Electronic Invoicing in Asia
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26 May 2010Arin Ray
Electronic invoicing is a low-cost transaction processing system that leverages information technology to transform a manual and paper-oriented billing process into a faster and more efficient electronic version of data messaging. As of today, it can loosely mean anything from scanned copy of a bill sent through an email network to a highly sophisticated electronic document sent through dedicated channels and maintained in an organization’s integrated system. The idea of electronic invoices stems from the increasing focus on paperless trading. Depending upon the nature of transaction, the process of paperless trading can involve a number of agents like insurers, transport organizations, excise and customs departments, banks, and financial organizations. Needless to say, the government authorities play an important role in this chain. Therefore, to facilitate greater efficiency among all participants, these public departments must set certain standards regarding components and formats of electronic bills/invoices, their transmission processes, and their legal status. From a logistical perspective, electronic bills and invoices help to reduce the amount of paper used for documenting and storing transaction information. Through e-invoicing, billers can dispense with a number of manual processes including printing, mailing, documenting, storing, and reconciling paper invoices. The adoption of electronic invoicing standards offers faster and more efficient data transfer, reducing the duration of billing cycles. Timely notifications and updates on invoice status, faster transmission of invoices for payers’ approval, and quicker dispute management systems enable better customer service. Payers get regular updates on invoice status, payment timings which enable them to estimate cash outflow with higher certainty, thereby helping them achieve better and more efficient working capital management. Eliminating costly paper invoices and reducing time and manpower required to manage them offers significant cost reduction opportunities as well. The situation in Asia Electronic invoicing in Asia is at a very nascent stage. This is due to a number of reasons including lack of regulatory framework, lack of established standards, tax impediments, lack of government initiatives, and lack of proper understanding of the overall system among the participants in the trading chain. Volumes of electronic invoices exchanged in Asia come from the business-to-consumer segment, and few technically qualify as “electronic invoice.” B2B invoices electronically exchanged are just beginning to emerge. In Asian countries, attention and investments are far more focused on the “paperless trade”. There is regular and ongoing processing of standards and regulations related to the adoption of international standards of communication. It is, however, a widespread practice at the governmental level to develop standards that adapt to the needs and uses of each individual country. The regulatory frameworks are at different stages for different Asian countries and legal aspects are regularly developed. Rather, it is taxes and fiscal constraints (for example, in China and India) to make recourse to electronic invoicing impractical. In a report titled ‘Progress of Electronic Invoicing in Asia’ Celent has studied in details the country specific developments regarding the adoption of electronic invoicing in Asia. The use of alternative transmission channels is still low in maturity in Asia. The tendency is to maintain a centrally managed, government-owned channel. Central governments and local administrations are very active in promoting the digitization of commercial documents. However, this does not necessarily mean specific recourse to the use of electronic invoices. The development and adoption of electronic billing are far more consistent in the presence of government programs devoted to the creation of procurement service centers. [caption id="attachment_119" align="aligncenter" width="330" caption="Figure- Scattered levels of e-invoicing adoption in Asia (source: Celent)"][/caption] The relatively low knowledge of aspects and rewards tied to the electronic processing of invoices in economically advanced countries (e.g., Japan) indicates an urgent need for greater investments in education and training. Another reason is the not yet complete integration of the procure-to-pay and order-to-cash corporate processes. Asian companies have a substantial lack of confidence in relying on banks as their technology partners. An increase in marketing, conference events, and education activities on the theme of electronic invoicing by operators who want to penetrate this market is expected in the future. While today companies are still running programs to persuade suppliers to embark on electronic invoicing, a more mandatory form of relationship building is expected.