I recently had the opportunity to connect with Todd Albers, Senior Payments Consultant at the Federal Reserve Bank of Minneapolis about creating a framework to address E-Invoicing in the United States. Todd will be giving a session on this topic on May 14th at the Exchange Summit Conference in Miami and I thought this would be a great opportunity for our user community to hear about his eInvoicing experiences and learnings over the past decade.
Bob Cohen: Thank you for taking the time to connect with me to discuss your E-Invoicing experiences at the Federal Reserve Bank and US Bank before that. Let’s jump right in. Does the United States need to create a framework to address e-Invoicing, and if so, why?
Todd Albers: The simple answer is “yes”, I believe the U.S. needs a framework to accelerate e-Invoice adoption in the market. Here’s why. The U.S. market for processing business documents is diverse and complex, with over 800 different accounting technology software and service providers. The result is a very fragmented approach to e-Invoices with many definitions, forms and formats. Some of the most commonly used methods are emails with PDF attachments, supplier portals to retrieve invoices, and machine-to-machine exchanges using EDI or XML. As a result, very few organizations reach their goal of 100 percent automation. This diversity and lack of fully automated processing is indicative of the need for interoperability standards.
Interoperability can be accomplished by embracing a framework of common data definitions, using open and non-proprietary technical standards, and establishing best practices. With common methods and models for exchanging invoices, businesses will be able to process more transactions straight-through, reducing operational costs. Creating a framework that standardizes the technical, semantic, business, and legal interactions between accounting software and service providers will create an interoperable “network of networks”.
BC: What role does the U.S. government need to play in creating this framework?
TA: The U.S. government can have an important role in defining the requirements and adopting them. With over a million suppliers, the U.S. government is one of the largest buying organizations in the market.
With that said, I think the opportunity is to work with the three Federal Shared Service Providers (FSSP) that the U.S. government uses for invoice processing. If the FSSPs become early adopters of an e-Invoice framework, it could be a significant catalyst, and create a positive adoption network effect for the rest of the market.
BC: How does the United States’ use of e-Invoicing compare to the rest of the world?
TA: According to the research published in the ‘Electronic Invoicing in the U.S.: Challenges and Opportunities’ paper, an estimated 25% of B2B invoices today are exchanged electronically in the U.S. which is similar to Europe. However, we will fall behind quickly if we don’t act, and develop a strategy to simplify electronic invoice adoption. I think Europe provides a great blueprint for developing a framework standard that the U.S. should follow. First, the European Committee for Standardization (CEN) has developed an e-Invoice sematic model standard (EN-16931) for the market. This standard helps ensure interoperability of invoice data between businesses. Second, OpenPEPPOL was created to support public procurement and e-Invoicing. OpenPEPPOL provides an interoperability framework for an e-delivery network and e-Invoices for public procurement bodies. OpenPEPPOL has been adopted by 12 member states of the European Union (EU), and has started to expand outside the EU with Singapore, Australia, and New Zealand announcing their intentions to join the OpenPEPPOL network. Lastly, the European e-Invoicing Service Provider Association (EESPA) provides an interoperability framework for its members to support e-invoicing adoption in the private sector. When you factor all of these together, Europe has put the pieces in place to accelerate the adoption of e-Invoicing. It will be telling to see how quickly the uptake of e-Invoicing will be over the next 3 to 5 years.
As I stated earlier, what the U.S. market can do is look to Europe, and leverage what has been done. For example, the Business Payments Coalition (BPC) assessed the European invoice standard, and found close alignment with U.S. requirements. With slight modifications to the European standard (mostly in the tax area), the US can rapidly develop a standard and begin adopting it. In addition, there are a number of service providers and U.S. companies who operate in Europe that are already familiar with the OpenPEPPOL and EESPA standards. Keeping closely aligned to these standards will provide the opportunity to quickly adopt a U.S. version. This will also reduce the overall cost and time for service providers to implement and support customers with adoption.
BC: What e-Invoicing standards, regulations, and compliance are needed in the United States?
TA: As mentioned previously, a framework can address the market challenges by standardizing the connections between the accounting technology systems that facilitate business processes. Using open, non-proprietary standards go a long way to accomplish this.
Moreover, by not straying too far from the standards already in use in other markets, adoption can happen relatively quickly. One area the U.S. market has been lacking is a catalyst to bring the parties together to do this. That is a role the BPC is playing in conjunction with the Federal Reserve. The Business Payments Coalition has brought market participants together to assess and evaluate the appropriateness of these standards for the U.S. market. The assessment work is wrapping up, and our reports will be released in Q3 this year. These assessments show there are no “technical” barriers to adopt the standards. More work needs to be done, but I am optimistic that a set of requirements, recommendations, and specifications will be developed for the market to consider for adoption.
BC: What recommendations can you provide to enterprises who want to improve e-Invoicing connectivity and interoperability?
TA: One of the primary challenges in the US market today is not the lack of standards, but too many. The Catalog of Electronic Invoice Technical Standards in the U.S. identified well over 40 different formats, and multiple ways they are being used by businesses today. The purpose of the framework is to establish the policies, standards and guidelines that enable businesses to connect once, and trade with anyone across the network, irrespective of the system or standard used. To get started, the first thing enterprises should be doing is asking their service providers what their strategy is to support the U.S. e-Invoice interoperability framework. This is a very important first step. Once the standards are established, they should be asking their service provider to adopt them into their systems.
BC: Thank you for your time and insight and best of luck on your presentation at the upcoming Exchange Summit in Miami.
[Disclaimer: Todd M. Albers is s senior payments consultant in the Payment, Standards, and Outreach Group at the Federal Reserve Bank of Minneapolis. He is the convener of the Business Payments Coalition e-Invoice Work Group and can be reached at todd.albers@mpls.frb.org. The opinions expressed in this article are those of the author, and not those of the Federal Reserve System or the Federal Reserve Bank of Minneapolis.]
UPCOMING WEBINAR:
