E-invoicing in public procurement

There has been a lot of interest and discussion on the European Commission’s proposed directive on e-Invoicing in public procurement since its announcement on 26 June 2013. While it may seem a fairly concise document, its implications and potential impact are far reaching and extend beyond public sector organisations alone. 

The European Commission’s current focus on e-Invoicing is driven by the Digital Agenda for Europe – the EU’s strategy for using technology to deliver sustainable economic growth – and cost savings. Michel Barnier, Commissioner for Internal Market and Services said: “Switching from paper to fully automated invoicing can cut the costs of receiving an invoice from €30-€50 to €1. These are good and valuable savings in the current economic climate. As the largest spender in the EU, the public sector should play a leading role in stimulating its uptake.”

A semantic standard

In the proposed directive on e-Invoicing in public procurement, the European Commission proposes the creation of a European e-Invoicing standard to improve interoperability between different e-Invoicing systems. Aside from the direct savings for the public sector and its supply chain, it argues that the standard will help boost the uptake of e-Invoicing more widely in Europe. At present, the European Commission states that e-Invoicing adoption continues to hover in the 4-15% range, although other estimates put this at a higher level.

The proposed directive is linked to a range of other non-legislative measures to promote a broader move towards automated procurement from order to payment. Although the specifics of these other measures have yet to be identified, we welcome the focus on e-Invoicing as a pivotal process in procurement automation as a positive political push.

The approach to the standard is interesting. The European Standards Committee (CEN) will be expected to create a semantic data model for the core e-Invoice. A semantic data model is defined as a structured set of logically interrelated terms and meanings at the business level. In this case it will likely include a lexicon for the content contained and exchanged in e-Invoices, such as buyer and supplier data, identifiers, attributes, line items, delivery information and payment details, etc.

Supporting interoperability

The standard will support the goal of interoperability: for information to be presented and processed consistently between business systems, regardless of their technology, application or platform. Full interoperability includes the ability to interoperate in terms of content (semantic), format (syntax) and transmission. Semantic interoperability implies that the precise meaning of the information exchanged is preserved and understood unambiguously, independent of the way that it is physically represented or transmitted.

The interesting aspect is the desire to create a standard that is technology neutral or independent of the infrastructure or solution employed, including the actual data standard or format. We presume that the expectation is for the semantic data model – which will hopefully be based on the best of existing standards – to become an overarching ‘informing’ layer for the format standards that are already in use at a national or European level. These standards will then become interoperable through mapping software that can identify the common definitions and meanings inherent in the data elements within the e-Invoices.

A mandate?

The forthcoming directive will require all EU public agencies to process any invoice it receives using the standard, which, in essence, will make it a mandatory, if not exclusive method. This requirement aims to support the single market and help suppliers deal with multiple public agencies in the member states.

The overall approach reflected in the development of a European semantic standard has the clear support of the European Multi-Stakeholder Forum on Electronic Invoicing, which is framing a recommendation to endorse the approach.

Having summarised the principal aspects of the proposal, our next post will offer a critical analysis and highlight potential challenges. This will include the scope of the directive; the need to ensure the right stakeholders are involved in creating the standard and existing models are reused; how prepared public bodies are to receive invoices electronically; and the role for service providers and software vendors.