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What is Electronic Invoicing (E-Invoicing)? - Get More Done In Less Time With Automation


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Home / Accounts Payable Hub / E-Invoicing

E-invoicing or electronic invoicing sends standard invoice data of trading partners from vendor system to customer system automatically. E-invoicing can transform and automate accounts payable functions, substantially increasing efficiency. With compatible standardization, cross-border transactions can work well with e-invoicing and subsequent global mass payments. 

AP functions include receiving and processing vendor invoices related to procurement, three-way matching to supporting documents including purchase orders and receiving reports, obtaining approvals, making vendor payments, and generating payables aging and payments reports. 

This article defines the e-invoicing meaning and e-invoicing process, lists problems with paper invoicing, and describes automated e-invoicing solutions. 

What is Electronic Invoicing (E-Invoicing)?

Electronic Invoicing, or E-invoicing, is the automated process of vendors generating electronic invoices and sending them to customers to process data elements in a standard format that ensures system interoperability. E-invoicing enables accounts payable workflow automation integrated with ERP or accounting software processing instead of inefficient manual data entry of paper invoices. 

Standard computer data formats for e-invoicing include EDI (electronic data interchange), XML (extensible markup language), or CSV (comma-separated values) for exporting files. E-invoicing solutions include automatic validation against rules as part of the invoicing process to ensure that invoice data is correct before being sent to the customer’s system. 

How Do Businesses Create an Electronic Invoice?

Vendors create electronic invoices (e-invoices) sent directly to their customers’ software systems for payment using the invoicing features of their ERP or accounting software, like QuickBooks. Some payment apps or add-ons include e-invoicing with pay now buttons. 

If customers receive paper invoices, they can digitize them using advanced OCR software that may be part of fully functional, add-on AP automation software integrated with ERP or accounting software. Scanning and converting paper invoices received to digital invoices may not be considered e-invoicing because the customer’s business takes intervening steps to get the invoices into its system. 

What Manual Invoicing Problems Does E-Invoicing Solve?

If a company’s AP staff or finance departments operate manually, here are some of the deepest cash flow and resource gouges it can (and should) expect: 

• Incorrect data entry from human error.
• Lost time and company resources due to fixing those errors.
• Wasted time and human productivity from manual invoice approval.
• Duplicate manual entries leading to duplicate payments.
• Dramatically heightened risk of fraudulent invoices.

It’s common to see AP staff using OCR software in a non-automated environment to quickly transcribe and record physically mailed invoices or emailed PDF invoices. Once the software records the invoices, an employee has to manually verify the information, resulting in as much wasted time and resources as with a fully manual operation. While e-invoicing also makes use of OCR, it does so in a fully automated manner.

What are E Invoicing Solutions?

E-invoicing software is a solution for operating in the world of AP.  The distinguishing factors of e-invoicing are its use of compatible vendor system to customer system data standards and possibly field mapping for interoperability and strategic centrality. All key data around the invoicing is sent to a centrally accessible cloud storage database.

E-invoicing supports AP automation to streamline workflows in real-time, including supplier portal integration and document storage, automated invoice matching and approvals, global mass payments processing and automatic reconciliation, and robotic process automation (RPA) of routine tasks. These automated solutions are benefits of e-invoicing. 

(If e-invoicing isn’t used, vendors can also upload their electronic invoices into a customer’s integrated supplier portal for centralized vendor management, status, and payment by the customer.)

This means that multiple individuals from different departments can access the same body of general info but pull the individual bits and pieces from it that are relevant to their department and its operations.  E-invoice processing totally eliminates the time and resource burden of employees running between departments daily to cross-check their info, verify approval, and so on. The total annual resource savings in terms of actual employee productivity from this aspect alone are considerable.

Fraud prevention is another benefit of invoice automation combined with e-invoicing generating massive year-over-year savings for a business.  Here’s the thing about fraudulent invoices…it only takes the fraudster one successful attempt on average to establish a deceptive (but lucrative) tie to a company’s AP department. Manual AP staff lack a centralized list of pre-approved and verified vendors.

So when a fraudulent invoice comes through, the odds of it “falling through the cracks” and getting paid are extremely high.  And what do companies tend to do with their suppliers?  Keep paying them with each monthly invoice, of course. They are, after all, providing a highly valuable service to the business.

The short- and long-term problems here should be glaringly apparent. But these risks are hugely alleviated with invoice automation. E-invoicing solutions allow a business to set up a verified list of approved suppliers and instantly check each invoice against that list.  An invoice from a supplier not present on the list will immediately be flagged for further inspection and possible fraud so that it can be traced and verified one way or the other.

Automation gives you the opportunity to improve relationships with your genuine suppliers.  E-invoicing software usually comes equipped with a supplier portal, so your suppliers can check the status of their invoices, and early payment arrangements can even be made if desired. This saves time in the long run in the form of calls and emails from suppliers inquiring about their invoice status.

As an all-important point in today’s world of rampant cybercrime, automation keeps all data entries and fields completely digitally secure.  From a company’s vital info to its suppliers’ private information and beyond, consider the heightened risk factor of stolen or misappropriated info from a physical invoice getting lost or compromised.

Summing Up

This article provides an e-invoicing definition, explains how businesses create electronic invoices (e-invoices), discusses OCR for digitization of invoices, describes manual invoicing problems, and covers e-invoicing solutions as part of your automated system. 
The world is experiencing a sea change in how AP departments will survive and thrive in the coming decades. But, as with all matters of technological adoption, e-invoicing is a rising tide that businesses must choose as part of their software automation solutions.



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About the Author

Barbara Cook

Barbara is a financial writer for Tipalti and other successful B2B businesses, including SaaS and financial companies. She is a former CFO for fast-growing tech companies with Deloitte audit experience. Barbara has an MBA from The University of Texas and an active CPA license. When she’s not writing, Barbara likes to research public companies and play Pickleball, Texas Hold ‘em poker, bridge, and Mah Jongg.


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