Electronic Invoicing in Finland - attitudes towards electronic invoicing by financial managers in small- to mid-sized companies

Transcription

1 Electronic Invoicing in Finland - attitudes towards electronic invoicing by financial managers in small- to mid-sized companies Anna Rofhök-Björni Master s of Science Thesis in Accounting Swedish School of Economics and Business Administration 2006

2 II SWEDISH SCHOOL OF ECONOMICS AND BUSINESS ADMINISTRATION Department: Accounting Type of work: Master of Science Thesis Author: Anna Rofhök-Björni Date: Title: Electronic Invoicing in Finland - attitudes towards electronic invoicing by financial managers in small- to mid-sized companies Abstract: Electronic invoicing is a fairly new phenomenon that is facing a surge in popularity in Finland at the moment. There has not been a lot of research made previously on electronic invoicing and attitudes towards using it by potential users. This thesis aims to fill this gap. The research objective is to ascertain what the attitudes are towards electronic invoicing by financial managers employed by SMEs in Finland. A questionnaire has been sent to financial managers with questions about electronic invoicing. The response rate was good. The result of the study showed that the attitudes towards electronic invoicing are positive. There were some concerns regarding the cost and safety of using electronic invoicing but the majority of the respondents believe that using electronic invoicing would be beneficial. Keywords: electronic invoicing, XML, ebxml, einvoice, Finvoice, electronic commerce, TEAPPSXML, PostiXML, EDIFACT

3 III Table of Contents 1 Introduction Background Research objective Structure of the thesis 1 2 Electronic Invoicing in Finland Introduction The invoice Electronic invoicing Techniques and standards Electronic invoicing in Finland Laws and regulations Summary 19 3 Theories and prior research Introduction Theories of adoption of new information technology Previous research-findings on factors affecting attitudes towards adoption Summary 28 4 Research model and Methodology Introduction Research model and hypotheses Data collection The results 37 5 Discussion The research and its limitations The results and their implications 62

4 IV 5.3 Suggestions for further study Conclusion 66 6 Bibliography 67 7 Appendix Appendix Appendix 2 77 List of Tables Table 2.1 Costs of paper invoices versus electronic invoices (Elma Electronic Trading, 2006)...10 Table 4.1 Current electronic invoicing status...38 Table 4.2 Preferred electronic-invoicing solution...39 Table 4.3 Electronic invoicing is hard to understand...39 Table 4.4 There is a risk of error increase when using electronic invoicing...40 Table 4.5 Electronic invoicing is tiresome to learn...40 Table 4.6 It would be difficult to check accuracy when using electronic invoicing...41 Table 4.7 Technically safe...41 Table 4.8 There are financial restrictions in our company to acquire electronic invoicing...42 Table 4.9 ERP Systems in use in our company...43 Table 4.10 Regression analysis Table 4.11 Regression analysis Table 4.12 Regression analysis Table 4.13 Regression analysis Table 4.14 Regression analysis Table 4.15 Summary of hypotheses...59 Table 4.16 Correlation Matrix...60 Table 4.17 Questions for correlation matrix in table List of Figures Figure 2.1 Elma for RosettaNet (Elma Electronic Trading, 2006) 12 Figure 2.2 einvoice model (e-invoice consortium, 2005) 14 Figure 3.1 The Technology Acceptance Model (TAM) (Gullkvist, 2005) 21 Figure 3.2 The Theory of Reasoned Action (TRA) (Gullkvist, 2005) 22 Figure 4.1 Research model 30 Figure 4.2 Technically safe 41 Figure 4.3 Normality Probability Plot Regression No1 45

5 V Figure 4.4 Normality Probability Plot Regression No 2 48 Figure 4.5 Normality Probability Plot Regression No 3 50 Figure 4.6 Normality Probability Plot Regression No 4 53 Figure 4.7 Normality Probability Plot Regression No 5 56 Table 4.17 Questions for correlation matrix in table Figure 4.8 Correlations in research model 61 Figure 5.1 The significant factors in the research model 63 Acknowledgements I would like to thank everybody who has helped me during the time I have been writing this thesis. I want to thank Thomas Lönnquist at ecraft Oy Ab who gave me the idea to write about electronic invoicing as well as Johan Andersson at Iversum who has sent me lots of information. Additionally, I would like to thank Janneke von Wendt and Tove Gordin-Lydman who translated the questionnaire from English to Finnish. Also, Oana Velcu, thank you so much for helping me out with all the technical stuff as well as giving me information on how to analyse my results. I would also like to thank Heli Salmi who agreed to meet with me and discuss electronic invoicing in Finland. And of course, Professor Anders Tallberg who has given advice on how to write the thesis and how not to. Last but not least, I want to thank my husband Janne for putting up with me and my writing it took longer than I planned. Thanks for your support!!

6 1 1 Introduction 1.1 Background In Finland, the Finns can use information networks for almost any everyday activity. Dealings with governmental departments, bank transactions and purchasing flight or concert tickets can be handled online. Eighty percent of the population in Finland is familiar with the Internet and almost fifty percent of them use the Internet daily. Finland has been ranked three times as one of the most developed IT economies by World Economic Forum (WEF) in the beginning of the 21 st century. Additionally, Finland has many times been cited as a good test laboratory for innovations and services because the Finnish people are technically oriented and interested in trying new products. Exploring electronic invoicing and financial managers views on its use and adoption in Finland will therefore give an interesting picture of the future of electronic invoicing (ICT Cluster Finland Review 2005). There has been a lot of research made regarding attitudes towards and adoption of electronic commerce by SMEs (Small and Middle-sized Enterprises) which has shown that SMEs are reluctant to adopt e-commerce (Grandon & Mykyton, 2004). Considering these findings, it is of interest to establish financial managers thoughts regarding electronic invoicing. 1.2 Research objective Electronic invoicing is currently a much discussed topic because of the time and cost reductions it can offer. Many different solutions and techniques have been introduced and tested. Even though there are numerous studies on attitudes towards information technology and electronic commerce and their adoption, there is no current research available on the attitudes towards electronic invoicing. The main purpose of this thesis is to fill this gap. The objective is to identify the attitudes towards electronic invoicing and its adoption among financial managers and accountants working for SMEs in Finland. This study will as a consequence increase our knowledge of attitudes towards new technology in general and electronic invoicing in particular. 1.3 Structure of the thesis The first chapter of the thesis serves as an introduction to the topic of electronic invoicing.

7 2 The second chapter will discuss electronic invoicing in Finland. A general description of the traditional invoice will be offered and discussed before continuing with the electronic invoice. There will be definitions and introductions of what kinds of electronic invoicing there are. Subsequently, benefits that can be won by using electronic invoicing are discussed. Chapter two continues by discussing techniques and standards that are used to make electronic invoices and also the most common solutions available on the Finnish market. The chapter will end by briefly introducing laws and regulations that need to be considered. Chapter three discusses theories on new information technology adoption and previous research in this area. In this chapter various factors influencing adoption decisions and attitudes are identified. Next part of the thesis, chapter four outlines the research methodology, the research itself and the results. The last part, chapter five will discuss the findings and their limitations and implications.

8 3 2 Electronic Invoicing in Finland 2.1 Introduction Electronic invoicing is facing a surge in popularity at the moment and especially in Finland suppliers of electronic invoicing and new solutions are increasing. In this section I will establish what an electronic invoice is, what options are available, the techniques and standards and finally some solutions on the market in Finland and the laws and regulations. 2.2 The invoice To understand the electronic invoice, it is useful to be aware of what an invoice is. The commercial invoice is according to the CEN/ISSS e-invoicing Focus Group (2005) the most important document exchanged between business partners. It is not only of commercial value but it is also an accounting document and it has legal implications for both the sender and the receiver of the invoice. According to Verohallinto (2005), an invoice is verification or a message in either paper or electronic format that fulfils the regulations of VAT (Value Added Tax) laws. In Finland, the invoice forms the basis for the VAT declaration and reclamation as well as the statistics declaration for intra community trade and the export and import declaration for extra community trade (CEN/ISSS e-invoicing focus Group, 2005). The invoice is made by the seller for a sale made to document the transaction and it subsequently supports accounting and auditing functions. In Finland, a typical invoice includes the following items: Date of invoice Number of invoice The issuer s VAT-number Issuer s and recipient s name and address The amount and kind of goods or services Date of delivery, date of performance or date of payment (if it is a prepayment) The tax-base for every taxable item, price per unit excluding VAT as well as price reductions and discounts. Taxbase Amount of VAT to be paid (Verohallinto, 2005)

9 4 2.3 Electronic invoicing Definitions According to the e-invoice consortium (2005), an electronic invoice is a modern, reliable, cost-efficient and practically paperless method of handling and processing invoices for goods, services and other expenses. Electronic invoicing is suitable for both large and small firms and companies as well as private customers and both large and small volumes of invoices can be sent. It is an especially efficient method of invoicing when there are many recipients. The recipient is sent the invoicing data and an invoice image for circulation, approval and archiving in electronic format (Elma Electronic Trading, 2005). The electronic invoice can be graphically displayed on the computer screen similarly to a traditional invoice. Consequently, archiving, distribution and approval procedures are improved. Business customers can receive the electronic invoice straight into their financial information system (e-invoice consortium, 2005). Private customers can receive invoices in their internet bank. Private customers will not be dealt with in depth as this thesis will mainly concentrate on B2B (Business to Business) invoicing solutions Invoicing electronically To be able to receive electronic invoices there has to be at least an internet connection, a workstation, and an agreement with an internet bank or similar where the invoices will arrive. Sending is usually done through the company s invoicing system but it can be done through the Internet as well (Tieke, 2005). Most financial administration services can send electronic invoices through the Internet without anything but a browser. The invoices are divided into electronic invoices, EDIFACT invoices or ekirje invoices to be printed in paper format and subsequently sent forward to the recipients. The recipient can also receive the invoices electronically straight into the financial information system provided that the account entries are already marked on the invoice. All the recipient has to do is to approve the invoice for payment. Sales and purchase invoices can for example be accessed and transmitted while performing other bank-transactions (Vahtera Pauli, 2005).

10 Scanning of invoices The most basic method of electronic invoicing is scanning. The invoice is issued by the sender in paper format and subsequently scanned so that the receiver can process them electronically. The receiver or a third party usually performs the scanning. In this case, the invoices do not use any electronic messaging. The receiver has good control of the internal handling of invoices, the processing system and the status right through the processing as well as the archiving (CEN/ISSS e-invoicing Focus Group, 2005). However, the benefits from electronic invoicing compared to paper invoices are non-existent if the financial information system does not use a system which can handle the electronic invoice. Consequently, scanning of invoices is only using a small part of the possibilities that electronic invoices can offer (Vahtera, 2002) Insular electronic invoice The next type of electronic invoice is the insular electronic invoice. This is when the receiver wishes to receive invoices electronically in his/her system but where the preceding messages have not been electronic. This may help to streamline the receiver s internal processing of invoices but the processing will nevertheless involve many manual actions such as verification and matching of the invoice against orders, and cut-and-paste operations to make the invoice information possible to manage in the ERP system. These invoices could be in text format (HTML, Word, Excel and the like) or graphical format (for example PDF or TIFF) (CEN/ISSS e-invoicing Focus Group, 2005) Electronic invoicing on Web forms This option involves a web site where the invoices are entered. An example would be a large, powerful buyer who wants to receive electronic invoices but buys irregularly or not very often from small suppliers. The supplier is then referred to a web site, usually one that is accessed through user id and password and he/she can enter the invoice manually there. The web site might also offer additional services such as storing of invoices and printed or electronic copies of the invoices entered. If the web site is also the point of access for orders to the supplier, his/her amount of invoicing data to be inserted may be considerably reduced. The buyer has full authority on the format of the invoices so that they can be processed automatically when received. The buyer or a third party runs the web site and is

11 6 in control of how the invoices are stored and the security surrounding the invoices. The web site could be in the supplier s control if the situation is reversed and the supplier is influential and can persuade the buyers to collect invoices from there. In this scenario the supplier controls the invoice format and procedures. Using a web site for electronic invoicing could however cause duplication of data entry for the receiver (CEN/ISSS e- Invoicing Focus Group, 2005) Electronic invoicing through a consolidator Many companies find using a consolidator convenient. A third party such as a bank or an ASP (Application Service Provider) operator is used to overcome differences in networks, communication protocols and message formatting standards by converting the invoice data between the sender and the receiver. The invoices are electronic throughout the process and even though the invoices are formatted differently, they are structured and intended for automatic processing. Consequently, a company only has to have one format of invoices instead of matching formats for every recipient (CEN/ISSS e-invoicing Focus Group, 2005). The consolidator is responsible for the sender s invoice traffic, the format of the invoice and the transfer to the recipient. The electronic invoices to be sent are gathered from the sender by the consolidator. Credit invoices can be sent separately or included. The consolidator subsequently checks the sender and its right to send electronic invoices and distributes the electronic invoice to the recipient according to the recipient s identifier. If the recipient cannot be identified or if the data is erroneous, an error message is received. If the recipient uses a service provider, it is his/her responsibility to collect his/her electronic invoices. If the service provider is a bank for example, electronic invoices could be accessed when collecting bank statements or paying invoices (e-invoice consortium, 2005) Electronic Invoicing under trading partner framework agreement In this scenario, the business partners have an agreement for a period of time stating the conditions for trade. The business process is agreed upon as well as products and prices. A Price List transaction may be used to change products and prices during the period. A Calloff/Order transaction is used for individual deliveries followed by an order response. When

12 7 the sale is fulfilled an invoice is used to request payment (CEN/ISSS e-invoicing Focus Group, 2005) Direct Electronic Invoices An electronic invoice can also be collected directly from the electronic invoice provider or straight from the sender. Software-specific direct connections have been developed for key accounting and workflow applications in association with software providers and ASPoperators (e-invoice consortium, 2005) Benefits to issuers and recipients The potential benefits have caused a fast growing interest in electronic invoicing. According to Luo et al. (2000), the most obvious benefits for using electronic invoicing are the reductions in time and cost when processing invoices. It has been estimated that around 200 million business-to-business (B2B) invoices and 150 million business-to-customer (B2C) invoices are sent in Finland yearly. On average, when including both issuer s and recipient s costs the handling of a B2B invoice is around EUR30. Eighty percent of this amount constitutes the handling of a received invoice (e-finland Forum, 2004). The process of receiving an invoice payment in Finland is largely automated using reference numbers, with the introduction of electronic invoicing, the recipient s accounting and payment of invoices could be automated as well. The cost reduction could be up to as much as 80-90% (Vahtera, 2005). In addition, the automation of the invoice processing reduces the risk of incorrect entries. Electronic invoices are also more environmentally friendly because of its paperless system (Rautajoki, 2003). According to the e-invoicing focus group, the introduction of electronic invoicing will furthermore aid tax administrators to implement new tools and procedures for controlling purposes that are less intrusive on the trading partners. It has also been said to offer better competitiveness to the economy as a whole if the number of users is large enough (ICT Cluster Finland Review 2005). The sender of electronic invoices can reap the following benefits: Fast invoicing Lowering of costs of material Better customer service and cost-savings for customers

13 8 Less manual work process - enhanced efficiency and reduced human error risk Possibility for electronic storage Possibility for outsourcing The receiver of electronic invoices can reap the following benefits: No manual invoice entry Automation of VAT services Fast circulation of invoices Easier filing Less errors in data entry and handling Automation of accounting Reduced cost of invoice handling (Tieke, 2005, Elma Electronic Trading, 2006) Typically, large companies have more bureaucracy when processing an invoice. Different companies have different processes for handling invoices and different invoices have different handling requirements. Pauli Vahtera and Heli Salmi have made a calculation (see table 2.1), where two companies with different needs are compared on the time it takes to handle an incoming paper invoice as well as the time and cost-savings when using electronic invoicing. Company A Paper Electronic (based on Internet and EDI in Effective Accounting Invoice by Salmi-Vahtera): Handling phase Time (min) Time (min) Opening the mail 1 Date stamping the invoice 1 Copying the original 1 Organising copy in a folder according to alphabetical 1 order Checking and posting the invoice 2 Entry into the purchase ledger 2 Checking 1 1 Approval 2 1 Posting the invoice to the data system 1,5

14 9 Approval of payment 0,5 Archiving the invoice (in numerical order) 1 In-house mailing (9 copies of the invoice) 10 Error handling (10% of invoices) 2 1 TOTAL (min) 26 3 Hourly rate Minute rate 34 EUR 0,6 EUR Cost / invoice EUR 14,57 1,68 Savings / invoice 12,89 EUR Savings as a percent 88,5 % Paper Electronic Company B Invoice (based on Paperiton kirjanpito [Paper-free Bookkeeping] by Vahtera-Salmi): Handling phase Time (min) Time (min) Purchase invoice from the post Supplier number, receipt stamp and receipt number 0,5 marked onto the invoice Entry into the ledger 1 Entry into the order processing system Finding the despatch note for the invoice; the despatch note is clipped to the invoice, the invoice is placed in a post box, someone takes it to the purchase team Approval in the team 0,5 The invoice returns to bookkeeping 10 A copy of the invoice is taken The despatch note is stapled to the copy 0,5

15 10 The copy and the despatch note are placed into a 0,5 folder in receipt order The original invoice is approved Approval 0,5 0,5 The chief accountant checks the invoice posting 0,5 The invoice is taken from the ledger and posted 0,5 The invoice is archived in receipt number order 0,5 TOTAL (min) 14 1,5 Hourly rate 34 EUR Minute rate 0,6 EUR Cost / invoice EUR 7,8 0,8 Savings / invoice 7,0 EUR Savings as a percent 89,3% Table 2.1 Costs of paper invoices versus electronic invoices (Elma Electronic Trading, 2006) 2.4 Techniques and standards Introduction There are many different techniques and standards available on the international market for electronic invoicing. As this thesis focus is on the Finnish market I will concentrate on the techniques and standards used in Finland. The main ones are the einvoice, the Finvoice, TEAPPSXML, PostiXML, VaLo and EDIFACT but there are others. The einvoice was developed by an organisation which was formed to facilitate the development of electronic invoicing in Finland, the e-invoicing consortium. The e- invoicing consortium agreed on technical data content as well as the information to be included in the electronic invoice supported (the einvoice). The einvoice standard has two possibilities: XML or ASCII. The Finvoice was introduced by the Finnish Bank Association and was developed according to ebxml. In addition to these, TietoEnator has its own product TEAPPSXML which is compatible with both the einvoice standard and the

16 11 Finvoice. Having many standards on the market is not a problem as the service providers transform the electronic invoices to the format required. In Finland, large corporations still use EDIFACT but according to Vahtera this will diminish as the other alternatives are stronger and less expensive (Vahtera, 2005) EDIFACT & ANSI EDIFACT (Electronic Data Interchange for Administartions, Commerce and Transport) and ANSI (American National Standards Institute) are traditional standards of EDI. These standards set fields for documents such as purchase orders, invoices and payments (Hasselbring & Weigand, 2001) XML (extensible Markup Language) XML is a mark-up language and is used to create self-descriptive data. It is a metalanguage. XML is independent of any application or platform and both humans and machines can read its syntax. (Hasselbring & Weigand, 2001) It has been widely used to describe data and creating mark-up languages (Deitel et al, 2003) RosettaNet Rosetta Net a consortium that develops an electronic business framework for business processes definition. It is a non-profit organisation and it is creating open standards so that supply-chain partners can coordinate business processes more efficiently. To accomplish this goal, RosettaNet has developed dictionaries and frameworks that assist organisations in implementing business-process standards. The core properties of RosettaNet is the definition of terms called PIPs (Partner Interface Processes). PIPs are XML specifications and describe processes and business documents shared in the supply chain (Deitel et al, 2003). The RosettaNet framework is for example used by Elma Electronic Trading in their Elma for RosettaNet.

17 12 Figure 2.1 Elma for RosettaNet (Elma Electronic Trading, 2006) EbXML (Electronic Business XML) This technical framework was developed jointly by OASIS (Organization for the Advancement of Structured Information Standards) and UN/CEFACT (United Nations Centre for Trade Facilitation and Electronic Business) to standardise XML business specifications and make it possible for XML to be used consistently for electronic business data exchange. EbXML provides a technical framework through which companies regardless of size and industry can communicate and exchange data using XML or EDI syntax. EbXML draws on extensive experience with EDI syntax and semantics and on current initiatives for converting EDI to XML (ebxml forum, 2005). In Finland, the Finvoice was developed using ebxml Biztalk BizTalk is a tool developed by Microsoft for communication between different systems. With BizTalk, data can be marked up as XML and subsequently transferred between different applications regardless of different platforms or programming languages. BizTalk actually includes three things; the BizTalk Server, the BizTalk Framework and the BizTalk Schema Library. The server parses and translates every message and the framework is a schema structuring the messages to be sent (Deitel et al 2003). Biztalk has been used in

18 13 Finland for electronic invoicing solutions by ASP operators. 2.5 Electronic invoicing in Finland Introduction As Finland is one of the forerunners in electronic banking, there is considerable expertise in the electronic business area and the internet banking and payment infrastructure is greatly developed. In addition, there has been a great deal of collaboration between banks, ASPs and others and this has resulted in a development of functional and cost-efficient procedures, standards, models and instructions for electronic invoicing. As a consequence, Finland has proven to be a good market for solutions for electronic invoicing to be developed in (Vahtera, 2002) Solutions available Electronic invoicing has been used in Finland over 30 years already. The first electronic invoices were sent between large corporations according to internal standards. In the 1970s, the KOTVA-standard was introduced and many large businesses traded invoices. At the end of the 80s, the international EDIFACT standard was established which is still used by big firms today (Vahtera, 2002). In 1998, payment of electronic invoices through the internet was commenced. International credit card-companies have their own electronic invoices and also other large international corporations have their own systems which are based on internal standards, EDIFACT and US ANSI standard. Invoices in pdf-format or invoices have also been used as electronic invoices. The Post s ekirje can be printed but is electronic in the seller s accounting system (Vahtera, 2002). Tietoyhteiskynnan kehittämiskeskus (Tieke, 2005) has developed a website where electronic invoice users can register when they are able to receive and send electronic invoices (Tieke, 2005). The biggest players on the Finnish market are according to Heli Salmi, Elma Electronic Trading, Nordea, TietoEnator and BasWare. In this section, I will describe some of the most common solutions available on the Finnish market The einvoicing Consortium The e-invoice consortium was initiated in 1999 and the einvoice solution was developed (Elma Electronic Trading, 2006). Providers of electronic invoicing and banks in Finland

19 14 agreed upon a common standard so that electronic invoices could be sent and received in a secure manner in a common trunk network. Consequently, invoicing between sellers and buyers is made in a uniform way even though they are using different providers. The einvoicing consortium is focused on securing the einvoice and making it reliable. The providers install the connections the customer needs to be able to send and receive electronic invoices. This can be done in collaboration with the financial administration software providers or ASP operators or independently. The banks and the providers then handle the set-up, maintenance, support and backup of the network connections as well as format conversions that might be necessary to let the customers use the method of receiving and sending e-invoices best suitable (e-invoice consortium, 2005).The parties in the consortium transmit the data to the receiver according to the technical address in the invoice. Standards for the invoice data has been developed by the consortium (Elma Electronic Trading, 2006). Figure 2.2 einvoice model (e-invoice consortium, 2005)

20 15 The einvoicing model is based on EDI (Electronic Data Interchange). EDI includes the electronic transfer, from computer to computer, of commercial and administrative data with the use of an agreed standard. In other words, EDI can mean both EDIFACT messages as well as XML messages. Electronic invoicing is based on agreements between the parties involved: the invoice issuer and the service provider or bank agreements between the parties in the consortium the invoice receiver and the service provider or bank. Verification of origin is established by the use of VPN (Virtual Private Network) protocol. The VPN protocol secures the origin, integrity and confidentiality of the message. In FTPconnections the FTP (File Transfer Protocol) user is identified with a user id and a password. Banks demand MAC (Message Authentication Code) digest in their connections. The verification of integrity is verified with start and end segments. In international transactions the transmission can be secured by: The invoice sender and the receiver make an EDI-agreement where the security methods are established Verification of origin is established by using VPN protocol The verification of integrity can be secured by a digest, which is included in the data. In all cases the integrity of the data can and will be verified with start and end segments (Elma Electronic Trading, 2006) Elma E-Invoice Elma is part of the einvoicing consortium and offers several solutions to their customers depending on the customers situation. Elma offers the Elma einvoice, the Elma einvoice Basic and Elma einvoice.com. The Elma einvoice is suitable for large and mid-sized organisations and the Elma einvoice Basic and the Elma einvoice.com are more fitted to small and medium-sized companies. All of the products support several standards, message descriptions and operational models available on the market. In addition, all Elma e-invoice products are based on the standards and operating procedures identified by the einvoice consortium. Customers can therefore choose the method of receiving and sending electronic

21 16 invoices that suits them best. Elma s products support, among others, the following formats: PDF, TIFF, einvoicexml, einvoice ASCII, TEAPPSXML (TietoEnator), EPL (Finland Post Ltd), and EDIFACT. The Elma einvoice is made to look like a regular, printed invoice. According to Elma Electronic Trading, this aids checking, circulation and archiving of the electronic invoice. It can easily be linked to the organisation s invoicing system. The recipient can receive the invoice in whatever format required, whether it is another Elma einvoice, an EDI invoice or in paper format (printed by the Elma Invoice service). Invoice payment information is automatically integrated into the recipient s system. The invoices can be accessed and viewed from the organisation s ERP system. It can be printed, saved on a workstation or forwarded by . If the recipient uses the einvoice Repository Connection (erc) the Elma einvoice can be received directly into the financial information system. The erc uses the Elma data warehouse technology and an FTP (File Transfer Protocol) application interface to make this possible. The recipient s software supplier is then responsible for transferring the data and integrating the invoices. With the erc Plus, the recipient can also receive electronic invoices from other operators and banks who are part of the einvoice consortium. EDI invoices are transferred automatically using the ElmaEDI connection from the sender s ERP system to the receiver s system. Orders and order confirmations often forms the basis for EDI invoices according to the SCM (Supply Chain Management) - model. EDI invoices are mainly for companies sending many invoices. For customers wanting invoices in paper format, the Elma Invoice service can be used. The issuer sends the invoice files electronically to Elma and the Elma Invoice service prints the invoices and sends them to the customer. A customer can furthermore receive scanned paper invoices by using the Elma ecom Connection. Paper purchase invoices are then converted into electronic format such as PDF or TIFF files. In addition to the connections in Elma s products, Elma einvoices can be received through several ASP operators. The operators then transmit the invoice data between themselves and the operators are responsible for their service. Each operator can use different ways to send the invoice data. The Elma einvoice can be transmitted through the Internet as well as

22 17 through fixed connections. Currently, the Elma einvoice supports the following distribution channels: Finland Post Ltd, TietoEnator, Elisa Solutions Ltd, Proha Oyj, ProCountor.Com, WM-data Novo, and BasWare Business Transactions. Elma einvoice Basic uses the same technology and distribution channels as the einvoice but has limited customisation. The Elma einvoice.com is a service where companies can send and receive invoices electronically without installing a new application to their own system. An internet browser is all that is needed. The invoices are subsequently sent straight to the recipient s system. For security, the invoice traffic is encrypted using SSL (Secure Socket Layer), MAC (Message Authentication Code) and PATU (Banking standard for secure customer connections). Automatic watchdog technologies are used to control the buffers for the invoices and the servers are placed safely and securely and under constant supervision (Elma Electronic Trading, 2006) Finvoice The European Committee for Banking Standards (ECBS) introduced in July 2003 a standard for electronic invoicing called the electronic Payment Initiator (epi). The epi was created to be used both domestically as well as internationally. In Finland, the epi standard, SOAP (Simple Object Access Protocol) and ebxml-compliant descriptions were employed to develop a format for electronic invoices called Finvoice (ebxml forum, 2005). The Finvoice was created by Finnish banks and uses XML syntax. The Finvoice can as such, be presented in a browser in a form similar to a paper invoice as well as be understood by an application. Consequently, the Finvoice can be printed as a paper invoice and processed traditionally if the need arises (The Finnish Bankers Association, 2005). A Finvoice consists of three things; a transmission frame consisting the information necessary for forwarding the invoice, a specification of the information needed for approval and accounting purposes and payment information. As mentioned earlier, the Finvoice can be opened for viewing and printing using a normal browser but it can also be processed fully automatically (The Finnish Bankers Association, 2005).

23 Laws and regulations According to Directive 2001/115/EC, all Member States must accept documents or messages in paper or electronic format as invoices if they meet the conditions outlined in Directive 2001/115/EC. It is also stated in the Directive that Member States can require special conditions, procedures or measures according to the national requirements. This can cause conflicts in cross-border trading. In such cases, the VAT rules of the issuer s Member State will apply (e-invoicing Focus Group, 2005). Directive 2001/115/EC entails requirements on electronic invoices regarding the guarantee of integrity of content and authenticity of origin for VAT purposes. As stated earlier, an electronic invoice should be accepted as long as the authenticity of the origin and the integrity of the contents are guaranteed. The authenticity of the origin is to know for a fact, the identity of the sender of the electronic invoice. The integrity of the contents means that any changes that have occurred during transport or storage can be detected. This should be accomplished through: - an Advanced Electronic Signature (AES). - or an electronic data interchange (EDI). - or any other electronic means subject to acceptance by the Member State in question. The conditions will if necessary be adjusted according to any future technological developments in this field by the latest. In addition to these conditions the following need to be considered: - some Member countries might require a summary document in paper format of the invoices issued. - some Member countries might require prior notification but only until the end of signed invoices should not be required. - regarding cross border invoicing, the terms and conditions of the agreement and of the acceptance procedures are to be according to the regulations of the State in which the goods or services are supplied. - regarding non EU countries, the Member State where the taxable person is registered can require specific conditions for electronic invoices issued from a country with which there is no legal agreement regarding invoices if the goods and/or services are supplied in the Member State. According to the e-invoicing Focus Group (2005), the Directive furthermore states that

24 19 copies of all invoices whether received or issued are to be stored. The authenticity of the origin, the integrity of the content and the invoices readability have to be guaranteed throughout the period of storage. The content may not be changed and it has to be legible throughout the period. If the invoices are stored in message format then the required directory and code sets required for conversion to clear format must also be stored. The place of storage is optional as long as the invoices or the information stored are available without unnecessary delay to the authorities. Invoices are required to be stored for fiscal administration for a period of six years (CEN/ISSS e-invoicing Focus Group, 2005). In Finland, electronic storage of invoices is allowed according to the Finnish accounting laws as long as they can be retrieved easily (kirjanpitolautakunnan yleisohjeet, 2000). The Finnish Ministry of Finance has proposed modifications in the national VAT legislation based on the EU directive. These modifications were accepted by the Parliament in February There will be no specific requirements for electronic invoicing in Finland. The proposal declared that there have not been any taxation difficulties in electronic invoicing and legislation should not include too strict requirements (Elma Electronic Trading, 2006). 2.7 Summary As presented in this section, there are a number of options available for companies interested in using electronic invoicing with the two main ones being electronic invoicing using a consolidator and making a solutions especially fitted to serve the company in question. The benefits of using electronic invoicing are several but the most important ones are the savings a company can make in time and cost. In addition, entry errors are reduced. The main products on the Finnish market are the einvoice, the Finvoice, TEAPPSXML, and EDIFACT. The einvoice standard uses XML or ASCII, the Finvoice was developed using ebxml and the TEAPPSXML is compatible with both the Finvoice and the einvoice. In Finland there are no laws especially for electronic invoicing.

25 20 3 Theories and prior research 3.1 Introduction The vast availability of new information technology, as well as the nature of the global village, have changed the way organizations work. For example, adoption decisions have now become more difficult for management to make (Dasgupta et al 1999). Adoption of information technology has been greatly studied in recent years and has been defined as the decision to invest in, or to accept, a new technology (Dasgupta et al, 2002) and is characterised by the making of the adoption decision and the investment following the decision (Dasgupta et al 1999). As there is no set framework made for studying the attitudes towards adoption of electronic invoicing I have decided to use a selection of theories on IT adoption as a basis for my research. In this section I will present these theories and what has been discovered to determine attitudes towards new information technology and its adoption and how I will apply them in my study on attitudes towards electronic invoicing and its adoption. 3.2 Theories of adoption of new information technology Introduction Adoption of new information technology has been widely researched and there are several theories that have been used to study this subject, for example the Theory of Reasoned Action, the Technology Acceptance Model, the Motivational Model, the Theory of Planned Behaviour, the Innovation Diffusion Theory and the Social Cognitive Theory (Venkatesh et al 2003). A selection of these will be introduced below Technology Acceptance Model The Technology Acceptance Model (TAM) was proposed by Davis in1989 as a tool to predict acceptance of information technology. It has since then been widely used and validated. The model states that adoption of information technology is dependent on the perceived ease of use and the perceived usefulness of the technology by the user. More recent research has extended the model to include factors such as perceived system quality, performance and prior use. Social norms and prior performance showed to have an

26 21 influence on technology adoption. The TAM has mainly been used to predict adoption of new technology by individuals but not by organisations (Dasgupta 2002). Many other theories on information technology adoption are based on the TAM and previous research often refers to the model. For example, Pavlou (2003) states that internet technology acceptance can be partially explained with the TAM. Perceived usefulness External variables Attitude Toward using Behavioural intention to use Actual system use Perceived ease of use Technology Acceptance Model (TAM) Figure 3.1 The Technology Acceptance Model (TAM) (Gullkvist, 2005) The Theory of Reasoned Action and the Theory of Planned Behavior The Theory of Reasoned Action, TRA and the Theory of Planned Behavior, TPB, are both well-known theories of intention and have been used with success in many different settings. These two theories suggest that behaviour can be predicted according to the intentions of the person in question. The intentions are in turn influenced by the person s attitude (favorable or unfavorable evaluation) and subjective norm (perceived social pressure to perform) towards the behavior (Grandon and Mykytyn 2004). The TRA involves using an individual s attitude and his/her subjective norm towards the behavior to predict intentions (Riemenschneider and McKinney, ). The TRA has been used to gain understanding of behavior and has been applied in many behavioral science disciplines. The TRA has for example been used by Davis, Bagozzi and Warshaw to examine user acceptance of computer technology and their conclusion was that

27 22 individuals use of computers can be predicted based on their intentions. (Riemenschneider and McKinney, 1999, Grandon and Mykytyn, 2004). The TPB builds on the TRA and has the addition of perceived behavioral control. (PBC). PBC involves the influence of past experiences as well as anticipated barriers. The theory with attitude, subjective norm and PCB is documented using belief-based measures and direct measures (Grandon and Mykytyn 2004). This theory has been validated in many different settings and situations and has proven to be useful in predicting managerial behavior in regards to adoption of new information technology (Riemenschneider and McKinney, 1999, Grandon and Mykytyn 2004). Beliefs and Evaluation Attitude toward Behaviour Behavioural Intention Actual Behaviour Subjective Norm Normative Beliefs and Motivation to comply Theory of Reasoned Action (TRA) Figure 3.2 The Theory of Reasoned Action (TRA) (Gullkvist, 2005) Technology-Organization-Environment framework The technology-organization-environment (TOE) framework uses three aspects of a firm s context as influences on adoption and implementation of an innovation: technological, organizational and environmental context. The technological context involves the internal and external technologies that are relevant to the firm. The organizational context involves the size of the firm, centralization, formalization and complexity of managerial structure, the quality of its human resources

28 23 and the availability of internal slack resources. The environmental context entails the environment in which the firm is doing business i.e. industry, competitors, resources, and government (Zhu et al 2004). The TOE framework has been confirmed by many researchers such as Swanson, Kuan and Chau and Iacovou. Iacovou et al (1995) discusses adoption of EDI by small firms. The TOE-framework is used and different adopters and non-adopters are identified The theory of diffusion of innovation The theory of Innovation Diffusion is increasing in popularity as a reference theory for studying information technologies. It provides tools to assess adoption and identifies factors that facilitate or inhibit technology adoption and implementation. It has many similarities to the TAM. For example, diffusion theory involves relative advantage and complexity, which can be seen as the same as TAM s perceived usefulness and perceived ease of use. Fichman (1992) explains that factors facilitating or hindering adoption of technology that can be identified by diffusion innovation theory include characteristics of the technology, characteristics of adopters, how adopters hear about the technology and how they are persuaded to adopt (Fichman 1992). 3.3 Previous research-findings on factors affecting attitudes towards adoption Introduction In this section, previous research findings will be presented. Previous research in this area has shown the following to be motivations for IT adoption sustaining competitive advantage improvement of efficiency protecting market share assisting in innovative activities increasing productivity and profitability (Wang et al (2004))

29 24 In addition to these motivations, many other factors have been introduced and validated or discarded. I have decided to include personal factors, organizational factors, environmental factors, technological factors and economical factors as these are the most prevalent in previous research Personal factors Personal factors include attitude, perceived benefits, perceived ease of use and perceived usefulness. These are included in the theories introduced in the previous section such as the TAM and the TRA. Chau (2003) uses the TAM when studying acceptance of internet banking but extends it by adding the variable attitude. In Chau s study, perceived ease of use showed to be the most significant determinant of acceptance. He therefore goes on to conclude that perceived ease of use will be of importance for any new technology in the early days of adoption. McCloskey ( ) also found in her study that perceived ease of use and perceived usefulness were determinants of acceptance. In addition, Gullkvist (2005) learned in her study of the electronic paper in Finland that perceived usefulness and perceived ease of use were important factors affecting attitudes toward the electronic paper. Pavlou (2003) proposes an e-commerce acceptance model that draws on the TRA. He states that perceived trust and risk are important variables when predicting B2C e-commerce acceptance. He found that perceived usefulness was a determinant of acceptance but the importance of trust is due to the high level of uncertainty concerning on line transactions. The adopters of web-based e-commerce in Riemenschneider and McKinney s study ( ) had stronger beliefs as to the advantages to be gained than non-adopters (Riemenschneider and McKinney ). This was also found in the research made by Wang et al (2004) where higher perceived benefits led to a greater motivation to adopt. Iacovou et al (1995) discovered in their study of EDI adoption in small firms that there was low awareness of the benefits of EDI before adoption. As a consequence, the relationship between perceived benefits and adoption of EDI was moderate (Iacovou et al, 1995) Organisational factors Organizational factors include culture, ownership, management skill and support among others. Dasgupta et al (1999) discovered that if an organization has a high performance-

30 25 oriented culture the level of computerization tends to be higher. This type of culture emphasizes people, team, detail, outcome orientation and innovativeness. Companies sustaining a stability-oriented culture were believed to be less likely to adopt new information technology as they tend to resist change but the study could not find any support for this theory. The conclusion was that even change-resisting firms need to adopt some amount of new technology to stay competitive. Foreign or domestic ownership did not show to be significant either (Dasgupta et al 1999). Chong (2000) identifies managerial factors such as lack of managerial and or technical skill that influence adoption or non-adoption. In addition, lack of managerial support has been found to influence adoption. This has been verified by Wang et al (2004) where strong support from top managers was shown to have positive influence on IT adoption. Availability of qualified personnel is another important factor discussed by Bertschek and Fryges (2002). Dasgupta et al (1999) also found that greater involvement of Information Systems staff in the decision making regarding adoption had a negative influence on adoption. However, Gullkvist (2005) discovered that managerial support as well as IT support did not have a big effect on the attitudes of accountants and auditors and states that these factors affect actual usage and not attitudes Firm Size Firm size is one of the most frequently studied factors on adoption and has been validated in many different settings as a determinant of adoption of new information technology. Riemenschneider and McKinney ( ) found in their study of belief differences in small business adopters and non-adopters of web-based e-commerce using the TPB, that large firms were more likely to adopt e-commerce than small firms. This was also evident in Bertschek and Fryges (2002) study of German companies regarding B2B e-commerce adoption. Firm size is a factor that determines adoption, the larger the firm the more likely adoption is. Dasgupta et al (1999) discovered the same thing. The degree of computerization was found to be larger in larger firms. Iacovou et al (1995) looked at the relationship between firm size and adoption of EDI and stated that adopters tend to be larger firms (in terms of sales volume) than non-adopters. This is a result of the resources that are available to the firm. Size measured as number of employees on the other hand does not seem to have an impact (Iacovou et al 1995). Kelley and Helper (1999) state, that a business likeliness to adopt new technology is a function of its organizational capabilities