e-Invoicing
What is e-Invoicing?
To understand how online B2B buying and selling transactions work, it’s important to understand their fundamental financial processes. The most critical part of the transaction process is the increasingly popular use of online or e-invoicing.
And as you may already know, the definition of an invoice is a transactional document sent to buyers for the cost of purchasing a product or service. This document helps to track accounts and establishes an obligation for the buyer to pay the balance.
In the past, invoices have been printed on paper, inserted into an envelope, and sent via physical means through the mail (or scanned via fax). In a world where most financial transactions are now digitized, this method is not only highly inefficient but riddled with risk and vulnerable to human error. In short, printed paper invoices are obsolete in today’s fast-moving business world.
With enhanced technology and modernized financial processes, companies have started to embrace the use of online invoicing software (AKA e-invoicing). This form of online invoicing transitions the traditional use of invoices from paper to a purely digital format to optimize payment processes.
As the world becomes more connected via the Internet, online e-invoicing helps companies stay on top of their cash flow and collaborate with their buyers regardless of their geographical location.
What is the e-invoicing process?
The processing of an e-invoice begins when a customer states their intent to purchase your goods or services. During the purchasing process, buyers and sellers agree to terms and conditions regarding the products’ cost, delivery, and payment.
Once the decision to purchase has been made, a purchasing order (PO) is created. The purchasing order is essential to the process, as it clearly states the expectations of both involved parties. When the terms of purchase are agreed upon, the purchasing order becomes a legally binding contract.
At this stage, the vendor must adhere to the agreed-upon terms of what is purchased, the delivery steps, and the cost of goods. Purchasing orders assist with providing clarity to the transaction and eliminate the possibility of any miscommunications or disputes. Once the vendor has delivered the goods or services, the transaction moves into the e-invoicing stage.
Online invoicing software is necessary for more than just ensuring you get paid on time. With the consistent changes and rapid speed of business in today’s world, keeping records of transactions will help streamline your business operations.
Organizations can refer to previous invoices to find areas that need attention within their supply chain and identify what aspects of their current processes are still functioning well. When filing taxes, organizations need a strong record of invoices and payments to ensure control and compliance.
Just like with traditional paper invoices, the length of time before payment is due on e-invoices may vary based on the size of the purchase and the agreed-upon deadline.
Usually, e-invoices are created using net 30 days, meaning the buyer is obligated to pay for the order within 30 days of receiving the invoice.
There are a variety of timelines for invoice deadlines, with the most commonly used deadlines being 10, 30, 60, or 90 days. While net 30 is the standard practice, remember that this timeline may not work for all situations or all clients. As you and the buyer negotiate the terms of the agreement, ensure both parties are satisfied with the decided-upon deadline.
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What are the advantages of e-invoicing online software?
E-invoicing via online invoicing software alleviates the stress of traditional paper-based invoicing and automates much of the tedious work associated with securing payments from buyers. When organizations consider moving to an e-invoicing platform, they must ensure that their digital tools can support their staff and processes. E-invoicing assists in the process by:
Saving processing time
Using technology to record and track invoices saves your AP department a great deal of time. Without having to manually enter data and file invoices by hand, a digital platform and the use of e-invoicing make storing previous payment records easier, allowing for accurate historical data that is accessible simply and quickly.
Reducing invoicing errors
Since invoices can be sent instantly and directly to the customer when using e-invoices, the possibility of misplacing or losing invoices is greatly reduced. The built-in digital paper trail makes tracking each invoice’s progress efficient and allows for stronger communication between all involved parties. Additionally, the automated system handles the collection and analysis of the data, leading to a much more reliable process.
Easier to use
A robust invoicing system integrated within an e-invoice processing platform collaborates with the other tools and technology your organization uses to support your AP and supply chain processes, allowing for total payments automation. This means returning customers don’t have to manually create invoices repeatedly. Organizations can more easily sort and keep track of their records, and often, they will find that they get paid more quickly. In fact, offering customers the ability to pay invoices instantly online may encourage them to pay you faster.
E-invoices also solve the issue of using multiple communication channels for payments and customer collaboration. A consolidated system leads to higher confidence in your supply chains and transactions and increased transparency–and trust–in your operations.
Bonus Material: Check out our guide to start e-invoicing in your organization.
Traditional paper-based invoice systems are rife with common invoicing mistakes:
- Buyer paying the invoice without having been delivered the product
- Customers paying the same invoice twice
- Invoices being tied to the wrong purchase order
- Customers being charged the incorrect amount
What are the disadvantages of traditional paper-based invoicing?
During the pandemic, supply chains faced disruptions like never before. Cash flow slowed, customers struggled to pay invoices, and businesses struggled to adjust to increased remote operations.
With more disruption expected in the future, businesses must analyze the weak points of their financial and business processes and find methods to adapt better. And it’s obvious that one process that deserves to go is outdated and obsolete traditional paper invoicing.
Traditional paper invoicing involves a lot of paperwork that can easily get lost or clutter up the office. When organizations rely on traditional paper methods, they open the door to various challenges and risks:
Time-consuming manual processes
Paper invoices are time-intensive. Research has found that the cycle time for processing paper invoices can take up to 22 days. Businesses using paper invoices will discover that a large amount of time is spent handling and entering data. Depending on the organization’s size, thousands of invoices can be sent around at any given time. This workload can quickly stack up, with every invoice needing to be validated and cross-referenced with purchase orders.
Tracking paper invoices is difficult
Let’s face it; paper is easy to lose. Rather than spending their time monitoring invoices and tracking down payments, your accounts payable (AP) team will spend their time and effort searching for misplaced invoices.
When customers call to inquire about their invoice status, it can be challenging for accounts payable staff to track down the specific invoice. Without digital assistance, your AP department will find it difficult to reassure executives and vendors on the status of payments, sowing distrust and eroding mutually beneficial supplier relationships.
As organizations highlight the weak spots in their invoicing process, the need to adopt some form of online invoicing software into your supply chain becomes apparent. This is where e-invoicing can provide the support and tools necessary to transform the efficiency of your system and enable faster, more efficient processes for everyone.
High risk of human error
The chance of error is significantly increased when using paper invoices. Since paper invoices need to be shipped or mailed, there is the possibility of invoices being lost or delivered to the wrong location. In addition to the challenges mail poses, there is a massive possibility for human error when manually entering and filing previous invoices. Without a consolidated invoicing system, confusion can easily occur through your communication lines.
How does Tradeshift make digital shift happen?
Tradeshift knows that shift happens, and your organization needs the comfort and support of strong technology to navigate disruption. Through the use of our customizable software, we are equipped to provide you with the specific support your team needs. In addition to assisting with online e-invoicing solutions, our digital network of business professionals enables you to strengthen your relationship with customers, leading to heightened transparency in communication and payment processes.
As the leading supplier of supply chain B2B payments and marketplaces, Tradeshift’s robust software processes millions of payments every day. Our expansive portfolio of clients showcases our commitment to creating an award-winning and user-friendly program. We stand out by:
Providing an outstanding supplier onboarding experience.
With our Adaptive Onboarding Solution, sellers immediately see value in the transaction. Since the launch of Tradeshift Engage in March, buyers and sellers have seen heightened communication and collaboration, leading to greater feelings of connectedness. Vendors whose customers are on the Tradeshift network can provide information on their buyers so that personalized communication and invoice tracking can occur instantly. The built-in AI in our programs simplifies the process, automating account notes, and payment processing.
Providing insightful and actionable data.
Tradeshift’s broad range of software solutions allow users to gain insight into targeted and actionable data. With an easy to navigate interface, users can gain access to real-time trends and data, increasing their ability to make informed decisions and navigate through times of disruption. This transparent and holistic view of your business’s payments ensures there is no confusion on the progress of outstanding invoices and previously processed transactions. This increased visibility into your data can help you remain resilient when future disruption occurs.
Ensuring efficiency and compliance.
When businesses operate in a global market, it can be challenging to ensure compliance across countries. This means that organizations using e-invoicing need to ensure that they are complying with dozens of regulations. Tradeshift helps users make sure all the T’s are crossed, and all the I’s are dotted. In addition to staying updated with the latest compliance regulations, our digital software ensures efficiency with all your transactions. Our streamlined and digital system means that your invoices get processed at a faster speed, getting cash in your hands quicker.
As a leading supplier of B2B marketplace and network solutions, Tradeshift enables suppliers and buyers to connect more quickly and process payments in record time. For more information regarding our e-invoicing options and how they can transform your traditional processes, reach out to one of our experts. If you’re ready to shift your organization to a digital format, sign up now for your free demo.