What is e-Invoicing?

Blog | August 13, 2020

Reading time: 4 min

e-Invoicing or electronic invoicing is the practice of transmitting transactional documents to trading partners electronically.

Diagram showing digital invoices on a laptop and desktop computer monitor

The importance of invoices

When two companies enter into a trading agreement, documentation is required throughout the process to aid communication and ensure that terms and conditions are being met. 

These documents can include: invoices (bills), purchase orders, debit notes, credit notes, payment terms and instructions and remittance slips. 

These documents are simultaneously numerous, vital to business and time-sensitive and are multiplied across a company’s total number of transactions. Managing all invoicing documentation in paper formats is challenging and prone to error. 

The history of e-Invoicing

The earliest attempts at “paperless invoicing” were undertaken in the 1960s as trading partners established proprietary data links between each other and developed the first EDI (electronic data exchange) systems. 

These early systems were rigid and unique. As computing and networking evolved, standards were created. With the development of new technology from the 1990s forward, new formats and more flexible applications were made available.

What are the benefits of e-Invoicing?

More and more companies are adopting e-Invoicing solutions because they save time and money and lead to less errors and faster payments. 

According to a Billentis report, the U.S. federal government estimated that implementing e-Invoicing across the government would lower costs by 50% and save $450 million every year.

e-Invoices save suppliers time because they can be automatically generated using the data in the supplier’s ERP system. 

e-Invoices can be electronically presented to buyers in a number of ways: 

  • Via PDF over email
  • Via a supplier-hosted self-service portal
  • Via an AP provider portal

When presenting invoices electronically, suppliers gain the ability to quickly search through all current and past invoices. These insights lead to less errors and better customer service. 

Electronic invoices are transmitted to buyers more quickly than paper invoices sent in the mail. And faster invoicing leads to faster payment – helping suppliers increase their cash flow and reduce their DSO. 

Electronic invoices have benefits for buyers as well:

  • Easily searchable current and past payables documentation
  • Time savings on keying in invoice data
  • Less labor intensive to process
diagram showing e-invoicing methods that are supplier and buyer controlled

What are the main methods of e-Invoicing?

The main methods of e-Invoicing are:

Emailed invoices

Often delivered via PDF, but sometimes also within the body text of an email. Emailed invoices will often appear very similar to their paper counterparts. Emailed invoices are more cost effective to send than paper invoices because they eliminate printing and mailing costs.

But the buyer will often still need to manually key the invoice data into their ERP system unless they have implemented an automated solution. This required human intervention can sometimes lead to a delay in payment processing and ultimately a slower payment.

Some invoicing automation vendors, like Billtrust, offer the ability for buyers to pay their emailed invoices directly from the email itself.

Supplier hosted self-service portals

These portals allow buyers to log in and see their open and past invoices. If the self-service portal is provided by an automation vendor that can manage integrated payments, then buyers can pay their invoices directly within the portal itself.

Accounts payable platforms / portals

Accounts payable platform adoption is a growing trend in business. A recent Gartner study states that, by 2025, over 50% of mid-market and large businesses will have deployed procure-to-pay suites.

These AP platforms require suppliers to log into them and manually key in invoice data in order to get paid. This can be a major challenge for suppliers. The work of maintaining portal credentials with all of their customers and manually keying in every invoice is expensive, error-prone and can slow the pace of business.

Some suppliers simply refuse to invoice in this way, but that can lead to customers taking their business elsewhere.

AP portal automation enables suppliers to integrate with all of their customers' portals and input their invoice data automatically and without the need for human intervention.

As buyer demand for AP portal invoicing grows, suppliers will need to leverage AP portal automation to stay efficient and competitive.

What are the challenges of e-Invoicing?

The technology required to seamlessly take transactional data from a supplier’s ERP system and transform it into useful electronic invoices is not something every company's IT department is equipped to develop in-house.

As described in the section above, invoicing into the dozens of different AP portals currently used by buyers can be a major challenge for suppliers – only truly surmountable with the power of automation.

On the opposite side of the spectrum, suppliers are often challenged to get their customers to accept electronic invoices in lieu of paper bills.

Running marketing campaigns to their customers to educate them on their benefits can help drive electronic adoption of invoices.

Learn more about invoicing automation

To learn how invoicing automation from Billtrust can help your company invoice into AP portals, receive payments faster and improve your percentage of electronic invoices, please reach out to Billtrust.