statements
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Motives for replacing paper invoices
• Organisations start E-Invoicing projects for various
reasons:
– External pressure (Suppliers, Customers)
– Internal cost pressure
– Process innovation and automation
– Quality improvement
– Public sector initiatives (with the aim to reduce fraud and
increase tax income and to optimize their own invoice
processes)
– Environmental reasons
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Different focus areas in different regions
1) Tax Compliance, strong goverment initiatives
2) Internal efficiency driven initiatives, strong savings focus
3) Trade enablement, harmonisation of cross border rules
TAX AUTHORITIES
SUPPLIERS
BUYERS
1) ASIA & Latin America
2) North America 2) North America
3) Europe
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Reduction of Tax Evasion
• According to various
economic theories one of the
main factors in tax evasion is
the probability of being
controlled/audited within
reasonable time
• E-Invoicing can be used as
pre-requisite to secure high
probability of control
• Further E-Invoicing can create
an electronic invoice
record/archive to the tax
authorities in real-time
0 %
5 %
10 %
15 %
20 %
25 %
30 %
35 %
40 %
2001
2002
20
03
2004
2005
2006
20
07
VAT breach in Argentina
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Tangible Benefits of Electronic Invoicing
• The Finnish State Treasury have estimated that an incoming paper invoice
incurs costs amounting to €30 to €50 Euros for the receiving company
• By moving to electronic invoicing these costs can be reduced to €10 Euros by
semi-automating the invoice process and to €1 Euro by fully automating the
process
• An in-depth analysis of Politecnico di Milano states that the net benefits are
€4 to € 12 Euros per invoice with VAT compliant E- Invoicing and up to €65
Euro with full integration of the trade process
• With the combination of electronic and automated invoice processing, savings
between 1% and 2% of the organisations entire turnover are realistic
objectives
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Public Sector Savings potential
• Average savings potential per invoices is
around 57% for invoice senders
• Average savings potential per invoices is
around 62% for invoice receiver
• Public sector savings potential:
– Austria 600 M€
– Italy 3,000 M€
– Belgium 900 M€
– France 4,200 M€
– Spain 1,800 M€
– UK 4,400 M€
– Germany 6,500 M€
– ...
State 12%
Communities
14% Cities 74%
Savings Potential: Denmark
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Environmental Issues
• Every year 30 billion invoices are sent across Europe
alone. A typical invoice is approximately three pages long
meaning that 90 billion pieces of paper were printed out,
posted and flown across Europe in just one year
• If all of those invoices were sent electronically 12.6 million
trees, 105 billion pieces of A4 paper, 13 billion litres of
water and 5.4 billion kWh of power could be saved each
year on just the paper manufacturing alone
• The equivalent of which could power 15.8 million 40W
lamps, constantly, for 24 hours of the day for an entire
year
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The carbon footprint of different types of invoices
• In addition to the actual
manufacturing of the paper, the
delivery, archiving and processing of
E-invoices result in significantly
smaller CO2 emissions than paper
invoices
• The carbon footprint of an E-Invoice
is only one third of a paper invoice
• The new Carbon Tax on the
Australian invoices will be
approximately $24 Million AUD per
annum
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E-Invoicing service providers
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E-Invoicing operator situation
• By 2012, more than 550 e-Invoicing operators
were active in the European market alone
• These “operators” are either start-up companies in
the e-Invoicing field or other types of business
expanding to the e-Invoicing market (e.g. banks,
post, EDI vendors, print shops etc.)
• Banks tend to concentrate on B2C and SME
invoicing
• Other non-bank operators have approximately
85% market share in all electronic invoices
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Standards
• Lack of information about existing standards
combined with some inflexible organisations
has resulted in the re-invention of dozens of
niche standards (domestic or industry focus)
• There are about 10,000 different ERP
solutions in Europe alone, all have different
integration points
• That is why most e-lnvoicing operators offer
any-to-any-data-formatting services
• As a result, senders and recipients of invoices
using such services are independent of any
standards and they no longer need to wait for a
market dominant standard
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The global E-Invoicing landscape
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Different E-Invoice Streams and Sectors
• The USA is leading the market for E-
invoices to consumers (B2C)
• The market leaders in the Business-to-
Business (B2B) and Business-to-
Government (B2G) segment are located in
Europe and Latin America
• This year (2011), roughly 5 million European
businesses and 75 million consumers are
expected to send or receive electronic
invoices. They likely exchange more than 3
billion E-Invoices.
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Classic market development pattern in most countries
1. B2C Biller Direct
2. B2C Consolidator
3. B2B Large organizations
4. Mass market
Adoption
Time in Years 0 10
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Global E-Invoicing Market 2012 B2B, B2G, G2B and B2C
Source: Billentis 2012
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Europe
• The expected market penetration of E-Invoices will be above 50% in
2017 for the B2B/B2G segment
• This should be achievable without any intervention from politics and
economical development
• B2C invoices
– About 20% of European households receive electronic invoices
– Roughly every second consumer in Nordic countries prefers to
receive electronic invoices via internet on-line banking
– In other countries, most consumers prefer to receive electronic
invoices via email
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Invoices received by enterprises
0% 20% 40% 60% 80% 100%
Finland
UK
Denmark
Norway
Estonia
Romania
Hungary
Sweden
Latvia
Russia
Germany
Austria
Czech Rep
Lithuania
Poland
Fully Electronic
Scanned paper
Paper
In 2011 the market grew by more than 35%. Sustainable annual growth rates of more than
30% are also expected for the coming years in the B2B and B2C segments
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EU Wide Focus on E-invoicing
• The European Commission is focusing its efforts on
removing barriers to the broad-scale adoption of electronic
invoicing in Europe
• Four key priorities on this topic are:
– Ensuring a consistent legal environment for E-Invoicing
– Achieving mass market adoption by getting SMEs
onboard
– Stimulating an environment that creates maximum
reach between trading partners exchanging invoices
– Promoting a common E- Invoicing standard
• EU Commission has set a target for E-Invoicing to be the
norm of invoicing by 2020
• New directive 2011/7/EU [22], focusing on timely payments
to SMEs
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North America
• Approximately 5.1 billion E-invoices were delivered in
2010 in the US and E-Invoices are likely to overtake
paper in 2016
• In the B2C segment the US is 3-4 years ahead of
Europe
• On the other hand the Northern American B2B/B2G
market seems to be 2-3 years behind Europe and
some Latin American countries
• The annual E-Invoicing growth rates of about 25%
are increasing, but are still almost 10% below
European rates
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US Federal Initiative (July 2011)
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Latin America
• In contrast to the rest or the world, most Latin American
countries have gone straight ahead to phase 3 (e.g. Chile)
and phase 4 (Brazil). Argentina and Mexico are other
advanced markets in Latin America
• The initiator for the market activities in most cases is the
government
• Although the legal requirements are among the strictest
worldwide, some countries in Latin America seem to take
over the global leadership role
• The Latin American model is also inspiring larger
countries in Asia
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ASIA Pacific market
• Most countries are in evolution phase 1
and 2: Large bill issuers stand with "Bill
presentment" via their company portals or
internet banking
• Market leaders are Singapore, Hong
Kong, Taiwan and South Korea
• Singapore is the only country with a active
government initiative, E-Invoicing has
been mandatory when doing business
with the government since 2005
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Market Evolution
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Public Sector’s key role in development
• The public sector is in an excellent position to initiate
the breakthrough in the mass market
– In many countries, 2/3 of local enterprises are
suppliers to the public sector
– Public sector bodies have the power to push
these suppliers to send invoices electronically
– Federal government is also in the position to
modify the legislation in a user- friendly way if
necessary
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Current Market Trends
• Fees for paper invoices
– Paper invoicing surcharges are becoming more and more popular in
some countries (EUR €1 - €3.50 to consumers and EUR €5 - €25 for
businesses)
• More innovative rollout models:
– "Opt-Out" rollouts
– Online Banking; when customers type in payment data, they receive
a pop-up message inviting them to receive the invoices electronically
(customers can activate this enhanced service with a simple mouse-
click)
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Break Through to Mass Market
• Initiatives which did NOT achieve a broad break-through
– Classical Opt-In models practiced for on-boarding of suppliers
– Low-cost or free services
– Standards
– Removal of legal barriers
• The key criteria for a substantial breakthrough are
– Obligations for trading partners to support E-Invoicing
– Excellence in the on-boarding process; “carrot and stick”-
policy; make registration process and usage of E-Invoicing
services as easy and quick as possible
– Appropriate service offered to all sizes of trading partners
including any-to-any data formatting and e-archiving
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Governments that have banned paper invoices
– Denmark, from 1/2/2005
– Singapore, from 1/5/2008
– Sweden, from 1/7/2008
– Italy, from 1/7/2008
– Finland, from 1/1/2010
– Brazil, from 1/4/2012
– Kazakhstan from 1/1/2012
– Greece, from 1/9/2012
– USA, from 1/1/2013
– Norway, from 1/7/2013
– Nepal, Mexico, Netherlands, …
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How about Australia?
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Thank you
www.basware.com.au