As the U.S. Federal Reserve continues to move forward in promoting innovation and the adoption of faster, real-time payments, the agency simultaneously explores a less flashy, but perhaps no less important, which could have a similar impact on the B2B payments landscape.
The Federal Reserve Bank of Minneapolis Payments, Standards and Outreach Group released a report in 2016, “E-Invoicing Adoption in the United States: Challenges and Opportunities“, which explored the potential for the United States to adopt electronic invoice standards with the goal of achieving end-to-end efficiency in the United States payment system.
“A major barrier identified by US businesses to adopting electronic payments is the willingness of their business partner to send or receive automated electronic information (for example, information on invoices and remittances),” summarized the Fed, adding that while a business can embrace B2B electronic payments regardless of its ability to send and receive electronic data, the lack of electronic invoicing often leads a business to continue to rely on the paper check.
Electronic invoicing, the Fed noted, is a key step in enabling direct processing (STP) of B2B transactions, in which an organization can receive an electronic invoice, automatically integrate that information into its back-end systems, process it, approve it. and initiate the payment, all without human intervention.
Years since the Fed first released its report, however, the United States has failed to achieve bill standardization. This is a major problem for companies looking to improve their accounts payable operations, says IPS President and CEO Greg Bartels.
“The problem for US accounts payable departments is that the country does not have standards on how suppliers must submit invoices,” he told PYMNTS in a recent interview, adding that IPS is collaborating. currently with the Fed in its continued efforts to set such standards. “But they are still a long way off,” he noted. “Without standards, accounts payable departments can never be sure of the format in which they will receive supplier invoices. “
A FinTech opportunity
As the market waits for regulators to tackle the problem, FinTech has identified the e-invoicing conundrum as an opportunity for innovation – and a chance for technologies like machine learning and artificial intelligence to ‘to intervene. Such technologies are able to analyze the data in a document regardless of the format or method of presenting this information, and automatically enter this data into the necessary back-end systems.
While in theory technology makes this possible, the reality, Bartels said, is quite different.
Instead, a significant portion of businesses continue to receive paper invoices, and even as vendors go digital, invoices submitted via email are often no more effective than physical documents.
“A lot of people mistakenly believe that invoices that arrive by email are electronic invoices,” he said. “It couldn’t be further from the truth.”
Often, Accounts Payable (AP) professionals print an invoice via email or need two desktop screens to manually enter data from an invoice sent by email into their systems. Adding to the complexity is the need for both buyer and supplier to have integrated systems, allowing suppliers to submit invoices that automatically land in the right place – a rare achievement in today’s landscape, in which AP services often lack visibility into the status of any given invoice, Bartels noted.
A long way to go
The consequences of a lack of e-invoice adoption and straight-through processing capabilities are vast, including a higher risk of supplier late payments, inaccurate processing and payments, missed opportunities for early payment discounts. and a lack of visibility on working capital for finance managers.
These are big hurdles to overcome at a time when CFOs demand digitization, automation and optimization to cut costs, take advantage of those early payment discounts, earn discounts through card payments. commercialization, to lengthen the days of unpaid payments (DPO) and to mitigate the risk. of fraud, as Bartels explained.
This means a greater opportunity for FinTechs to resolve these sticking points with technologies that can support automated data capture and entry of invoices even when sent by email, like IPS. latest addition to its Productivity Wrx platform, a straight-through function that supports capturing invoices as they are sent by email, file transfer protocol, or through a supplier portal.
Nonetheless, regulation will become an important part of supporting organizations’ access point automation journeys. The same goes for the Fed’s faster payments efforts: according to Bartels, continued use of checks means faster payment networks won’t necessarily have a major impact on B2B payments yet, although more As the adoption of electronic payments by businesses is high, faster payments will offer businesses an additional means of optimizing their transactions.
In the meantime, technology will be the key to tackling the friction, and Bartels said there isn’t a single silver bullet to tackling the challenges in this area.
“We don’t think a single technology will have a disproportionate impact on the accounts payable function in the next year or so,” he said. “Instead, we believe more businesses will recognize that these technologies are just one more tool – with established technologies such as intelligent data capture, business intelligence, and mobile – that they can use. to transform the way they process invoices and pay suppliers. “