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    Cross-border eInvoicing in
 eRegion – Banks and Technology
      Providers Perspective

               Friday, 22nd October

               Franc Bračun, PhD

                Merkur Day 2004
   Chair:
    Dr. Franc Bračun, Executive Director
    Branch Network, Abanka Vipa, Ljubljana, Slovenia
   Speakers:
    Mag. Martin Mihelčič, Director of Card Business & eBanking
    SKB banka d.d. - Société Générale Group
    Mr. Kari Korpela, eBusiness Project Manager
    Technology Centre Kareltek Inc., Lappeenranta, Finland
    Ms. Andja Komšo, Adviser to the Government
    Head, Department for Organization and Development of Information Technology
    Tax Administration, Ministry of Finance, Republic of Slovenia
    Dr. Tomaž Domajnko, Director, IT Research & Development
    SRC.SI, Systems Integration, Ljubljana, Slovenia
    Mr. Tomaž Kavčič, Executive Director
    eBusiness Unit, S&T Hermes Plus, Ljubljana, Slovenia
    Mr. Janez Uplaznik, Director
    Mikropis Holding, Žalec, Slovenia
   There are many aspects to electronic commerce and trading. Being able to
    present and pay invoices electronically is an obvious element of this, but until
    recently one of which few organizations have taken full advantage.
   In most organizations today, invoices are:
     –   raised manually
     –   printed on paper and
     –   posted to the customer
   When the payment period has expired, the supplier will contact the customer to
    ask why no payment has been received and will here one of the three answers:
     –   There will be a dispute over the order, necessitating a process of checking,
         adjustment and final agreement
     –   the invoice will be somewhere between the desk of the person who placed the order
         and the accounts department
     –   The payment will be about to be settled via the payment system

          This process is time-consuming and cost-inefficient.
Evidence of the Need for Change

   The bank with 200 people to repair the 30% of payments that they have set up
   The insurance company with 90 people to answer the 1 million phone queries it
    receives annually from suppliers chasing payment;
   the supermarket group which cannot reconcile up to 5% of its spend on goods
    for sale with the invoices it receives;
   the procurement organization that rejects 3,000 invoices per month due to
    incorrect charging information;
   the same organization that creates over 1,000 new supplier records each year
    on its accounting systems;
   the drugs company that churns annually 40% of its clinical trial suppliers due to
    disputes over payments.

    A list of such horrors could be drawn up from organizations in every industry.
Key Business Needs

   Purchasing control, efficiency and contract
    compliance are key to businesses.
   Critical elements to achieve these are
    electronic payments and invoicing solutions.
   These need to be practical, and integrated
    into the end-to-end buying process for use by
    all within it, not just the accountants.
The First Key Point

          Procurement                                      Treasury
     Supply Chain Operations          Finance and Accounting Operations

 Select      Order        Receive      Fit       Pay        Reconcile   Reclaim VAT
 Offer    Process Order   Dispatch   Invoice   Reconcile    Reconcile    Pay VAT

     Supply Chain Operations          Finance and Accounting Operations
     Focus on optimizing the end-to-end supply chain business
        processes that require invoicing and payments, not on
                          isolated solutions.
A clear channel strategy and policy for
using channels are required

Invoice Channels                     People, Processes & IT       Payment Channels
    Card Payments                   Organization                    Bank Branch
    EDI                               Procurement                  Charge Card
    Electronic Invoices                                             Cheque
      –   Electronic file transfer     Supply Chain Operations      EDI
      –   Electronic invoice          Finance and Accounting          –   Electronic
          presentment                                                      Payment Initiation
      –   E - mail                     Treasury                       –   Electronic Funds
      –   Magnetic media/CD-ROM                                            Transfer
      –   XML                          Tax                          Internet Banking
    Paper Invoices                                                  Telephone
    Self Billing                                                    PC Banking
    T&E Card                                                        Purchase Card

    Establish a clear ‘channel’ strategy – one-size fit all solutions are impractical in
    large and in complex supply chains. Different solutions are needed for different
                     areas of spend and for different supply chains.
Electronic Invoice Presentment
and Payment (EIPP)

   With an EIPP system money transactions
    can be handled end-to-end electronically
    over the Internet, from rising the invoice to
    collecting the money.
Areas to Address
   Cost savings through process and administrative efficiencies
    (e.g. studies in Europe have identified process cost savings of
    60% - 77% when purchasing cards have been introduced in
    specific areas), and through improved deals based on better
    information and service with
   Improved customer and supplier relationships through reduced
    exception processing and queries, and better information
   Reduced working capital through improved collections and
    better use of discounts.

Be innovative, but take one step at a time - focus on areas of
 tangible benefits such as the manually intensive processes
           that generate non-added value activities.
Barriers to moving forward
Barriers that need to be overcome before this critical mass occurs
    –   A lack of widely accepted standards for interoperable solutions
    –   The need for adoption of widespread and low cost supplier/customer/bank
    –   Migration away from traditional, high-cost EDI networks to innovative, low-
        cost internet-based
    –   Upgrade of banking infrastructures to allow processing of the new payment
        schemes needed to support electronic business processes
    –   The need for a growing number of case studies of successful electronic
        payment and invoicing implementations
    –   Changes to executive perception (payment and invoicing processes are
        boring utility processes that add little value and are generally not broken –
        so why change?) and greater executive appetite to innovate.
Functions and Features

   Features and functions to consider are:
     –   Exception processing and dispute management features
     –   Payment schemes (e.g. bulk, guaranteed, conditional)
     –   Clearing system integration – direct debits and credits
     –   XML messaging (to accommodate multiple, organisation-specific
         invoice formats)
     –   ERP purchase-to-pay processes for large repetitive orders from
         key suppliers (often purchase orders against a contract)
     –   Public Key Infrastructure security for electronic transactions
     –   Hosted vs. in house operated applications
     –   Email notification of receipt/sending.

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