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eInvoicing: The Upside Down Cloud Application

einvoicesIt’s hard enough keeping track of EDI messages, standards, deadlines and systems requirements for different countries’ tax authority. And requirements change quickly, so if you’re a growing company, the cost of supporting those requirements gets expensive. The challenge with e-invoicing is that traditional technology approaches have not worked to streamline what is an inter-company process, according to industry observers.

“Traditional license and install software was designed to automate processes within a single company, not between companies,’’ notes Bill Jetter, director of trade solutions at GT Nexus, a provider of a cloud-based platform for the global supply chain. For the past 30 years the approach has been to connect software systems via EDI networks, but while they efficiently pass messages between systems, “there are no standards and data gets out of sync quickly,” he says. The ability to do e-invoicing in the cloud, Jetter adds, “is a complete breakthrough.”

In the cloud, all of the information is posted in the middle of a network, where all parties look at the same business object and view “a single version of truth,” he says. With everyone in a business or supply chain network working off the same piece of information, “you become enabled in ways that weren’t possible before. So the business case is, at what point do companies stop dumping millions of IT dollars trying to build out their own private supply chain networks and instead move to existing, proven networks in the cloud?”

Another new aspect of e-invoicing in the global supply chain, Jetter says, is about e-commercial invoicing. A commercial invoice is used in international trade and contains details about the goods to determine the customs duty to apply to the goods. The commercial invoice would typically include details such as weight (since some customs areas levy duty based on weight in addition to value), volume, country of origin, transportation mode and shipment terms. This data is often determined through supply chain activities related to but not germane to the invoices, Jetter says: product logistics; packaging to calculate weights and volumes; transportation booking with carriers or third-party logistics providers to determine transportation; and shipment details. “Thus, the e-commercial invoice is the result of a more holistic supply chain management process that integrates transportation execution, packaging and, yes, financial invoicing,” says Jetter.

Once all the data is agreed to by the parties involved, that commercial invoice is produced--and in many cases is now being generated by the buyer for benefit of supplier, Jetter says. “The traditional one-to-one relationship without the cloud model assumes the seller of goods is the entity that will produce the commercial invoice,’’ via a web browser, he says. E-invoicing has often been coupled with settlement—electronic invoice presentment and payment, e-billing and payment—but buyers have been cool to paying sellers through an e-invoicing solution, he says. When e-invoicing is moved to the cloud, “We’ve found that often the entity that creates the commercial invoice is flipped and in a lot of instances it’s the buyer creating the invoice; essentially self invoicing to pay the seller.”

Buyers want to control the timing and initiation of payments from their banks and this has made them resist using e-invoicing systems, he says. Buyer self-invoicing overcomes this resistance to e-invoicing, Jetter maintains, and is common in cloud-based supply chain system. Both buyer and seller have visibility into the orders and shipment data in the cloud system, and therefore trust the invoice as the basis for determining the settlement from buyer to seller, he says.

With self-invoicing, a system generates an invoice using data from the buyer’s original orders and applies shipment quantities and dates provided by the seller, and then constructs the invoices. When the buyer approves the invoice for payment, it controls the timing and instruction to its bank to pay the supplier.

And small suppliers end up benefiting when large buyers do self invoicing in the cloud, Jetter points out. “They don’t have to invest in technology to create an e-invoice environment. For many small suppliers, this could remove a substantial technology hurdle if I’m utilizing the buyer’s self invoice, because they have the system in place. All you need is a web browser. The format and the data in the invoice are all standardized so anyone can use it. It’s a win-win.”

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