Accounts Payable News^®

Overview

Electronic invoicing (e-invoicing) is the issuing of invoices by email directly to your customer. It is also referred to as Electronic Invoice Presentment and Payment (EIPP).

Electronic commerce has grown rapidly in recent years, and by early 2004, almost 90% of UK businesses had access to the internet and increasing numbers of these businesses are involved in e-commerce* - ordering and paying online. Research published in 2004 by the Credit Management Research Centre revealed that 35% of the 400 businesses surveyed issue electronic invoices to their customers.
* DTI - Information Security: Guide to the Electronic Communications Act 2000

So Why Use It?

• Reduce Days Sales Outstanding (DSO). E-invoicing helps retrieve money more quickly from your customers, by reducing the amount of time wasted whilst your invoice is in the post. The average DSO for a business is between 40 and 60 days, but businesses which have used e-invoicing have reported a fall in their average DSO.
• Reduced print and postage costs. If invoices are sent electronically, money can be saved on the cost of paper, print cartridges, envelopes and postage.
• Reduced requirement for sending out copy invoices. The direct delivery of invoices to the customer's inbox minimises the likelihood of them claiming they have not received them or that they must be lost in the post. Time delays are minimised, as copies can be resent and received by them immediately.
• Faster dispute resolution. The sooner your customer receives your invoice, the earlier they can alert you to any concerns they have about their account or the amount due.

How Do I Start?

If you intend to begin invoicing electronically, then it is a legal requirement that you let HM Revenue and Customs know within 30 days of beginning to do so. You can notify Customs by phoning their National Advice Service on 0845 010 9000.
In addition, you should let prospective customers know that you intend to invoice them electronically.  You will need to add this into your contract and ensure that they are able to receive communication by this means. For existing customers, write to them informing them of the change to your terms and conditions, and seek their agreement.  While you're doing this it's a good idea to verify the correct email address for the person responsible for making payments.

It is important to protect the authenticity and integrity of the invoice when sending it electronically. Therefore, your invoice should either be written into the email itself, attached as a protected word file or sent as a pdf document. It helps if you keep the wording and lay-out the same as previous paper invoices to avoid confusion and, if possible, use delivery tracking to check that your email has arrived safely.
You may want to print off and keep a hard copy of all invoices you send electronically as a back up.
HM Customs and Excise have issued a useful guide to Electronic Invoicing on their website that can be found by clicking here. http://customsandexcise