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Defining Terms: What Exactly is a Third-party e-Invoicing Network?

Having operated in this space for a number of years, I sometimes notice little things here and there that appear to be indicative of this industry.  It’s not that others don’t notice it as well, it’s simply that some of the ‘little’ things perpetuate.  One of those things is a lack of clarity regarding the definition of specific terms.  For example, the term ‘electronic invoice’ is understood to represent different things to different people.  One person may see it as simply “sending an attached invoice document to a recipient via ‘electronic’ mail,” while another may see it as “an invoice that has been issued by the seller, transmitted and received by the buyer in a structured digital format which allows for automated processing” (page 5, Catalog of Electronic Invoice Technical Standards in the U.S. – authored by the Business Payments Coalition and supported by the Federal Reserve Bank of Minneapolis).  The second definition is the accurate one, as its practice removes manual intervention, especially on the recipient’s end.  While some may continue to debate this specific term, others may still be unclear as to what a third-party e-Invoicing network really is.

Having previously been employed by one, my understanding of a third-party e-Invoicing network is an organization or company whose primary purpose is to help customers streamline invoices delivered into their Accounts Payable department. The customer does not own the network, nor does the supplier. The network is a third-party player, similar to the United States Postal Service, where they facilitate the exchange of a piece of correspondence between the sender and the receiver.

For example, a Fortune 500 company may have thousands of suppliers located around the world. As a result, thousands—or millions—of invoices are submitted to the Accounts Payable department every year. If left unchecked, those invoices may be delivered in a variety of formats with no standardization. With multiple formats from different suppliers operating in different countries, it’s a tremendous task for any Accounts Payable department to get a handle on the incoming invoices. This is where the third-party e-Invoicing solutions play a role.

The solution provider works with the customer, enrolling suppliers onto the network on behalf of the customer. Once enrolled, the supplier is then able to submit invoices to that customer—or any other customer on that particular network—where invoices are validated and automatically submitted into the customer’s accounting system.

The customer must establish specific business rules, and the supplier must ensure their invoice submissions adhere to these rules. Once this is established, the process of creating and submitting invoices can become much easier for suppliers, and customers are able to automate their invoice acceptance and processing.

While third-party e-Invoicing networks manage the transfer of electronic invoices, it’s worth noting that customer-created online portals should can be considered as conduits for electronic invoices.  If removing manual intervention is the key for e-Invoices, then third-party networks, as well as online portals configured in a way that facilitates automation, can be used to further the cause for electronic invoicing.

Ernie Martin is Founder and Managing Director of Receivable Savvy. He brings over 25 years of experience in financial supply chain management, marketing and communications and draws upon his extensive experience to share knowledge and best practices with AR professionals. He currently chairs the Vendor Forum of the Federal Reserve Bank of Minneapolis and his resume includes time at several well-known brands and companies such as Tungsten Network, Delta Airlines, CIGNA Healthcare and Georgia Pacific as well as a number of years as an independent consultant.

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