In the past few years, the pace of change in the electronic invoicing industry has seen steady, unequivocal growth, which has been driven mainly by the development of new technologies. Adoption of digital automation has led to year-on-year growth of between 10 and 20 percent, while Billentis’ Market Report 2016 estimated the total volume of electronic invoices worldwide would reach 30 billion in 2016. By digitising business processes such as invoicing, companies will benefit from cost savings, increased control and fraud reduction, in addition to improving the customer experience.
As noted in Capita’s 2016 Trends vs Technologies report, there is a clear disconnect between businesses recognising the benefits of technology to increase efficiencies, and businesses actually taking advantage of and implementing that technology. This slow adoption sees many businesses fail to operate as efficiently as possible.
Where investment in innovation has been made, it has typically been in the customer-facing ‘shop window’ of the business, like in marketing automation. Meanwhile, the back office has often been neglected. Herein lies the opportunity.
At Tungsten Network, we have focused on close collaboration with our customers and, in particular, have helped them communicate the benefits of e-invoicing to their suppliers. This partnership approach, rather than positioning ourselves as simply a service provider, has seen us working with buyers and even meeting up face-to-face with their suppliers to ensure everything we do is easy to access and understand. We also offer ‘how to’ guides and films on our online portal.
These strategies have led to real growth, as one by one suppliers have been inspired by our vision and joined the network. Our business proposition is only as strong as our network, and therefore it is critical to get our customers on board with the demonstrable benefits from e-invoicing, which in turn reduces business friction. On top of this, we constantly consider which new value-added applications we can offer to our 200,000 customers, and how to leverage Tungsten’s network effect. Recently, when focusing on the difficulties vendors face when their customers pay them in foreign currencies, we created a new partnership with Payoneer, an international currency conversion platform. In so doing, we reduced the cost, time and paperwork associated with conversions to local currency.
Today’s borderless, digital world presents a number of challenges to our industry. Guaranteeing data security and ensuring virtual attackers can’t exploit loopholes, break into servers and steal sensitive financial information or funds is vital for all companies – particularly in the invoicing industry, where we encourage companies to trust us with critical data on their trading activity.
Complex buying organisations are able to make payments on time, every time, as well as identify fraud or duplication
Keeping data safe from outside threats is one thing, but invoice fraud is another growing issue faced by businesses of all shapes, sizes and sectors. Fraudsters are finding increasingly sophisticated ways to intercept business processes: according to Tungsten Network’s own research, in the UK this is costing SMEs more than £9bn ($11.4bn) every year, or £1,658 ($2,095) per SME.
In the last year alone, nearly half of all businesses (around 47 percent) have received a fraudulent or suspicious invoice. Tactics being employed by fraudsters can include viruses embedded in attachments, unknown invoices attached to an email or sent by post, false changes to bank details, or sending duplicate invoices. Worryingly, the scale of the fraud is accelerating, with 54 percent of businesses now concerned about its rise and viewing it as their single biggest threat – more so than losing a major contract or a member of staff, or competitor activities.
The issue of late payment continues to pose an ongoing problem. In November, the Federation of Small Businesses launched a report into the effect of late payments on smaller businesses in the UK. It found 30 percent of payments to SMEs are made late, with 37 percent of businesses reporting that this causes significant cash flow problems in their day-to-day operations. The report suggested that in 2014, if such payments had been made on time and as promised, around 50,000 business would not have closed down, which would have in turn contributed £2.5bn ($3.2bn) to the UK economy. Furthermore, according to a survey by Atradius, around 40 percent of invoices in Europe are paid late or defaulted on. Clearly this trend is having a massive impact on the global economy.
It is critical for our industry to respond and show how it can support companies as they expand, and remove some of the hassle surrounding operating globally and making payments in different jurisdictions.
Headquartered in the heart of London with offices in North America and Asia, Tungsten Corporation is a leading global supply chain enabler. We are a team of technologists, B2B commerce experts, process mavens and digital evangelists that is dedicated to accelerating global trade through the intelligent use of data and the death of paper. We have built the world’s most trusted, compliant business transaction network, Tungsten Network, and a suite of services designed to improve business outcomes for our networked firms. These include real-time spend analysis through Tungsten Network Analytics and access to disruptive supply chain financing through Tungsten Network Finance.
For more than 16 years, we have been connecting buyers to their suppliers in order to enable tax-compliant electronic invoicing. This platform currently processes $200bn of invoices in 200 countries for more than 200 complex buyers. At Tungsten Network, we aim to revolutionise the payment process through the use of unique technology that brings buyers and suppliers closer together, maximises efficiency and
improves cash flow management.
It’s strange that, while the digital revolution has touched upon the front end of most businesses, many companies have not incorporated new technology into their back office. Instead of adopting automation – which seems like a no-brainer in this digital age – fewer than 10 percent of invoices are digitised. Too many companies are still receiving invoices in numerous different formats – paper documents, PDF scans of a hard copy, or totally electronic – via post, email, web portal or uploaded directly to an accounting system.
It can even be a confusing combination of several different options. Each invoice requires a person to open, scan, and send it to the correct department, before it is filed and archived. Against this backdrop, it is not surprising mistakes and inefficiencies creep in.
In contrast, Tungsten enables businesses to fully digitalise the process by creating an electronic invoice that helps them adopt faster, smoother business practices, saving valuable time and resources (see Fig 1), as well as completely eliminating paper from the process of paying suppliers. Instead of relying on a paper-based system, e-invoicing streamlines the process and reduces the opportunity for errors and inefficiencies, which cause friction and delays in the payment process.
Complex buying organisations are able to make payments on time, every time, as well as identify fraud or duplication. They also have greater visibility of the current status of every single invoice in the system and can connect with their global supply chain in a much more transparent and immediate way. These benefits are vital in our increasingly borderless world, as companies continue to adapt to the complexities of trading internationally.
E-invoicing is becoming the norm for many of the world’s brands; around 70 percent of FTSE 100 and Fortune 500 companies have already taken their procurement, invoicing and payment procedures to Tungsten’s electronic network. This is timely, as a growing number of countries are moving towards recognising electronic invoices as legal documents, and even mandating their use over paper counterparts (see Fig 2).
Businesses, organisations and governments that use the Tungsten Network benefit from unprecedented access to a wealth of data at the touch of a button. Using innovative spend analytics technology, management teams can analyse their invoice data, offering them comparisons against past spending patterns. These can then be used to uncover significant opportunities for savings, as well as optimising the procurement process. The technology can also provide useful insights into which suppliers they are spending the most money with, and where duplications may be occurring.
Smarter procurement is particularly important for public sector organisations as the taxpayer expects the government to be financially responsible. As a consequence, any foolish spending decisions can make news headlines. A recent example of this happened in the UK, when an analysis of National Health Service spending reported that, while some trusts paid less than £4 ($5) for a box of needles, others were paying £31.68 ($40).
Clearly, if this mistake had been spotted sooner, huge sums of money could have been saved. But when teams are based across multiple locations and in different departments, it is easy for duplications to occur. Essentially, this means procurement departments can miss crucial opportunities to negotiate on consistent pricing and economies of scale, which could add up to hundreds of thousands of dollars. Tungsten Network’s spend analysis technology can reduce the likelihood of these situations arising in the first place.
Given an accounts payable department of a large organisation – whether in the public or private sector – may handle thousands of invoices per month, the sums that can be saved are considerable. These computer-led systems open up a huge amount of data that can help improve future business, but this data is so vast it is impossible to analyse manually. We believe artificial intelligence offers a much more efficient solution. With machine learning, we can train computers to crosscheck items so that when a pen appears at 100 times its normal price, flags are raised and the mistake is then rectified by a real person. Currently, this process can take days.
For example, using our current spend analysis capabilities, we have helped one pharmaceutical company analyse its spending patterns on 475,000 products – a process that has found $80m worth of potential savings.
E-invoicing has the potential to greatly improve buyer-supplier relationships. As both parties can keep track of their invoice status at the touch of a button, it makes it easier to monitor what stage in the approval process an invoice has reached at any given time, without having to chase for updates. Suppliers feel reassured their invoice is being handled effectively, while this greater transparency aids the critical and sensitive working relationship between both parties.
Easing overseas payments
While our borderless world has thrown the floodgates for trade wide open, it has also presented businesses with various new challenges. Research by the Economist Intelligence Unit found the biggest pain point for companies surrounding global trade was in relation to payments: of the 500 companies surveyed worldwide, 32 percent cited making payments as a top challenge, pointing to issues arising from currency fluctuation, process inefficiency, limited payment visibility and bank fees.
Companies can easily come unstuck when valuable working capital is tied up in elongated payment processes and lost through unfavourable currency conversion rates. This is why Tungsten Network has recently teamed up with international money-transfer platform Payoneer to enable businesses to receive cross-border payments quickly, securely and at low cost, saving up to 90 percent on bank transfers. Through the Tungsten Network platform, businesses can now receive bank transfers from their international clients and customers as if they had a local bank account – meaning, if a client pays in dollars, a supplier in the eurozone will receive each payment in euros. This removes much of the stress and complexity from making payments across different markets.
Companies can easily come unstuck when valuable working capital is tied up in elongated payment processes
Another issue can be ensuring invoices are compliant in different countries and are meeting the relevant legal requirements. Nowadays compliance is a moving target as governments are constantly changing the rules and countries or regions each tend to have their own set of criteria. Again, this is where Tungsten Network is uniquely positioned to help: its business transaction network is tax compliant in 47 countries, and our teams are constantly abreast of changes in legislation.
Guaranteeing data security and ensuring virtual attackers cannot exploit loopholes, break into servers or steal sensitive financial information or funds is vital for all companies. The amount of highly sensitive customer information on business transaction networks means this is a particularly critical issue within this sector.
Earning our customers’ trust and ensuring the security of their data is one of our top priorities and at the heart of everything we do. Every day, Tungsten Network deals with highly sensitive customer information, and takes its responsibility to keep it safe very seriously. The success of our network relies on its confidentiality, availability and integrity. To guarantee these, Tungsten Network advocates and is certified to ISO 27001, an internationally recognised minimum standard on data security. This means those businesses that transact through the network can be confident their data is safe and they have not been exposed to any additional risk by using the platform. Tungsten Network also requires any data centre it uses to have the same certification.
E-invoicing can also eliminate the possibility of invoice fraud, thus shifting the responsibility for checking an invoice from your finance team to a highly sophisticated, automated-service provider. Tungsten Network’s technology doesn’t just check the invoice, it creates it – and only after ensuring that all the data inputs are compliant with a given country’s regulations, and the buyer’s own requirements. Only when our system validates all of this can a payment be made, thereby spelling the end of the fraudulent duplications.
In addition to automated rules, the move to electronic also makes the invoicing process much more efficient. This therefore makes it easier for your business to react to fraudulent activity once it is detected.
of businesses received a fraudulent invoice in 2016
The annual cost of fraudulent activity to the UK’s SMEs
of European invoices are defaulted on or paid late
of invoices are currently digitised
of FTSE 100 and Fortune 500 companies are in Tungsten’s electronic network
The growth of invoice financing
Supply chain finance (SCF) is a set of solutions that optimises cash flow by allowing businesses to lengthen their payment terms to their suppliers, while providing the option for their large and SME suppliers to get paid early. This results in a win-win situation for both the buyer and supplier; the buyer optimises working capital, and the supplier generates additional operating cash flow, thus minimising risk across the supply chain.
It generally involves the use of a technology platform in order to automate transactions and track the invoice approval and settlement process from initiation to completion. The growing popularity of SCF has been largely driven by the increasing globalisation and complexity of the supply chain. SCF places Tungsten Network at the heart of the supply chain, enabling the cash to keep flowing and businesses to keep growing and thriving.
Invoice finance gives businesses access to finance by unlocking vital working capital that can otherwise be tied up in unpaid invoices. For companies looking to grow, the lengthy administration or set-up processes of traditional lending can act as a barrier to funding. In addition, tighter lending criteria are resulting in more and more businesses looking to alternative finance models. Unlocking working capital is the key to growth and to maintaining a healthy financial supply chain, which benefits everyone involved.
Originally launched in 2015, Tungsten Network Early Payment has been offering flexible, transparent funding to many SMEs at the touch of a button. The mechanism is simple: submit an invoice electronically via Tungsten Network’s digital platform and get paid immediately, rather than wait until the end of the agreed payment terms for that job. There are no credit checks or administrative delays.
The system enables suppliers to get paid upfront for invoices by simply selecting an individual invoice for immediate payment. It is a low-cost and easy way to access alternative to bank finance and factoring solutions, and is offered exclusively to suppliers in the Tungsten Network. In addition, it allows suppliers to accelerate payment when they want, giving them much more control over their cash flow.
Tungsten Network Early Payment offers fully transparent funding with an advance rate of 100 percent, minus a small discount, which is significantly more favourable than the 90 percent or lower offered by similar schemes elsewhere. Furthermore, by taking advantage of early payments and through access to funding from the same platform as they transact with their clients, SMEs can introduce more control to their cash flow, choosing when to have a cash injection depending on their day-to-day circumstances.
As well as Early Payment, Tungsten is broadening its network solutions to include receivables financing and payables financing. More suited to larger enterprises in the SME bracket, this will support businesses looking to scale up their operations further.
Thousands of businesses now use Tungsten Network Early Payment to access the cash they need at the press of a button, eradicating the perennial SME bugbear of being kept waiting for weeks, or even months, for the payment of invoices. Alonso Jose da Silva, an International Technical Manager, explained: “Tungsten Network Early Payment is easy to use and understand. We do not take advantage of it on a regular basis, but on a particular occasion when we needed to pay a supplier, we took early payment on an outstanding invoice and received the credit sooner. This provided us with a lot of flexibility and reassured us that our suppliers will always be paid on time, even if our clients may be late in processing their invoices.” Similarly, Michelle Burnage of Abacus Industrial Flooring said: “We would recommend Tungsten Network Early Payment system to other companies because we know how much it’s helped our situation. It’s helped us as a company to move on to bigger projects.”
Over the next few years, Tungsten Network expects its spend analytics technology to evolve even further to achieve even greater levels of trend monitoring, using financial modelling to predict future pricing patterns and assess supply chain risks. Software and artificial intelligence will be able to assist with the buying decision process by checking prices online against existing deals with suppliers. They will also be able to offer a risk analysis of suppliers. All of these components could transform the procurement industry.
Recovering from the international financial crisis has been a slow process, and continues to worry companies across the world. In fact, much of the eurozone and many developing countries are stagnating: 2017 is surrounded by further economic uncertainty, with policymakers refering to this economic performance as the ‘new mediocre’. As a result, businesses need to be careful and look for efficiency benefits wherever they can find them.
Ever tighter margins, volatile currencies and fluctuating global commodity prices
mean no organisation can afford to waste time chasing for payment
Ever-tighter margins, volatile currencies and fluctuating global commodity prices mean no organisation can afford to waste time or money chasing for payment or clarifying information on invoices. Neither can they afford to waste money through overpaying on products. Smarter procurement is an easy way to make cost savings that can multiply through an organisation.
While the digital revolution continues to embed itself in more businesses processes, the importance of building and maintaining trust is vital and remains one of the biggest challenges facing our industry. Cybercrime is growing apace and any company that operates in the digital space will need to constantly reassure its customers their information is safe. Our network is totally reliant on customers buying into the model and trusting it implicitly. In the coming years, we must continue to guarantee to our customers that our digital processes and the valuable information that passes through the network are properly administered, and that we are agile and responsive to any security threat.
In addition, trading globally and ensuring invoices are compliant is only going to get more complex, especially when non-compliance is regarded as tax evasion. Keeping abreast of developments across the world will be critical for our industry. We are committed to being at the forefront of the industry and, in some cases, even intervening to encourage the take-up of e-invoicing. For example, several Indian states have changed legislation to allow invoices to be signed off digitally – this has been the result of Tungsten Network’s extensive negotiations with the relevant authorities. India’s entry into the world of e-invoicing reflects its rising position in global business and the importance of providing access to the latest technology in emerging markets in order to drive economic growth. Tungsten Network’s focus on achieving compliance in India is a direct response to customer demand, as increasing numbers of businesses are seeing opportunities in this fast-developing market.
The issue of late payment never seems to go away as companies continue to use payment as a means of managing their working capital. For this reason we foresee invoice financing will continue to grow as companies rely on it to keep their cash flow healthy. According to Nesta, the alternative finance market grew to £3.2bn ($4.04bn) in 2015. It currently makes up 12 percent of the market for lending to small businesses in the UK, and we would expect invoice finance to continue to gain ground.
In the future, technology will only become more engrained in business processes, reducing friction around the globe. E-invoicing is already helping businesses to seamlessly manage the accounts payable process, improving relationships between buyers and suppliers. By improving cash flow in the supply chain, financial technology such as ours is also increasing confidence and enabling growth. Tungsten Network’s approach to digitising business is about constantly reviewing what customers need, so our technology is always changing and developing to reflect our reason for doing business: to be the world’s most trusted business transaction network.
For more information, visit tungsten-network.com