E-invoicing in the pharmaceutical industry

Stefan Foryszewski

OB10

For major pharmaceutical companies, the invoicing process can often be laborious. With thousands of invoices being sent to many different addresses within major organizations, a considerable amount of time is spent re-directing, opening and scanning paper invoices. These then need to be re-keyed, leading to further delays and possible errors. Not only does this cost companies a large amount of money, but it also wastes a great deal of time.

Crucially, many pharmaceutical companies have a large, valuable supplier base, and it’s therefore vital to make sure that invoices are processed and paid on time. Processing these invoices manually is not only expensive to manage, but can also result in significant delays. In order to maintain good, healthy relationships with suppliers and avoid unnecessary costs, e-Invoicing is both an attractive and practical solution.

Additionally, many companies are now looking to reduce the amount of paper they receive as part of wider sustainability drives. The elimination of paper through the adoption of e-Invoicing is therefore not only beneficial for cost reduction, but also central to meeting important environmental targets.

 

“Additionally, many companies are now looking to reduce the amount of paper they receive as part of wider sustainability drives.”

 

At the same time, exceptions management, the process of managing formatting errors in invoices, is becoming a key operational tool for companies looking to enhance productivity and manage operating risks. Not only are exceptions expensive (mainly because human intervention is nearly always required), but they can also lock up valuable working capital and reduce both customer and supplier satisfaction.

The problem of mistakes in manual invoicing in the pharmaceutical industry is especially prevalent. Industry figures suggest that anywhere between 8% and 20% of invoice transactions regularly have errors in them, and that these errors can increase the cost of processing by four to five times. As such, there is definitely room for improvement in this area, especially within an industry like pharmaceuticals, which cannot afford to be seen making mistakes or taking risks with its business practices or products.

Many companies have chosen to implement e-invoicing in order to address their most pressing business objectives. However, success in this area will require a fiscally compliant e-Invoicing solution that can guarantee high levels of supplier participation.

E-invoicing: how it works

E-invoicing requires both project management and supplier enrolment, which determines the technical implementation for both the buyer and its suppliers. The e-invoicing provider should manage the supplier enrolment process – in order to ensure that suppliers actively participate in the uptake of the new system.

Supplier enrolment is a key component of a successful e-invoicing project. Working closely together, the e-Invoicing company and the pharmaceutical company’s own finance and procurement departments set specific targets for the suppliers they want to approach. After identifying which suppliers are already present on its network, the e-invoicing company can begin the supplier enrolment campaign for any suppliers that remain.

It’s best if the e-invoicing company manages the whole process, firstly helping the client to develop and send a comprehensive communications pack to its targeted suppliers. It’s then up to the e-invoicing company’s enrolment team to contact the suppliers and enroll them on to the network. In addition, it is important to ensure that all internal stakeholders take part in the communication process and understand the importance of e-invoicing to the business. The initial take-up of such services can be impressive, with global pharmaceutical company GlaxoSmithKline (GSK) now receiving over 85% of its targeted invoice volumes electronically.

Key Benefits

The improvement in the accuracy of data is one of the main benefits of e-Invoicing. Validatinges each invoice before passing it to the client, ensures that any invoices that are not correct are rejected and are sent back to the supplier for them to correct and resubmit. Once verified and submitted to the client, the supplier should receive notification that the invoice has been delivered.

This improvement in data accuracy and regular delivery notifications will boost the efficiency of a client and its supplier’s accounts payable (AP) team. Many calls made to a company’s AP team are to enquire if a company has received the invoice, as well as to check when the invoice will be paid. With the improved delivery that e-invoicing provides, the time spent dealing with such calls can be dramatically reduced.

 

“GSK has confirmed that approximately 95 percent of its invoices delivered electronically are now paid on time.”

 

Additionally, companies can save further costs caused by unnecessary paper invoices. Pharmaceutical companies collectively spend thousands of pounds every month on physical copies of their invoices and go through a staggeringly large amount of paper in the process. This not only costs them money that could otherwise be saved, but also has a negative environmental impact.

At a time when all businesses are looking to create a greener image and reduce their reliance on environmentally unfriendly business practices, pharmaceutical companies cannot afford to let things continue as they are. In addition to reducing unnecessary expenses, e-Invoicing can also help in this area by helping companies to achieve a greener reputation and to meet their environmental targets with ease.

Suppliers also benefit from e-Invoicing, as bills are processed more quickly and payments made on time. This not only maintains good relations with current dealers, but also expands the company’s reputation amongst new suppliers, who know that they can rely on efficient and prompt payment.

There has also never been a better time to take up e-Invoicing. The EU Commission has recently made changes to the fragmented system that was previously applied to the e-Invoicing VAT rules and has instead adopted a new directive applying a common system of VAT. The new legislation now treats e-Invoices in the same manner as paper copies, meaning that e-invoicing is a perfectly valid form of invoicing since the new rules do not impose any additional requirements on e-invoices. This greatly facilitates businesses sending e-invoices, providing they maintain ‘business controls which create a reliable audit trail between an invoice and a supply of goods or services,’ just as they would with paper invoices.

 

“This greatly facilitates businesses sending e-invoices, providing they maintain ‘business controls which create a reliable audit trail between an invoice and a supply of goods or services…'”

 

After joining the OB10 network, GSK has confirmed that approximately 95 percent of its invoices delivered electronically are now paid on time. GSK’s initial contract with OB10, which commenced in 2003, resulted in 65 percent of its total invoices being processed electronically through our network. Due to the great success of this first campaign, a second campaign was launched in 2009. The company then went on to convert 90 percent of its total invoices to the electronic format by the end of 2010.

Additionally, there are further services that can be gained from e-invoice providers, such as an extended invoice status check, which enables suppliers to check where their invoices are in the payment process, and thus preventing them from having to regularly enquire about the status of an invoice. Another popular e-invoicing service, purchase order delivery, enables suppliers to receive their purchase orders via the e-Invoice provider and then convert those orders directly into an invoice.

By combining e-invoicing with enhanced services like these, further efficiency gains can be achieved and even greater benefits can be delivered to the pharmaceutical company and its suppliers. Benefits such as a lower reliance on an AP team to deal with invoice correction, supplier peace of mind as they are kept informed of the process of invoicing, a decrease in the amount of paper used, and saved costs thanks to fewer late payment fines makes e-invoicing a logical port of call for companies in the pharmaceutical industry.

About the author:

Stefan Foryszewski, co-founder of OB10, was previously head of data delivery at Visa International EU. Prior to joining Visa Stefan spent 15 years in procurement and supply chain automation in various sectors, focusing on process improvement in the purchase-to-pay cycle.

Stefan heads up product development, marketing and channel partnership activities. He is also responsible for developing new markets, country plans and service compliance plans.

OB10 also manages e-Invoicing for other major global pharmaceutical brands including Pfizer, Eli Lilly &amp, Company, Janssen Pharmaceutical and Bristol-Myers Squibb. By contractually guaranteeing compliance for its customers, OB10 ensures they can fully realise the efficiencies of e-Invoicing, and that they can respond to local markets as well as the needs of international companies.

Is it time you made a move to e-invoicing?