Electronic invoicing undoubtedly performs a crucial role in the digitalization of business operations. It has gained foothold throughout the world. However, some businesses are still skeptical about the implementation of e-invoicing. This article discusses the benefits and challenges related to the switch from paper-based to electronic invoicing. A special focus is on Vietnamese market, where the Ministry of Finance has taken measures to accelerate the replacement of paper-based invoicing with electronic one.
Authors: Ha Giang Le and Sirpa Varajärvi
E-invoicing and its benefits
The traditional method of billing is paper-based invoicing. However, e-invoicing has proved to be a competitive method as it is faster and more efficient than paper-based invoicing. Koch (2009, 99) defines electronic invoicing as “the sending, receipt and storage of invoices in electronic format without the use of paper-based invoices as tax originals”. To put in other words, e-invoicing eliminates the use of paper in every step.
Why companies decide to switch to paperless invoice? The top 9 benefits of e-invoicing are summarised in Figure 1.
Figure 1: Top 9 benefits of e-invoicing
Companies can benefit from e-invoicing process in many ways. Touchless process is the first advantage of e-invoicing. Another benefit is invoice tracking – e-invoicing automates this process and makes it more efficient. It is inevitable that a higher integration level among accounting systems of the buyer and the seller stems from the implementation of e-invoicing. This leads to transparency of information. At the same time, account reconciliation is improved as invoices are accessible to both trading partners. Therefore, e-invoicing ensures the automation of reconciliation and thus a faster payment process. Since the whole process is monitored automatically, no more time is spent on creating, delivering and routing invoices to account payable department. Hence, e-invoicing is time-saving. (ICG consulting 2018.)
Undoubtedly, e-invoicing brings cost effectiveness to firms. Direct costs – such as ink, paper and mailing costs – related to paper-based invoicing, can form a significant sum altogether. Less money spent on invoicing means more money allocated to other important business activities, and thus competitiveness may be improved. An additional value of e-invoicing is cash management. Once sent, electronic invoices are visible immediately for the receivers. Hence, cash managers are aware of cash flow and can enhance financial forecast accuracy. Finally, environmental benefits are also to be considered. By implemeting e-invoicing, and thus decreasing paper consumption, companies can reduce their carbon footprint. (Ruisaho 2018.)
Challenges related to e-invoicing adoption in Vietnam
Although e-invoicing might be a great solution, businesses in Vietnam are still reluctant to adopt this method. Do the benefits overweight the challenges that firms will face during the adoption? The mass adoption of e-invoicing undoubtedly poses challenges which vary from business to business. The most common challenges that companies have to tackle were studied in a research made by Ha Giang Le as a Bachelor’s Thesis at Lahti University of Applied Sciences. The research was carried out as a case study on Danang Power Company, which is a subsidiary of Electricity of Vietnam Group, and one of the few pioneers in e-invoicing in Vietnam.
The empirical research included two interviews with the case company’s personnel and a survey with its clients. Based on the findings of the research, the challenges are divided into two categories, namely internal challenges and external challenges. Internal challenges are challenges that affect the company’s success of switching to paperless invoice. Contrastively, challenges that the company faces while convincing its customers to adopt e-invoicing are external challenges. (Le 2018.) Challenges are described in table 1.
Table 1: Challenges of the migration to electronic invoice
Among the challenges mentioned above, Bartlomiej Wojtowicz (2015) from Comarch EDI pointed out top biggest challenges that firms are facing. The first big challenge is the resistance to change in small businesses. Besides, data security is another reason for companies to postpone the adoption of e-invoicing. Lastly, technical requirements in e-invoicing process discourage the acceptance of electronic billing in firms.
In order to promote the national spread of e-invoicing in Vietnam, there is a quest for solutions to such matters. The study of the case company is a good example to understand what challenges Vietnamese firms are facing. The possible recommendations are illustrated in table 2.
Table 2: Recommendations for the development of e-invoicing
In order to effectively implement e-invoicing, the case company requires several strategies. Firstly, the company is incapable of upgrading the whole system simultaneously, and thus it should allocate its resources and power reasonably. Besides, the higher the quality of e-invoices is, the more applicable they are. E-invoicing should be treated as a matter of all departments for better ongoing services. Finally, helping its customers to understand e-invoicing process and benefits creates incentive for them to use e-invoicing. (Le 2018.)
The adoption of e-invoicing is obviously associated with a wide range of benefits. However, the process poses a lot of varying challenges, depending on the specific features of the company or business involved.
The transition from paper invoice to paperless one in the Power Company in Vietnam is a typical example of going digital in business. This company in particular and other businesses in general are supposed to profoundly analyse the internal and external factors arising to ensure a favorable adoption of e-invoicing.
ICG Consulting. 6 benefits of Electronic Invoicing. [Cited 30 May 2018]. Available at: http://www.icgconsulting.com/6-benefits-of-electronic-invoicing
Koch, B. 2009. E-invoicing/E-billing in Europe: Taking the next step towards an automated and optimised process. [Online document]. Billentis. [Cited 30 May 2018]. Available at: https://www.norstella.no/getfile.php/1295634.177.ursydetwpv/Extract_Market_Report_Europe_2009.pdf
Le, G. 2018. Adoption of E-invoicing in Vietnam – case: Electricity of Vietnam Group, Danang Power Company. [Online document]. Bachelor’s thesis. Degree Programme in International Business. Lahti: Lahti University of Applied Sciences. [Cited 30 May April 2018]. Available at: http://urn.fi/URN:NBN:fi:amk-201804275705
Ruisaho, M. 2014. Why we switch to e-invoicing and how it benefits you? Greencarrier. [Cited 30 May 2018]. Available at: https://blog.greencarrier.com/why-we-switch-to-e-invoicing-and-how-it-benefits-you/
Wojtowicz, B. 2015. 4 Challenges For E-invoicing A hot global topic. E-invoicing platform. [Cited 30 May 2018]. Available at: https://eeiplatform.com/16679/4-challenges-for-e-invoicing-a-hot-global-topic/
About the authors
Ha Giang Le has studied Business and Administration at Faculty of Business and Hospitality Management at Lahti University of Applied Sciences and has graduated and received a BBA degree in May 2018.
Sirpa Varajärvi works as a Senior Lecturer at the Faculty of Business and Hospitality Management, Lahti University of Applied Sciences.
Illustration: https://pixabay.com/fi/binaarinen-k%C3%A4det-n%C3%A4pp%C3%A4imist%C3%B6-2372131 (CC0)
Reference to this publication
Le, H.G., Maturana, T. & Varajärvi, S. 2018. The adoption of E-invoicing in Vietnam. LAMK Pro. [Electronic magazine]. [Cited and date of citation]. Available at: http://www.lamkpub.fi/2018/06/08/the-adoption-of-e-invoicing-in-vietnam