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5 myths in e-invoicing

The talks around switching from PDF and paper to e-invoices have created some myths that need to be dispelled.

Myth 1: PDF invoice is e-invoice
PDF invoices that are sent via e-mail are not actually electronic invoices. Data from PDF invoices must be entered or copied to the business software manually. Electronic invoice is issued by supplier in a structured electronic format which allows for its automatic transfer and receival into buyers business software without human intervention.

Myth 2: In order to adopt e-invoices, all suppliers must send e-invoices
In case all of your suppliers would start sending e-invoices, the benefit would be the biggest. Unfortunately it is a bit unrealistic and will take time. Many e-invoicing solution providers have created interim solutions that enable processing paper invoices, PDF invoices and electronic invoices in one environment.

Myth 3: E-invoicing creates value only for large enterprises
E-invoicing is beneficial also for small companies. More efficient invoice processing allows to save time, minimizes mistakes and assures better cost control. For the companies with several locations, there is an extra saving on the time that was spent on physically moving the documents from one location to another.

Myth 4: E-invoicing increases costs
There are certain implementation costs and service providers charge monthly fees for e-invoicing. However, considering the efficiencies gained, the net effect of e-invoicing is costs decrease. The time saved can be used for more value-adding activities, such as sales or financial analysis.

Myth 5: Implementing e-invoices is an IT-project
Actually it is much more than just a regular IT initiative. Implementation of e-invoices will alter several business processes. and all the stakeholders must be involved in the project, including top management. Adjusting IT-systems is just one part of the project.

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E-invoicing in public sector will become mandatory in 2018

All over the European Union, the reception and processing of e-invoices will be mandated by the third quarter of 2018. Estonian authorities have declared the transition to e-invoicing already during 2016. If you want to do any business with the public sector in any of the EU Member States, be ready to switch to e-invoices.
 
The economic benefits of e-invoicing are widely acknowledged. For companies, automated invoice processing generates savings between 1% and 2% of turnover. With the entire EU initiative, total savings could amount to more than 100 billion euros.

The e-invoice usage rate is high in Denmark, Finland and other Nordic countries. In the Estonian private sector, 19% of all invoices issued are electronic. Latvia and Lithuania are advancing steadily with the estimated e-invoices rate of about 10%. Nevertheless, a large proportion of invoices are still issued on paper. Often pdf documents are considered electronical, but this is not true. The benefits of image-based PDFs are mainly limited to cheaper transport and archiving, but process automation does not really happen and cost savings stay limited. It is good to know that the laws and tax administration guidelines in European Countries recognize both paper and electronic invoices.

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What is an “original” invoice in times of e-invoicing?

Many companies are struggling with the term “original invoice”. It used to be an important paper that had stamps and handwritten signatures by issuer and receiver. Nowadays, fewer and fewer companies issue invoices on paper. Instead, either PDF-s are emailed to receivers or in most advanced cases, “real e-invoices” are sent from senders’ systems to receivers systems.

An invoice is a commercial document issued by a seller to a buyer, relating to a sale transaction and indicating the products, quantities, and agreed prices for products or services. Data that is required on the invoice are specified by laws and regulations and are the same for paper invoices, PDF invoices and e-invoices.

Original invoice is the very first copy of an invoice issued in case there are multiple copies. If the seller uses electronic means and sends out e-invoices directly from its ERP, then the original invoice is the electronic e-invoice. The law defines unambiguously that the electronic version is the original.

More and more state authorities, who need companies’ documents in their inspecting processes, not only allow but require sending evidence in digital format via electronic channels.

In case of a problem with a business transaction, a stamped and signed invoice may not be sufficient. Instead, a whole “audit trail” is needed-- contracts, despatch advices, payment orders and other correspondence between the parties may be needed to prove that the transaction really existed. Life is easier if also those other documents are all electronic.

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Real-time economy - a hot new concept


It is predicted that the next generation of entrepreneurs will be doing business in Real-Time Economy (RTE). What is real-time economy? It means that all the information flows between business partners are digital, increasingly automatically generated, and completed in real-time. The benefits of increased computing power and the possibility to automate processes will let business people to think, innovate and focus on their main activities.

In purchase and sales, this means that orders, order confirmations, invoices, and payments flow from system to system without any delays. In accounting, this means that all transactions are automatically recorded when they occur. Furthermore, there is no need for composing monthly reports to Tax Authority or other public institutions, as they will get their information also online and real-time.

It is estimated that processing a one-page document is 30 minutes faster in digital format than in paper format. During 2015, Telema customers will exchange over 13 million e-documents thus saving over 6 million working hours. Using an average monthly salary of €1000, the time savings can be converted to cost savings of €90 million.

Real-time economy also impacts nature and environment. According to the survey by Aalto University, moving from paper document to e-document decreases the emission of carbon dioxide from 350 g to 6 g per document. This figure includes only printing and transportation. In 2015, Telema customers will decreased the emission of CO2 by 4200 tons - 70 full rail wagons.

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What has beer game to do with supply chain management?

As of March 2015, 100 teams in Estonia have played the Beer Game. All over the world, the number of players is in hundreds of thousands. The Beer game is a business simulation created by professors at the MIT Sloan School of Management over 50 years ago to demonstrate a number of key principles of supply chain management. The aim is to keep inventories low while still meeting the unknown demand of the buyers and not running out of stock. The game is fun but also very thought provoking and players often admit they learned more about supply chain than ever in other trainings.
Telema is conducting this game annually in September as an opening accord for the to Tallinn University of Technology master students in supply chain management. Both in 2014 and 2015, the beer game was orchestrated by Telema at the Pärnu Supply Conference. Telema offers moderation of the game as a training at the companies’ internal events and many companies have used this opportunity: Swedbank, Wendre, Eugesta, and Ericsson to name a few. Estonian Daily Newspaper Eesti Päevaleht wrote about the game and its principles on March 23, 2015.

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