1 UN electronic invoicing initiative update Geneva, April 2005

2 Advantages of electronic invoicing 25 billion invoices/year ( B2B + B2C, US + Europe) 25 € cost/invoice (seller + buyer, B2B) 20 € [potential] saving/invoice (  automatic routing and reconciliation) “Social” advantages of e-invoicing: - less “grey” economy - less tax evasion - better corporate governance - more transparency - less corruption

3 Other “winners” of e-invoicing Banks  More efficient payment processing, possibility of offering new services to customers ERP vendors  New business opportunities to “upgrade” companies (especially SMEs) that have accounting systems that are not “e-invoicing” enabled Consulting companies  Process reengineering can be required, especially on the buyer side, to make potential gains of e-invoicing “real” Solution providers  electronic signature/sealing solutions, presentment and payment portals, archiving solutions, format conversion, outsourcing of invoice print and delivery (for customers who “do not want” the e-invoice),…

4 Present situation (USA and Europe) 95% of invoices are paper, the rest is EDI (little XML) Slow growth (Gartner estimates that Electronic Invoice Presentment & Payment market might [i.e. 0,6 probability] grow to 500 million USD by 2010[!]) Some “success cases” (Finland, 28% penetration): main characteristic  very easy for sellers Many solution providers, some (according to Gartner) on “shaky financial ground”. Lots of interest from users and tax administrations It is [still] not happening

5 Is it all about asymmetry? Most (about 18 €) of the savings go to the buyer, who can reconciliate the invoice much more efficiently For the buyer, processing e-invoices is rather straightforward, provided he has a “good” ERP The seller can save about 2 € per invoice (stamps, envelops, archiving costs,…) For the seller, migrating to electronic invoicing means going through a number of hassles and costs Until the seller has achieved 12-15% customer adoption e-invoicing ROI is negative

6 Can buyers “force” sellers? Yes, if the buyer represents a large part of the seller’s business (ex. automotive sector) EDI’s adoption model is based on “forcing the sellers”, and had little success in “cross-industry” scenarios For the buyer, e-invoicing makes little ROI sense if many suppliers do not sign in “Gentle pressure” is OK, but sellers must believe it will happen

7 Key levers Projects to achieve critical mass in “high visibility” scenarios/markets (after, it will grow by itself…) Lower the barriers for the seller (make it as easy and an inexpensive as possible) Convince sellers that e-invoicing will happen in the near future (if the seller is sure that more that 15% will require/accept e-invoices he is also sure he will save money with e-invoicing)  build awareness  get commitment from key stakeholders  create “self-fulfilling prophecy”

8 “Interoperability” obstacles Lack of an accepted invoice data content standard Lack of an accepted XML standard Lack of regulatory harmonization [Too] stringent legal requirements (ex. electronic signature)? Why isn’t happening in countries where there are less stringent legal requirements and where legal harmonization issues are less relevant (example USA)?

9 UN standards & recommendations Formal (and relatively time consuming) approval process required to guarantee neutrality UN “backing” can create powerful consensus even before the recommendation is officially approved “Legal” recommendations can be a powerful tool to influence tax administrations, but cannot be enforced XML standards must be implemented into software products. Then, client installations must be upgraded Very important tool, but have a certain “time to market” and - per se - do not solve the “asymmetry issue”

10 UN revision of Recommendation 6 project Data content for reconciliation and bank processing VAT/sales tax data content requirements Electronic signature and ”sealing” requirements Work group members: IATA, EU DG Enterprise, SAP, CEN, swissDIGIN initiative, Italian Banking Association, PricewaterhouseCoopers, ADLittle, LEDES Legal Standards Group, AdsML Media Standards Group, FINinvoice, EU IDABC programme, UK Tax & Excise, Microsoft, ENI, OB10, Utimaco,… Draft ready in June 2005

11 UNeDocs electronic documents project A UN-backed global XML standard for digital trade documents Covers ”common” (i.e. non industry-specific) core of data elements (example “buyer, seller, VAT,…) Industry-specific data elements will be defined by industry bodies Consistent with UN and ISO standards (ebXML, Core Components,…) “Version 0” can already be implemented (example IATA travel agent e-invoicing project)

12 Bridging the gap Third party web services “solve” [most of] the issues tied to lack of standards and of legal harmonization They provide invoice format translation, invoice signing/sealing, invoice archiving, assurance of respect of national VAT requirement They vastly reduce the e-invoice hassle for the seller Widespread use of these services would somehow “simulate” the implementation of UN standards E-invoicing will happen sooner if sellers embrace the use of third party services, which still have a limited market

13 UN’s role UN’s objective is to make e-invoicing happen UN standards and recommendations provide a path to interoperability between industry-specific XML standards, and represent a solution for smaller ERP vendors to provide e-document functionality UN provides an “umbrella” to foster consensus among key players interested in e-invoicing happen The Recommendation 6 work group has attracted interest as a way to coordinate efforts between “national” invoicing forums UN “backing” can give visibility and “universal value” to industry-specific implementation projects