Roadmap for U.S. eInvoicing Is Set. Will Businesses Follow?
When a new administration swept into executive office early this year, the notice of an impending standardization of business-to-government (B2G) electronic invoices (eInvoicing) suddenly disappeared from WhiteHouse.Gov. Had momentum stalled to meet a 2018 mandate and follow the example of several other countries by increasing invoice processing efficiency?
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The scope of the eInvoicing opportunity in the U.S. commercial sector dwarfs the federal government’s 2018 B2G initiative … by at least 110x!
- U.S. has learned from EU’s PEPPOL and Australia’s public-private partnership. (Forget legislative mandates. It’ll never happen.)
- There’s a game plan for rolling out a single, ubiquitous eInvoicing system in the U.S.
The hitch? Service providers and early adopters
will need to step up.
A January 2017 memorandum issued by the Federal Office of Management and Budget (OMB) indicates timing of the initiative is still very much on track. If done government-wide, U.S. taxpayers could save roughly $450 million per year in processing costs, according to early project estimates.
But those savings pale in comparison to a similar opportunity in the private sector.
The convener of the Business Payments Coalition (BPC) eInvoicing Work Group believes the potential cost savings for a business-to-business (B2B) application of eInvoicing in the U.S. is in the neighborhood of $50-150 billion annually. And that initial estimate doesn’t factor in the benefit to ancillary invoicing metrics, like improvement in the number of on-time payments, or the ability to incorporate new working capital strategies into corporate business practices to help with cash flow. In other words, this thing is rife with potential.
“It’s a very compelling case,” said Todd Albers, who acts as a facilitator of the Work Group and is a senior payments consultant with the Federal Reserve Bank of Minneapolis. “This is what we discovered and described in our electronic invoicing whitepaper published last year.”
The BPC, which acts as an advocate for improvements in B2B payment-related issues like payment security and efficiency, is made-up of hundreds of volunteer professionals and experts from businesses and like-minded associations. Ultimately, its objective is to eliminate barriers to electronic payments and “straight-through processing” in the U.S. business environment—something a single, standardized eInvoicing system could go a long way in doing.
Applying Learning from Abroad
So how would a streamlined system of electronic invoicing be constructed and later received in the U.S.?
Fortunately, Albers said the U.S. can learn from models that have been implemented in other parts of the world, such as in Australia and Europe. The Pan-European Public Procurement Online (PEPPOL), for example, offers a glimpse of a pattern for both development and features of a prospective eInvoicing system for the U.S., with some important distinctions.
Albers said PEPPOL wasn’t created from a blank slate. Rather, its foundational framework was borrowed from or built upon widely recognized, open standards and technologies in Europe. The European Union sponsored the creation of the PEPPOL consortium for public procurement. PEPPOL uses a set of open standards from OASIS for the messaging infrastructure, metadata locators, and electronic capability publishing, all of which ensure secure and reliable messaging between access points. Structured invoice messages can be sent in OASIS UBL format. PEPPOL now provides businesses (and governments alike) with a single access point for electronic exchange of procurement documents.
“I’m a strong proponent of leveraging existing open standards,” Albers said. “They help overcome interoperability issues between businesses and the tools that enable automation.”
Yet despite a foundation of existing open standards used within PEPPOL, adoption of the true eInvoicing standard has been uneven—with encouraging adoption trends in Nordic countries and a slower uptick in others. Even B2G eInvoicing mandates enacted by various EU member governments have shown mixed results as a catalyst to more widespread usage.
Albers says the likelihood for the U.S. to pass legislation aimed at commercial eInvoicing adoption is doubtful. Rather, a public-private partnership, similar to Australia’s approach, seems much more probable and perhaps more effective—that is, if free-market actors recognize the magnitude of the opportunity and carry the torch.
“It’s really going to be incumbent upon the private sector and service providers to look at this and say, ‘Hey, this framework makes complete sense,’” he said. “Essentially the eInvoicing Work Group is advocating the benefits of greater payment efficiencies, and the critical first step is digitizing invoices.”
The Work Group will also involve key industry associations to collaboratively define the best approach for establishing an interoperability framework, Albers said. And the good news is there are plenty of international resources for them to draw from.
“The U.S. doesn’t need to recreate the wheel,” he said. “It makes a lot of sense to leverage what Australia and PEPPOL have done. We can build from that work to develop similar tools here in the U.S.”
If They Build It, Will Others Come?
Time will tell if a market-based approach to standardizing eInvoicing in the U.S. will yield the sort of results that will give the country’s commercial sector a financial jolt. But if U.S. companies fail to get the big picture, it won’t be because Albers and the Work Group haven’t laid out a solid proposal covering the next three years.
Here it is, in a nutshell:
- 2017 – Establish a baseline for what’s going on in the marketplace. Due later this month, the eInvoicing Work Group is releasing a report based on their efforts to catalog the existing electronic data standards prevalent in the U.S. Their findings will be foundational to the next step, selecting a universal invoice format.
- 2017 – Formalize the benefits of an interoperability framework for U.S. market. The Work Group plans to publish a position paper that paints a clear picture of the benefits moving to a universal electronic invoicing framework would have, especially because Albers says only 25% of such invoices are electronically exchanged in the U.S today. “There’s a huge opportunity to streamline a whole bunch of other invoices.”
- 2018 – Develop a framework for ubiquitous eInvoicing. Here’s where the heavy lifting begins in earnest. The eInvoicing Work Group plans to develop the technical specifications, define a U.S. eInvoicing semantics model, and build an implementation and operations plan. “Fortunately, the Work Group can leverage a lot of the work that has been done elsewhere, which should help accelerate our timeline,” he said.
- 2019/2020 – Implement the new framework. The eInvoicing work group will create a comprehensive adoption guide for industry and service providers alike. “Service providers will be integral to this effort,” Albers said. Service providers may even form a professional association to support the U.S. effort, taking a page from EESPA in Europe.
Coalescing the Idea of a Single System
Part of Albers’ optimistic outlook for this project stems from the enthusiasm he’s met with from the business community when he tests these ideas out on the road. Larger corporations are attuned to streamlining processes as a means to achieving cost savings. Even small and midsized businesses (SMBs) that have previously been on the outside looking in on technologies like electronic data interchange (EDI) to digitize invoicing are beginning to see the vision and value of a single access-point system.
“When they get it, they buy into it,” he said. “To borrow from Australia’s Digital Business Council, ‘Connect once, trade with many’ should be the goal for a business to achieve.”
And, who knows? Maybe eInvoicing is just the first stop on a longer journey.
“What really excites me is what we’re doing can also be extended beyond invoices,” Albers said. “The framework can be used to exchange any kind of [business] document, from orders to shipping notifications—and even to remittance information. This is a step towards truly achieving straight-through processing for B2B transactions.”