This article originally appeared in PYMNTS on August 31st, 2015. Follow this link to read the original article.
So much for a paperless world. Paper is alive and well in the realm of B2B payments, for sure. That’s something that Invoiceware CEO Scott Lewin would like to change. He tells PYMNTS what countries are indeed on their way to paperless and the value they’re getting from saving trees and embracing digital invoicing.
The annual growth rate for e-invoicing worldwide is around 20 percent. Have company’s goals in implementing electronic invoices changed from pure cost and process efficiency to enabling value creation along the supply chain? What are you hearing from your clients?
SL: It really depends on where the clients are located. Electronic invoicing means different things in different countries and regions.
For example, Latin America mandates electronic invoicing. There is no other option when doing business in Mexico, or Brazil, or Argentina, or Chile; you have to use an electronic invoice that’s validated by the government for every transaction.
In other parts of the world, that’s not the case. The United States is certainly an example of such an environment; while in Europe, we’re starting to see some mandates rolled out.
We often see that companies who utilize electronic invoicing in areas where it’s not mandated are initially looking for cost reduction via the elimination of paper processing. Once they implement electronic invoicing, though, they start searching for additional efficiencies. That’s where companies like Invoiceware can help.
Based on your experience, what markets are on the verge of mass adoption of e-invoicing, and why?
SL: You can tie the adoption of electronic invoicing to areas of the world that have valued-added taxes (VAT). Latin America is the most progressive region of the world when it comes to electronic invoicing; in fact, their adoption is about double what you see in Europe.
Other regions and countries that are trying to close the leakage in their tax systems are also beginning to explore mandatory electronic invoicing. As you can imagine, having to report every transaction to the government — and, correspondingly, having to document to it every payment — makes it very difficult to avoid the value-added tax payment. What we’re seeing is countries that have big fiscal challenges are looking at adopting mandatory electronic invoicing to increase their tax collections.
Colombia is one of the last countries in Latin America to move forward with electronic invoicing, and their finance minister projects that in the first year tax collections will increase by over 10 billion pesos. It’s obviously a big deal, and countries are starting to recognize that there’s a large opportunity to become more efficient in their collections.
What would you say is the primary obstacle to the growth of e-invoicing. Is it lack of regulation? In what countries might regulation stand to be more stringent?
SL: There are still a handful of countries that don’t allow electronic invoicing, where it’s not considered valid; but that scenario is increasingly few and far between. The trend is towards the electronic invoice — the file itself — becoming the official and legal document.
Whether it’s Russia, Singapore, Italy or Spain, to name some examples, countries are starting to move towards the Latin American model of a mandated electronic invoice format. In that sense, regulations actually promote invoicing as opposed to prevent it.
How do you see e-invoicing evolving, and what role is Invoiceware going to play in that evolution?
SL: Invoiceware is focused on what we call business-to-government compliance. That’s where the government mandates electronic invoicing and fits in between every transaction. We believe that this model will continue to grow, beyond Latin America and into the rest of the world.
As the only business-to-government network, we’re well-positioned to add value — not only across the Latin American region, but also across the rest of the world, as these regulations take hold. We’re actually the fastest-growing business network in the last 5 years; we grew from $0 to $80 billion of invoice dollars across the network.
This model of focusing on compliance is a real accelerator of growth, and it’s sorely needed by our customers. Multinationals who do business across many countries don’t want to be in the compliance business, and we take that off their plate.
Do you expect that the current rate of e-invoicing acceptance worldwide will maintain, or increase, or decline? When do you think that it will become the global standard?
SL: In Latin America, estimates point to the likelihood of nearly 100 percent electronic invoicing adoption within 10 years. It may also be close to that rate even in Europe.
North America is lagging. Right now on the continent, no regulations related to electronic invoicing are even being considered. Additionally, there’s no VAT in the United States. Without that VAT pushing the need for compliance and reporting, those decisions are left up to the individual companies. And that makes electronic invoicing adoption much more difficult than if it were a government mandate.
The end result is that adoption in North America is going to be much slower than in other regions.