While business to business (B2B) e-commerce offers tremendous opportunities to drive business growth, it is a complex landscape filled with multiple currencies, languages, tax codes and regulations.
Driven by this complexity and increased demand from governments and companies around the world, changes are emerging in the purchasing, invoicing and payments areas to open up new possibilities for organizations to easily trade with business partners globally.
Following are some of these developments.
Governments are front-runners in pushing connected commerce. More than 50 governments around the world arein the process ofimplementing e-invoicing mandates and are pushing for a supportive infrastructure to enable agile e-commerce.
A key factor behind this massive movement is the need to increase tax compliance and reduce fraud, since governments rely on value added taxes (VAT) and sales taxes to contribute up to 30% of their Gross Domestic Product (GDP). Other factors stimulating the push for e-invoicing include increasing efficiency, saving costs and facilitating e-commerce. The focus of the U.S. Federal government's e-invoicing initiative, for example, is on cutting costs and improving efficiencies. To that end, it has implemented an Invoice Processing Platform (IPP) at 74 U.S. government organizations, and has realized approximately $5 to $6 million in savings (about $20 an invoice) to date.
The EU is focused on another goal: to facilitate borderless commerce through a uniform e-invoicing standard that is supported by interoperable systems. It is working to require e-invoicing for government suppliers this year and following that, making it the standard method for companies to conduct business.
Financial processes are untethered. Thanks in part to the growth of cloud computing and the use of mobile devices, B2B financial services are no longer restricted to a particular location or time. Organizations are increasing the speed and efficiency of processing invoices and payments regardless of travel schedules or time zones. Since there is no disruption in the workflow, they are better able to manage their payables, realize early payment discounts and avoid late penalties.
Networks are connecting trading partners around the world.The emergence and growth of business networks have been a critical part of the infrastructure, helping break down the traditional trade barriers of different currencies, taxes, languages and regulations.
Organizations around the world are now able to conduct transactions, such as sending and receiving e-invoicing in a real-time, a savings over the weeks it would have taken using manual, paper-based methods. Organizations can purchase through e-catalogs, send and receive e-invoices and conduct real-time communications with their trading partners to address issues and resolve problems. Open networks and interoperability between them enable e-commerce to be a truly global, easy experience.
The demand for real-time, online payment and financing options is intensifying.Many companies are continuing to look for ways to hold onto their cash by extending payment terms and delaying payments to suppliers. While it enables them to have greater working capital, it creates cash flow pressures for their suppliers, potentially leading to financial problems or even supply chain risk. However new solutions have emerged that are changing the nature of payments and enabling both buyers and suppliers to benefit.
For example, by combining business networks that enable real-time e-invoicing, along with worldwide payment networks, suppliers can be paid more quickly with more favorable terms, and buyers can extend their payments. Similarly new, innovative financing models are removing suppliers dependence on buyers for cash flow and along with it, a potential source of conflict.
Advanced analytics is enabling new insights into finances.To identify road blocks and improve efficiencies and outcomes, companies are using analytics to evaluate all of their operations from procurement to payment.
For example, they are uncovering procurement, spend and payment trends; improving processes; and identifying the most effective payment strategies, such as capturing early payment discounts. Through analytics, organizations are optimizing cash-to-cash conversion cycles, days sales outstanding (DSOs) and days payment outstanding (DPOs), among other key metrics.
Growing market demands, accelerating government initiatives and evolving technologies and infrastructures are enabling companies to more effectively and efficiently conduct business with trading partners around the world. This new era of B2B commerce not only benefits companies through stronger supplier relations, and improved cash flow and working capital, but it also helps to boost trade by enabling cash to flow more freely throughout the global marketplace.
Bob Cohen is vice president of North America for Basware.