E-invoicing seen from the users perspective

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1 E-invoicing seen from the users perspective Statements from the public sector Reduced bookkeeping resources by 50 per cent Today there is no doubt that we manage invoices more efficiently. The entire process has been digitalised, and this makes our work much smoother. After introducing e-invoicing we have been able to reduce bookkeeping resources by 50 per cent. We are very spread out geographically and e-invoicing means that we no longer have to send invoices back and forth by post. This is a huge advantage as we receive about 6,000 invoices every year. We would like to digitalise more of our administrative work processes, and we see e-invoicing as an important step in the right direction. - Anne Lund, the Danish Coastal Authority Faster and better handling of 80,000 invoices a year In general, e-invoicing has enabled us to manage invoices more rapidly and far more efficiently. Now we don t have to open letters, send internal envelopes from pillar to post, and spend time on filing. Every year we receive 80,000 invoices and getting this amount of paper into ring binders so that we can find an invoice later is a challenge in itself! It took ten minutes to process an invoice under the old system, and now it is much faster. And furthermore we have used our experience with e-invoicing to look at the whole procurement process, which we also hope to digitalise and make more efficient. - Jens Josephsen, Municipality of Gentofte Statements from the private sector Simple and manageable We have changed many of our routines for the way we manage debitors. We have 800 outlets in Denmark, which previously each sent invoices. Now five people deal with things centrally. It is much more simple and manageable than before. Managing each monthly invoice from an outlet cost 2 under the old system; now it costs just 1.2. We send 16,000 invoices each month to public-sector clients, so this is a significant saving. Therefore, we hope that more suppliers will send electronic invoices to us in the future. - Karsten Frandsen, COOP Denmark (supermarket chain) No more envelopes, letter paper or stamps Electronic invoicing has saved us loads of time and money. We don t need envelopes, letter paper, or stamps for invoices and this gives us a big saving. Employees who previously had to put invoices in envelopes have now been released for other tasks. We send more than 100 invoices per week, and today this takes just ten minutes. This is much quicker than before. I guess that it cost 1.3 to send an invoice under the old system, now it costs The more enterprises that introduce electronic invoicing, the greater the savings for us. - Maria Birk, Leif M. Jensen A/S (transport company)

2 The next step eprocurement E-invoicing is the first step towards public procurement that is digital from start to finish. This will mean further efficiency benefits for both the public and the private sector. Business-to-business innovation The public-private partnership that e-invoicing in fact is has contributed to promoting digitalisation in the private sector. The initiative is a driving force for private companies who make good use of the advantages that digitalisation can give them in business-to-business transactions. High transferability to other European countries The Danish e-invoicing initiative has a high transformation value to other countries. Most European countries can to some extent make use of our technology and governance. The Swedish review of how e-invoicing could be established in the Swedish public sector recommends the Danish mandatory model. Will become the preferred way of sending an invoice A more thorough test of the technical setup could have prevented some of the initial difficulties that we have encountered. But I do believe that e-invoicing will be to great advantage for small and medium-sized companies once it has been integrated as a standard in invoicing systems. I am also convinced that it will become the preferred way of invoicing business-to-business. Jakob Brandt Danish Federation of Small and Medium-Sized Enterprises A competitive advantage for Danish commerce An efficient public sector plays an important part in determining how well Danish businesses do on a global market. If we succeed in making the most of e-invoicing, it may lead to a more efficient private sector. The Confederation of Danish Industries has no doubts that in the long run e-invoicing could be a competitive advantage for Danish commerce. Gitte Bengtsson, Vice President Confederation of Danish Industries The Danish Ministry of Finance initiated e-invoicing in Denmark. In cooperation with Local Government Denmark and Danish Regions, they developed the ideas, and parliament passed the necessary legislation behind e-invoicing in Denmark. E-invoicing supports the Danish national strategy for e-government which aims to create a more effective and coherent public sector. The Agency of Governmental Management, under the Ministry of Finance handles the implementation and ongoing administration of e-invoicing. Visit us at and For further information please contact THE AGENCY OF GOVERNMENTAL MANAGEMENT LANDGREVEN 4 DK-1017 COPENHAGEN C Contactperson Head of Division Thomas Fjeldberg tfj@oes.dk

3 E-invoicing in Denmark higher efficiency in the public sector

4 E-invoicing in Denmark a step into the future Today public institutions in Denmark only accept invoices from suppliers in electronic format. Thus, all public-sector bodies have converted their systems and administrative processes from physical to digital processing of invoices and credit notes. The reform was put into force in February It affects approximately 15 million invoices a year, and applies to the entire public sector, from government ministries to nursery schools. E-invoicing includes every company in Denmark trading goods or services with institutions or other bodies in the Danish public sector. Public procurement covers purchases ranging from a teacher on a school outing booking a boat trip to an IT-department in a ministry placing a large order to buy computer software. Before February 2005 they would get a paper invoice by post that had to be handled by a number of persons in the organisation for approval, entry and filing. Only one person at a time had access to the invoice, and for future reference you had to go and find it in the basement archive. When placing an order today, the employee states the electronic address of the institution, the EAN number. This ensures that the invoice arrives directly into the electronic invoicing system of the institution, and is subsequently approved online via the employee s pc a process that takes minutes. The invoice can be called in a matter of seconds for future reference. This process considerably reduces the processing time for invoices and involves no paper. The compulsory transition ensures a modernisation of the entire payment infrastructure and the old-fashion paper channel has now closed for good. The new system provides security and convenience for the supplier, because all invoices to public-sector customers can be sent in a single, standard format. Furthermore, it enables the individual public institution to begin the digitalisation of all internal work processes and systems immediately. The public sector in Denmark aims to improve efficiency, and digitalisation including e-invoicing supports this. The strategy behind digitalisation is that investments must pay off, which means that digitalisation projects must either increase the quality of public services (better products, faster case-processing times, fewer errors etc.) and/or supply the same service using fewer resources. The efficiency benefit of the conversion to e-invoicing itself is estimated at about EUR million a year. Part of this saving is earmarked for the national treasury. In addition to this comes significant savings in internal administrative processes. E-invoicing contributes to building a digital infrastructure that will benefit the efficiency of society as a whole, in much the same way that railroads and telephone cables have done in the past. The progress in e-invoicing The table shows the development in the amount of e-invoices received by public institutions in the period from February to October In 2004 KPMG estimated the total number of invoices received annually by Danish public institutions to be 15 million or 1,25 million a month. *In October 2005, 95 per cent of all invoices to public institutions are delivered electronically. There are approximately 300,000 active companies in Denmark, and many of these do business with the public sector.

5 This is how it works All goods and services delivered to public institutions in Denmark must today be invoiced electronically. An electronic invoice is a bill converted to a particular format, which can be read directly by the public sector s accounting systems. This particular format is called an OIOXML electronic invoice and is based on international standards. The infrastructure is made up of a sort of electronic postal service, the VANS network, and an electronic postal address, an EAN number that identifies each public-sector entity. The project is based on proven market solutions, including the VANS infrastructure and the systems that can receive and process e-invoices. The solution is independent of the companies IT sophistication and is highly flexible. Companies can send their invoices in different ways, according to their level of IT readiness: Through an electronic invoicing system, by sending an OIOXML digital invoice directly from their own system to their public-sector customer via the VANS network. Through a digital invoice portal, which resembles an Internet bank where companies compose their invoices using a login and password, and then send it electronically. By sending a paper invoice with an EAN number to a Read-In bureau. Here it is converted to an electronic invoice and forwarded to the correct public institution. This solution ensures that foreign companies and companies without the necessary IT can still do business with the public sector. Our timeline The implementation of electronic invoicing in Denmark has proceeded according to plan. Here is a short overview of the main activities:

6 Our lessons your gain Electronic invoicing illustrates that the public sector can implement a swift overall upgrade in technology, with significant improvements in efficiency, if there is sufficient political commitment and the technology to support it. The main lessons learned are: Regulation by law and backing by parliament is crucial In the case of electronic invoicing, legislation has been crucial in enabling swift conversion of all administrative processes for the parties involved. Also, legislation has provided security in volume of orders for the private suppliers. Leave it to the market Private companies have provided the infrastructure and the local systems to support e-invoices. Thus there is a market and competition but no new major inventions, thereby ensuring that the risk is relatively limited. How fast can technological change be carried out? The entire public sector and all private companies delivering goods and services to the public sector had less than six months to adjust their invoicing systems and procedures to the new standards. In retrospect a longer period of implementation would have been preferable. Don t forget the people side of digitalisation Introducing e-invoicing has mainly focused on getting the technology in place. The people who have to change their work processes are an equally important success factor. Call for a clear vision The project has involved many players, all of whom have contributed to making e-invoicing a success. Communicating with all parties has been a complex task. Communication should be a structural element of the project, and a detailed communication plan at an early stage is a must. A clear vision reduces resistance as it provides the various players with an understanding of why digital conversion is a good idea.