How Can E-Invoicing Adoption Accelerate in the U.S.?...• The Digital Business Council, a private-public ... • Directs CFO Act agencies, to transition to electronic invoicing for

How Can E-Invoicing Adoption Accelerate in the U.S.?

Minnesota AFP May 2, 2017

Payments, Standards, & Outreach Group Federal Reserve Bank of Minneapolis

Senior Payments Consultant Todd M. Albers

Disclaimer

The opinions expressed are those of the individual presenters & not those of the Federal Reserve System or any Federal Reserve Bank

2 ©2017 Federal Reserve Bank of Minneapolis. Materials are not to be used without consent.

• Tasked with advancing the FRS mission in payments by supporting work in standards, research, education, and other initiatives that increase the efficiency of business-to-business (B2B) transactions

• Standards Work

– ISO 20022 Payments SEG

– ISO 20022 Trade SEG

– W3C Web Payments Interest Group

– OASIS UBL TC & Co-Chair of the Adoption Sub-Committee

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Todd M. Albers Senior Payments Consultant

Federal Reserve Bank of Minneapolis

Provide financial

services to depository

institutions & U.S. government

Establish & execute U.S.

monetary policy

Supervise & regulate financial

institutions

Maintain a stable financial

system & contain

systemic risk

Federal Reserve Banks

©2017 Federal Reserve Bank of Minneapolis. Materials are not to be used without consent.

Discussion Topics

• Barriers to Electronic Invoicing & Payments

• Global & U.S. Invoicing Review

• Business, Economic, & Societal Benefits

• Addressing the Barriers through the Business Payments Coalition

©2017 Federal Reserve Bank of Minneapolis. Materials are not to be used without consent. 4

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Barriers to Electronic Invoicing & Payments


Straight-through-Processing (STP)


Invoice Payment Remittance

• Seller sends electronic invoice, invoice is automatically entered into the accounts payable system.

• Invoices without discrepancies (i.e. 3-Way/2-Way Matched) are readied for payment execution.

• Payments clearing & settlement performed by Banks.

• Payment remittance detail is electronic & automatically applied against the invoice(s) in the accounts receivable system.

• Discrepancies between payments, remittance, & invoice are assigned to dispute resolution process.

Barriers to Electronic Payment Adoption


Source: Strategies for Improving the U.S. Payment System, page 50

Electronic payments are more complex than check payments

Electronic payments capabilities are not ubiquitous

Small & Mid-Sized businesses do not always have support of their FIs

Difficult to discover trading partners electronic payment capabilities

Difficultly in exchanging payment related data (i.e. invoices & remittance information)

• Large Business still send 50% of their payments via check

• For Small & Micro Businesses its even higher at 70% to 90% using paper checks

Paper Checks

Barriers to Broader E-Invoicing in the U.S.


• Service providers “close” their networks to only those who participate, creating an “island effect”

• Businesses have created their own community, with standards that meet their needs, increasing the difficulty for trading partners to connect / integrate

• No common definition of what an “e-invoice” is • Many different invoice syntaxes, semantic models, and

formats • Increases integrate expense with their trading partners

• What’s in place – works. Business case needs to be compelling for the investment

• No industry led coordination, collaboration, or leadership

Interoperability

Inertia

Too Many Integration

Points

The Evolution of the Electronic Invoice

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Supplier Portal

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EDI

Invoice Presentment Models

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Seller Buyer

A/R System

A/P System Electronic Invoices

Buyer Direct

Seller Direct

Seller Direct: • Seller request Buyer to

view invoices on the Seller EIPP system.

Buyer Direct: • Buyer requests Seller

to Post invoices to the Buyer EIPP system

Network: • Many-to-Many

relationships, collects invoices from all network participants

E-Invoicing: • Point to Point

connection between trading partners

Network / Consolidator


Global & U.S. Market Review


Europe


Source: Electronic Invoicing in the U.S.: Challenges and Opportunities

• Europe is in various stages of e-invoice adoption

• Nordic countries were first and have the highest adoption rate compared to the rest of the region

• Estimated 24% of invoices were electronically sent in 2015, up from 6% in 2004

• By 2024, expected to have 95% converted to electronic invoices

• Key drivers in the market include legislative, a defined set of standards and framework, service provider alignment, and programs in place

Latin America


• A number of countries have implemented Clearance Systems & Models to improve tax compliance

• 58% of the all invoices were electronic in 2014, compared 1% in 2004

• Brazil, Mexico, and Chile are world leaders with over 90% electronic invoicing

• Tax compliance is the key to driving adoption in the market

• Standardization (format & semantics) enables transactions to flow between trading partners and taxing authorities


Australia


• Estimated savings annual savings to the Australia economy is AUD$9 – 10 Billion

• Projected 38% of invoices to be sent electronically by 2019, up from 14% in 2014

• Key drivers in the market include a defined set of standards for electronic invoices, along with an adoption program promoting & supporting businesses and service providers to enroll into the framework

• The Digital Business Council, a private-public partnership developed and formally adopted the e-invoice interoperability framework in 2016


United States


• Complex market, requirements differ by industry segment & size

• Over 150 different service providers offering & supporting customers with automation e-Invoicing initiatives

• Estimated 24% of invoices were electronically sent in 2015, up from 15% in 2004

• By 2024 expected to have 38% converted to electronic invoices

• Key drivers in the market are businesses focused on automation and meeting requirements of their trading partner.

• OMB mandate may drive an increase in adoption for B2G invoicing.


OMB Mandate for the U.S. Federal Government • Directs CFO Act agencies, to transition

to electronic invoicing for appropriate Federal procurements by the end of FY 2018 to one of the following means: • Migration to a designated Federal Shared

Service Provider (FSSP) and adoption of the FSSP electronic invoicing solution;

• Use of an OMB-approved electronic invoicing solution that aligns with agency mission and support requirements; or

• Cessation of any investments in new electronic invoicing solutions. Choice of offerings from DoD, DOE, Treasury (IPP), VA, and possibly others

• Includes other requirements including linking to SAM (System for Awards Management) and data standards.


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Business, Economic, and Societal Benefits of Broader Electronic Invoicing


Business Benefits



AP

• Reduced Operating Expense

• Optimize Cash Management

• Minimize Payment Risk & Fraud

• Reduction of Data Entry Errors, Rekeying, etc.

AR

• Reduce DSO

• Fixed Cost Reduction

• Increased Cash Flow

• Complete Remittance Information

Savings

• 50% to 80% per Invoice

• $4 to $8 per invoice

Economic & Societal Benefits

Economic

• Positive correlation between less burdensome business overhead & economic growth

• Viewed as a competitive advantage in the global economy

Societal

• Reduction of cumulative energy demand & greenhouse gas emissions

• Reduction in waste & waste bi-products in the production, transportation, printing, mailing, storage, and destruction of paper



Business Payments Coalition




Mission: Work together to solve problems related to processing information associated with B2B payments in order to promote use of electronic payments & straight through processing (STP).

Participation: National group of associations, small & large businesses, financial institutions, technology & software vendors, standards development organizations & others.

Formed in 2011 550+ members & growing

SIPS Focus on B2B Efficiency


Strategies for Improving the U.S. Payment System (SIPS) paper identified efficiency improvements in the U.S. payment system as one of the five desired outcomes

Specifically calls to explore the possibility of developing & implementing a standard, ubiquitous B2B electronic invoice & processing platform

Exploration resulted in a whitepaper reporting on the current global activities with e-invoices, potential benefits, & the barriers to greater adoption in the U.S. market

E-Invoicing Work Group

Mission:

Identify ways to accelerate the adoption of B2B e-invoicing by all types and sizes of U.S. Businesses

• Objectives: • Develop a catalog of electronic invoice syntax, formats, and subsets used in the

U.S., publish through ASC X9 as a Technical Report

• Define what a electronic invoice is for the U.S. market

• Develop a position paper on how the U.S. market should adopt an e-invoice interoperability framework

• Develop an interoperability framework

• Develop an implementation guide


Proposed milestones for the E-Invoice Work Group

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SIPS

• Calls to investigate development of a EIPP solution for the U.S. market

Framework Development

• Technical specifications defining a semantic model, business identifiers & locator guides

Establish Work Group

• Document e-invoice syntax, formats, and subsets along with current environment for transmissions

Position Paper

• Present the benefits of an interoperability framework for the U.S. market

• Requirements on how operate within

the framework

Implementation Guide

2015 2016 2017 2018 2019

Whitepaper

• Outlines the challenges and opportunities the U.S. market faces against a global backdrop

Research

• Secondary research • convene expert

advisory group

Catalog

• Technical standards in use by U.S. businesses

• Outline current processes

• Define what an e-invoice is


Questions


Thank You!

• Contact me with additional questions or interest in joining the Business Payments Coalition at [email protected]


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Resources


E-Invoicing Resources

• Standards: — OASIS – Universal Business Language: https://www.oasis-

open.org/committees/tc_home.php?wg_abbrev=ubl — OASIS – Business Document Exchange: https://www.oasis-

open.org/committees/tc_home.php?wg_abbrev=bdxr — UN/CEFACT: The United Nations rules for Electronic Data Interchange for

Administration, Commerce and Transportation: http://www.unece.org/cefact/edifact/welcome.html

— ISO20022 - https://www.iso20022.org/trade_services_messages.page

• Europe: — European E-Invoicing Service Provider Association (EESPA): http://eespa.eu/ — Pan European Procurement Online Portal (PEPPOL): http://www.peppol.eu/

• Australia: — Digital Business Council: http://digitalbusinesscouncil.com.au/ — Interoperability Framework: http://digitalbusinesscouncil.com.au/einvoicing-have-

your-say


E-Invoicing Resources

• E-Invoicing Platform: http://eeiplatform.com/

• Billentis: http://billentis.com/index_e.htm

• PayStream Advisors: https://www.paystreamadvisors.com/

• Exchange Summit: http://www.exchange-summit.com/


Invoice Standards

Subsets

40+ Defined Subsets, including 15+ Industry Specific Variants for EDI& 10+ Country Specific Variants for UBL

Formats 14 Defined Formats

UN/EDIFACT, UN/XML, OASIS UBL (ISO 19845), XBRL, ISO20022, OAGIS, HL7, cXML, xCBL, CIDEX, PIDEX, GS1/XML, RosettaNet, Proprietary

Syntax

6 Defined Syntax Languages

PDF, CSV, ANSI X12, ISO 9753 (EDIFACT), W3C XML, JSON


2017 High Priority Objectives


ISO 20022 Education & Promotion Work Group: Develop a whitepaper that reports on a survey, case studies, benefits & challenges reported by U.S. adaptors

Vendor Forum: Identify issues & topics to focus on in 2017 related to B2B payments efficiency & strengthen the membership

Small Business Toolkit: Release v3.0, enhancements include information on Same Day ACH, Payment Fraud, and Self Assessment Quiz

E-Invoicing Work Group: Document & publish e-invoice technical standards & current processes

B2B Directory: Assist the BPDA with developing requirements & governance models


Documents

How Can E-Invoicing Adoption Accelerate in the U.S.?...• The Digital Business Council, a private-public ... • Directs CFO Act agencies, to transition to electronic invoicing for