The Office of Management and Budget (OMB) has issued a memorandum announcing the future mandating of electronic invoices by end of fiscal year 2018.
The memorandum forms part of a larger drive to reduce inefficiencies within the government, ultimately to reduce the taxpayer burden and better utilize resource. By fiscal 2018 all-electronic invoicing will be mandatory for all federal government agencies; the U.S. federal government is the largest purchaser of goods and services in the country; the government collectively processes over 19 million invoices per year; and only 40% of these are processed as electronic invoices.
That leaves a whopping 60% of invoices – 11.4 million invoices – to start processing as e-invoices in just over two years. Can it be done? It is optimistic for sure. But the OMB is committed to mandatory e-invoicing to improve government efficiency and reduce the cost to the tax payer.
As part of this drive, not only will all-electronic invoicing be mandatory, there will also be rules in place regarding how this e-invoicing needs to take place to be compliant. The exact rules are yet to be issued, however the suggestion is that federal bodies will need to process e-invoices through a shared service.
The aim is to ensure consistency and reduce administrative burden on vendors, yet it does also complicate things in some respects. With multiple agencies making up federal government, this means multiple accounting packages, multiple ERPs, multiple workflows…all this needs to be managed by the shared service. And fiscal 2018 isn’t far away.
As is often the case when we start talking about e-invoicing we think about Europe. We hear so much about how Europe is adopting e-invoicing; how Europe is leading the way. And the reality is that in many European countries electronic invoicing has not yet been widely adopted. However, there are some clear success stories and one that we can learn from with our federal government dilemma is the Scottish government.
The Scottish government has made electronic invoicing available to all its public bodies, and has encouraged this processing through a central shared service. Now, Scotland is hardly huge but it is the 43rd largest economy in the world with a nominal gross domestic product (GDP) of $240.975 billion per annum.
In relation to the U.S., it is tiny, but it is still greater than most states. Even in a country of such a small size, government bodies were operating using more than 60 different finance packages, so for a shared service to be a success it needed to be able to interface with these different systems.
A further complication for shared service processing, and for electronic invoicing is the ability, and willingness, of vendors to send their invoices electronically. Larger organizations may well have the infrastructure in place to send cXML files, but the clear majority do not. And they equally do not have the resource to put in place the necessary technology to enable this. Nor do they want to spend time duplicating invoices, creating them once in their own system and then again in an e-invoicing portal. Oh, and no one wants to be charged for sending their invoices either.
The Scottish government understood these challenges and has adopted a system which provides suppliers with the option to either send their e-invoice as a cXML file OR to send an email with a PDF invoice attached.
PDF invoicing means that most suppliers can move to e-invoicing without any changes to their own systems. They create their invoice in the system they currently use, create a PDF (which most accounting packages can do as standard), and email it over. By simplifying the process of electronic invoicing, the Scottish government ensures the highest levels of on-boarding of suppliers – a prerequisite of widespread e-invoicing adoption.
So, there are two simple lessons we can learn for the U.S. federal government e-invoicing initiative. A shared service needs to be able to 1) interface with multiple different systems in use, and 2) accept different formats of e-invoices to ensure that all suppliers can move to electronic invoicing.
For federal government to move to all-electronic invoices by fiscal 2018 it is imperative that suppliers can come on board quickly and easily. PDF e-invoicing will enable this. In fact, I would go so far as to say, it is essential.
So, we come back to our original question. For mandatory federal government e-invoicing through a shared service, that shared service needs PDF invoicing as an option, and the shared service must be able to integrate with the multiple software packages in use across federal government.
In conclusion I would say, yes, it can be done. But only if it’s done in the right way.