Electronic Invoicing: New Channel Opportunity

Alternatives to traditional invoicing systems provide a lucrative opportunity for channel partners. Mitch Baxter executive vice president, business development for Transcepta, explains what pitfalls to avoid when evaluating the proper solution.

December 23, 2008

Mitch Baxter

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Many resellers today have Optical Character Recognition (OCR) solutions in their portfolio. It’s easy to understand why. Despite all of the hype over the “paperless office” in the last 20 years, paper continues to bury us all, and OCR solutions make it easier for a business to consume inbound paper. To help solve the problem, business owners and managers are willing to pay for a solution.

One of the most prevalent business documents utilizing OCR is inbound vendor (seller of goods & services) invoices. An accepted rule-of-thumb in the industry is that one accounts payable (A/P) specialist can handle approximately 1,000 invoices per month. For businesses with 10,000 or more invoices per month, this translates to a very large staff working full-time to keep them afloat. The business is literally drowning in paper.

There is a cost to the business for all of this paper. First, there are the obvious costs to vendors, who have to send these invoices using frequently manual processes. Second, there are also costs to the buyer organizations (buyer of goods & services) who have to open the mail, collate and scan the invoices, “index them” (the process where invoice header information is tagged to the image), and enter all relevant information from the invoice by either keying it manually or using OCR.

There are other costs as well. There are increased costs from vendors who charge “late pay” buyers more because they know they’ll have 60-day payment terms (or longer). There are lost early-pay discounts, which for some buyer organizations become impossible to take if the paper-processing timeframe is a typical 15 to 20 days.

It’s ridiculous when you think about it. Vendors usually have invoice data in a modern accounting system, QuickBooks being prevalent. Large buyers run one of the major ERP systems (like SAP or Oracle E-Business Suite), and they want invoice data that they can import into their systems. Yet, the transport of this information, which is present in electronic form on both sides, is paper. Sent in the mail. Ridiculous, right?

There are alternatives in the form of electronic invoicing systems, and they comprise an interesting business opportunity for channel partners.  There are varied approaches to the market. What are they and how can resellers to choose the right partner?

There are a number of questions that arise when evaluating potential solutions:

·     Is the company a channel-centric company? Ask “approximately what percentage of your buyer-side revenues come from/through a partner?”  This number should be above 50 percent.

·     Is the solution a software product or a service?  So far, no software products have made substantial progress in solving the e-Invoicing problem. Why? Because you have to have a team doing the work of connecting vendors, and it probably can’t be a team inside the buyer company.

·     If it is a service, does the company offer vendor on-boarding services? Typically, vendors do not have the time or energy to start a new IT project. A solution where vendor on-boarding is handled without vendors having to do much (or any) of the work, will have much higher acceptance.

·     How many potential connection methods will be offered to vendors? The leading e-Invoicing solutions in the market offer four:

First, emailing of PDFs: Invoices are emailed to a hosted data center where business rules are configured to extract data off of the attached PDF and are delivered to the buyer in a common form for import into their ERP system.

Second, the use of a virtual printer. Installed on the vendor’s accounting system and used to send invoices to the hosted data center for processing by business rules as defined above.

Third, acceptance of a variety of different electronic data file formats, including EDI, XML, text, etc., and transforming these into one file passed into the buyer’s ERP for import.

Fourth, a portal for manual submission of invoices for vendors that cannot use the first three submission methods. The key here is vendor acceptance. How is the solution for vendors? This includes getting them connected in the first place as well as day-to-day use. One piece of advice: There are solutions on the market that rely extensively on a vendor portal, so evaluate these solutions closely because vendors don’t want to re-key invoices when they have them ready-to-send in their existing accounting systems.

In summary, there are several key reasons why you should recommend an e-Invoicing solution to your valued customers. First, you’ll be a hero. When paper is replaced with electronic connections between vendors and buyers, it works like magic and the return on investment is easy to quantify. Second, you can perform professional services to help connect the electronic invoices into the buyer’s ERP system and configure back-end imaging and workflow. This deepens your customer relationship and makes you money. Finally, you can build a revenue stream that pays as an annuity, which is an emerging model in the days of hosted software solutions.

(Mitch Baxter is executive vice president, business development for Transcepta.)

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