Enhance the finance department with an electronic invoice system

After careful review, many businesses are realising the essential need to update their internal processes with digital transformation.

This includes switching from a manual to an automated invoicing process.

Thus, in this blog, we will cover the benefits of utilising digital transformation in relation to the two functions in the accounts department: Account Payable (AP) and Accounts Receivable (AR).

The finance department is often associated with extensive administrative tasks.

This is not desirable, especially when these teams can instead be focusing on higher-value activities. For example, generating revenue or interacting and building stronger relationships with trading networks.

To elaborate, the AP team is burdened with processing inbound invoices, which usually require manual rekeying of data. This is troubling for businesses with a high volume of invoices. This manual process introduces numerous complications, such as inaccuracies, time inefficiency, and disputes.

Whereas, the AR team has intense pressure to keep up to date with the ever-changing trading regulations. Failure to comply can lead to consequences such as a fixed fee per non-compliant invoice to fines equivalent to 100% of the value of the invoice.*

As described, by sticking to a manual invoice process, both the AP and AR functions suffer from inefficiency. We cover below how an electronic invoice system can remove headaches and greatly improve the process.

As described above, keeping on top of invoices manually is challenging for the AP team. Unsurprisingly, this invoicing process often results in human error. For example, duplications or incorrect character entries. Thus, this leads to the additional steps of identifying inaccuracies and rectifying them.

However, the challenge does not stop there. Due to this slow process, approval and payment are delayed. Hence, leading to business disputes, which is not ideal, especially when securing future business.

These are common problems associated with the AP function.

On the other hand, with an electronic invoice system, these problems are removed.

This is because automation eliminates human intervention. To explain, the electronic invoicing system diverts inbound invoices to a cloud-based platform for automated processing. Hence, no manual rekeying is necessary.

Furthermore, to guarantee the most accurate results, we recommend a solution that utilises Intelligent Document Processing (IDP), such as Transalis’ AP Automation.

Unlike technology such as Optical Character Recognition (OCR), IDP does more than extract data from documents such as PDFs and text files.

In addition, this technology interprets data with AI and Machine Learning (ML). It observes the invoices received and compares them to previous formats. Thus, if changes are detected, the technology can make the necessary corrections. Plus, it will also notify these changes, via email, to the AP team for review to ensure the most accurate results.

You may be wondering why there is a move towards electronic invoicing. The answer is: to close the VAT gap.

What is the VAT gap? VAT standards for Value Added Tax. To elaborate, the gap is the discrepancy between the expected VAT revenue and the amount actually collected. This is caused by a number of factors such as corporate bankruptcy, maladministration, legal tax optimisation and corporate insolvency.

This is a problem for tax authorities worldwide, somany are turning towards electronic invoicing as a solution. This is because it solves many complications. For example, it helps remove fraud and evasion (known causes of the VAT gap) through an auditable, digitised paper trail.

Businesses can choose to comply with these mandates in-house or with an electronic invoice solution. If you are currently handling invoice processing in-house, it is important to evaluate if your AR team is fully capable of handling this challenge.

For businesses issuing large volumes of invoices, we recommend our solution, AR Automation, to ensure the great scale is fully processed. Especially to remove the risk of penalties looming over the business if not processed properly.

As mentioned above, more and more countries are implementing electronic invoicing mandates.

To help you illustrate the growing numbers, below are just a few of the European countries that have introduced B2B mandates…

This is due to the evident success of the automated process. In fact, one of the first countries to implement this mandate, Chile, found an astonishing 50% reduction in the VAT gap.

Furthermore, businesses are not only mandating in terms of B2B (Business-to-Business) but also Business-to-Government (B2G) and even Business-to-Consumer (B2C) transactions.

Hence, businesses should implement an electronic invoice system to stay ahead of competitors, increase efficiencies, and ensure they are ready for inevitable new tax reporting mandates. At Transalis, we can support your business with our suite of eInvoice products for both the AR and AP functions.