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Cross-border eInvoicing in eRegion – Banks and Technology Providers Perspective Franc Bračun, PhD Merkur Day 2004 A B A N K A Friday, 22nd October.

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Presentation on theme: "Cross-border eInvoicing in eRegion – Banks and Technology Providers Perspective Franc Bračun, PhD Merkur Day 2004 A B A N K A Friday, 22nd October."— Presentation transcript:

1 Cross-border eInvoicing in eRegion – Banks and Technology Providers Perspective Franc Bračun, PhD Merkur Day 2004 A B A N K A Friday, 22nd October

2 Speakers Chair: Dr. Franc Bračun, Executive Director Branch Network, Abanka Vipa, Ljubljana, Slovenia Speakers: Mag. Martin Mihelčič, Director of Card Business & eBanking SKB banka d.d. - Société Générale Group Mr. Kari Korpela, eBusiness Project Manager Technology Centre Kareltek Inc., Lappeenranta, Finland Ms. Andja Komšo, Adviser to the Government Head, Department for Organization and Development of Information Technology Tax Administration, Ministry of Finance, Republic of Slovenia Dr. Tomaž Domajnko, Director, IT Research & Development SRC.SI, Systems Integration, Ljubljana, Slovenia Mr. Tomaž Kavčič, Executive Director eBusiness Unit, S&T Hermes Plus, Ljubljana, Slovenia Mr. Janez Uplaznik, Director Mikropis Holding, Žalec, Slovenia

3 Background There are many aspects to electronic commerce and trading. Being able to present and pay invoices electronically is an obvious element of this, but until recently one of which few organizations have taken full advantage. In most organizations today, invoices are: – raised manually – printed on paper and – posted to the customer When the payment period has expired, the supplier will contact the customer to ask why no payment has been received and will here one of the three answers: – There will be a dispute over the order, necessitating a process of checking, adjustment and final agreement – the invoice will be somewhere between the desk of the person who placed the order and the accounts department – The payment will be about to be settled via the payment system This process is time-consuming and cost-inefficient.

4 Evidence of the Need for Change The bank with 200 people to repair the 30% of payments that they have set up incorrectly; The insurance company with 90 people to answer the 1 million phone queries it receives annually from suppliers chasing payment; the supermarket group which cannot reconcile up to 5% of its spend on goods for sale with the invoices it receives; the procurement organization that rejects 3,000 invoices per month due to incorrect charging information; the same organization that creates over 1,000 new supplier records each year on its accounting systems; the drugs company that churns annually 40% of its clinical trial suppliers due to disputes over payments. A list of such horrors could be drawn up from organizations in every industry.

5 Key Business Needs Purchasing control, efficiency and contract compliance are key to businesses. Critical elements to achieve these are electronic payments and invoicing solutions. These need to be practical, and integrated into the end-to-end buying process for use by all within it, not just the accountants.

6 Needed Steps toward Sound Solution Action Plan Areas to Address Barriers to Moving Forward Solution Landscape Functions and Features Taking Action

7 The First Key Point Focus on optimizing the end-to-end supply chain business processes that require invoicing and payments, not on isolated solutions. Select Offer Order Process Order Receive Dispatch Fit Invoice Pay Reconcile Reclaim VAT Pay VAT Supply Chain Operations Tax Treasury Finance and Accounting Operations Seller Procurement Supply Chain Operations Tax Treasury Finance and Accounting Operations Buyer

8 A clear channel strategy and policy for using channels are required Invoice Channels Card Payments EDI Electronic Invoices – Electronic file transfer – Electronic invoice presentment – E - mail – Magnetic media/CD-ROM – XML Paper Invoices Self Billing T&E Card Payment Channels Bank Branch Charge Card Cheque EDI – Electronic Payment Initiation – Electronic Funds Transfer Internet Banking Telephone PC Banking Purchase Card People, Processes & IT Systems Organization Procurement Supply Chain Operations Finance and Accounting Treasury Tax Establish a clear ‘channel’ strategy – one-size fit all solutions are impractical in large and in complex supply chains. Different solutions are needed for different areas of spend and for different supply chains.

9 Electronic Invoice Presentment and Payment (EIPP) With an EIPP system money transactions can be handled end-to-end electronically over the Internet, from rising the invoice to collecting the money.

10 Areas to Address Cost savings through process and administrative efficiencies (e.g. studies in Europe have identified process cost savings of 60% - 77% when purchasing cards have been introduced in specific areas), and through improved deals based on better information and service with Improved customer and supplier relationships through reduced exception processing and queries, and better information Reduced working capital through improved collections and better use of discounts. Be innovative, but take one step at a time - focus on areas of tangible benefits such as the manually intensive processes that generate non-added value activities.

11 Barriers to moving forward Barriers that need to be overcome before this critical mass occurs include: – A lack of widely accepted standards for interoperable solutions – The need for adoption of widespread and low cost supplier/customer/bank connectivity – Migration away from traditional, high-cost EDI networks to innovative, low- cost internet-based – Upgrade of banking infrastructures to allow processing of the new payment schemes needed to support electronic business processes – The need for a growing number of case studies of successful electronic payment and invoicing implementations – Changes to executive perception (payment and invoicing processes are boring utility processes that add little value and are generally not broken – so why change?) and greater executive appetite to innovate.

12 Solution Landscape The solutions landscape is characterized by: – channels, – payment and invoicing applications, and – the vendors that provide them. The ability of solutions to interface with ERP systems is an important consideration when setting a channel strategy and analyzing the solutions landscape. ERP systems are widespread in large organizations and are the primary source of record of transaction and financial data. They are used to great effect in optimizing internal processes, and they have a central role to play in extending the automation of these processes out to third parties such as banks and trading partners. The role of ERP systems in potential solutions should be one of the first things to consider when investigating the market. This leads to the next key point that, in implementing electronic payment and invoicing, organizations should: Leverage ERP capabilities and work with ERP vendors and banks to develop solutions.

13 Functions and Features Features and functions to consider are: – Exception processing and dispute management features – Payment schemes (e.g. bulk, guaranteed, conditional) – Clearing system integration – direct debits and credits – XML messaging (to accommodate multiple, organisation-specific invoice formats) – ERP purchase-to-pay processes for large repetitive orders from key suppliers (often purchase orders against a contract) – Public Key Infrastructure security for electronic transactions – Hosted vs. in house operated applications – notification of receipt/sending.

14 Taking Action The single most important action that managers should take is to understand the potential to innovate: – To identify how their current payment and invoicing works across the enterprise and externally with third parties, and how they link with their supply chain and other business – To determine the opportunities to optimize business processes by automating payments and invoicing, by improving the connectivity between different internal systems, subsidiaries, operating organizations, banks and third parties within it – To identify the benefits that can flow from these opportunities.

15 The Key Points Seven key points for procurement, supply chain operations and finance managers: Focus on optimizing the end-to-end supply chain business processes that require invoicing and payments, not on isolated solutions However, establish a clear ‘channel’ strategy – one-size fit all solutions are impractical in large and in complex supply chains. Different solutions are needed for different areas of spend and for different areas of the supply chain Be innovative, but take one step at a time - focus on areas of tangible benefits such as the manually intensive processes that generate non-added value activities Target business areas where critical mass of electronic invoice and payment transactions with suppliers and customers can be achieved quickly Eliminate invoices where possible (for example, using Purchasing Cards) and then optimize payment and invoice processing for the rest, by cutting the marginal cost of processing a payment or invoice close to zero Leverage enterprise resource planning (ERP) capabilities and work with ERP vendors and banks to develop solutions Consider new solutions under development by traditional electronic data interchange (EDI) value added networks (VANs), the most innovative of which are migrating their traditional solutions to the internet thereby eliminating the cost barrier to greater adoption among lower tier trading partners.


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