Electronic invoicing - Understanding fiscal dematerialization

Deskom entered the electronic invoicing market in 2002 with the acquisition of Post@xess, the specialist subsidiary of the La Poste Group. Today, with a network of more than 270 clients connected or in the process of being connected, and representing almost 400,000 invoices monthly, Deskom handles the heaviest flow on the European market. Cyrille Sautereau explains the ins and outs of paperless invoicing.  

Commerce International: Why should companies take an interest in electronic invoicing?
Cyrille Sautereau : « As things stand, traditional invoice processing is less than optimal from many points of view. Economically, it represents a considerable cost for the company. In terms of quality and accounting traceability, paper that circulates around a company is a weak link. Lastly, conforming to legal requirements is in itself a real worry for companies. The move to an electronic system necessarily brings an improvement in these three areas. The primary benefits are economic, but they are also qualitative with in particular, improved access to accounting information.
A study carried out in the field has shown that for a buyer, traditional invoice processing costs around 14 euros, broken down as follows: 1 euro for the reception of the invoice, 1.5 euros to enter it into the computer,  5 to 6 euros to validate it, 2 or 3 euros for the payment phase, and then 1.5 euros for archiving. 2 euros remain for litigation. Comparable costs are also borne by the supplier. An electronic invoicing system dispenses with costs linked to reception, circulation and verification of conformity. Data entry is often no longer indispensable or is minimal as is validation, which can be automated at line item level. Archiving is significantly reduced. The result is a total saving of 10 euros! Moreover, in a perfectly organised structure, computer-assisted  invoicing need now only cost 2 or 3 euros on average.
In addition, optimising a process also means reorganising the company to increase quality and reliability. Consequently, directors and financial managers are able to reallocate resources hitherto devoted to invoice processing, to management control and improving the quality of their accounts. Finally, aside from these direct benefits, relationships with clients and suppliers improve since they also benefit from faster invoice processing and are freed from “non-cause” litigation. Such litigation, due solely to the “disappearance” of paper invoices during processing, can have serious consequences and even result in a break in supplies. » 

C.I. : Is an electronic signature obligatory in electronic invoice processing?
C.S. : « It’s true that we have heard a lot about electronic signatures for invoices over the last two years. But the straight answer to your question is no, an electronic signature is not compulsory for paperless invoicing. Nonetheless, we think it will soon become widespread. Moreover, one must realise that two kinds of fiscal dematerialization exist side by side. The first, and oldest (since the 1990s), is EDE (electronic data exchange), which is present throughout Europe. This is based on the exchange of invoices in a file, the format of which is structured  and defined by the supplier and the client.
The regulations dictate that this type of  exchange must be secured by the use of standardised tools: the creation of a directory of companies with which exchanges of electronic invoices are made, a day-book with invoices sent and received inscribed in chronological order, formal verification of the presence of compulsory information on the invoice, and finally, the production of a file that can be read by a non-specialist, i.e. comparable to a paper invoice - indispensable for easy checking. All these elements must be archived and made undeletable for 7 years, even 10 years in commercial law. For exchanges carried out in this way to be legally valid, an interchange agreement signed by the supplier and the client must exist. The law does not require the files to be signed for this type of exchange.
The second type of invoice involves the electronic signature. In principle, it is a legible invoice, a PDF for example, and therefore a non-structured data file, which bears an electronic signature and must be archived by the sender. The signature must be checked upon reception and before archiving. The principle is new since it only dates from 2001. We have not yet had enough time to assess the system and have no examples of its use on a scale that would allow us to see whether legal obligations and operational practices match. At present, therefore, it is preferable to use the same system to sign the invoice as to check it. There is, for example, a problem of interoperability that no longer exists in EDE mode. However, this method is the one proposed by all the European legislators and will therefore be used in the long-term to secure all electronic invoices whether structured (and therefore accompanied by their legible representation) or not. This is why we predict that the 2 methods will converge before too long.       

C.I. : Although fiscal dematerialization is no longer a minority activity, it is still far from widespread. What stage are businesses at?
C.S. : « Feedback from our clients’ experiences confirms that fiscal dematerialization rapidly brings significant benefits for companies. In practice, they have understood this, since we have observed a major, irreversible move amongst the biggest of them towards electronic invoicing. For almost all the large groups,  fiscal dematerialization has been plotted on the roadmap. Moreover, more and more traditional consultants have understood the importance of optimising invoice processing as part of their overall goal of optimising the company’s financial supply chain, which includes and affects the compliance of companies with the requirements of the Sarbanes-Oxley Act.                     
In practical terms, calls for tender have been mushrooming since last year and the use of electronic invoicing in organisations such as supermarkets hit the headlines in 2005. In 2006, numerous other projects launched this year will take effect, such as, to mention just a few of the high-profile accounts Deskom has won, Schneider Electric, the SNCF for the invoices they receive and EDF Entreprises for the invoices they send. This is how the electronic invoicing network is built. For example, from Deskom’s accounts to date, we have more than 270 suppliers connected or scheduled to be connected in the months to come. Some of them are already planning in their turn to distribute electronic invoices to all their clients.
We are planning to service twenty additional key accounts in 2006, involving almost a million invoices a year. At the same time, we have observed that increasing the number of electronic invoices effectively exchanged takes time. This is normal and foreseeable by virtue of the way our network is created. It should be remembered that a deployment plan generally takes from 12 to 18 months. But the widespread adoption of electronic invoicing in progress at the moment enables us to say unequivocally that in a maximum of 2 to 3 years, most of the invoices exchanged by big companies will be electronic. 
C.I. : Once companies have been won over to fiscal dematerialization, how can they set up an electronic invoicing system?
C.S. : « Once they have decided to go ahead, implementation is fairly easy. Moreover it is Deskom’s job to make it as easy as possible. The buyer must, nonetheless, rethink or adapt his invoice validation methods. The longest phase then consists in “collecting” electronic invoices, i.e. ensuring that suppliers issue them complete with all the required data because an electronic invoice contains more information than a paper invoice (additional descriptive elements, order numbers, delivery slip references). This also means that electronic invoices are more precise and lend themselves more easily to automatic validation.
The text of the invoice differs depending on the sector. For temporary work, for example, the number of hours worked and the employee’s social security number must be recorded. These specific characteristics are determined by the individual sectors who can produce their own invoice text whilst maintaining a certain coherence thanks to the work on standardisation carried out by EDIFACT and XML. At present, standard texts exist such as EANCOM 97 for supermarkets and HRXML for human resources, as well as the formats proposed by big operators such as Deskom.
Companies should not be dismayed by all these parameters because electronic invoicing specialists such as Deskom are there to manage the system for them. We therefore allow our supplier clients to issue their invoices following any of the formats as well as the media (electronic, paper) required by their clients, just as we allow our buyer clients to receive, integrate, validate and distribute electronic invoices in the format that suits them. More generally, we have observed that there is now a need to help companies optimise the financial supply chain as a whole, over and above the electronic invoice which is why we are increasingly helping our clients with their overall approach.» 

C.I.: What are Deskom’s specificities?
C.S.: « Firstly, our international presence - in France of course, but also throughout Europe thanks to our partnership with our shareholder Influe-Illicom. This longstanding EDE player, who is also one of our leading shareholders, enables us to maintain a direct operational presence in 14 European countries and to present a credible global offer. We support our clients in Europe as in the case of an intra-group project mounted with L’Oréal in 15 European countries.
Our second specificity is the size of our network. Besides the 270 companies connected or in the process of being connected to our platform, we have privileged and immediate access to Influe-Illicom’s 6,000 connected clients, who are therefore free to exchange invoices with our clients.
Thirdly, it should be pointed out that Deskom is the only European platform that allows the whole invoice flow whether electronic (EDE or signed) or paper in origin to be handled in the same way. This platform offers value-added services such as checks on compliance with the regulations of the sector imposed by the buyers, archiving, validation and online payment.
Lastly, we have, in comparison with other companies, a unique offer for factoring companies in Europe. Deskom offers industrial and electronic management of invoice acquisition for factoring companies, beginning by scanning technologies, then using an electronic invoice. Moreover, our invoice processing platform integrates the capacity to call for the refinancing of invoices.  This is how we have consolidated our presence in England in fact. It is a solution that allows a supplier to make the move to electronic invoicing without upsetting his relationships with his clients. Clients who may later spread the good news…».