Electronic Invoicing and ERP Processes, Part 3

This article is Part 3 in a series on Electronic Invoicing and ERP Processes and focuses on the challenges that third party, ERP agnostic, electronic invoicing service providers face delivering global solutions.

First let's recognize that there are at least two different kinds of electronic invoicing service providers:

1. Independent, third party, ERP agnostic, e-invoicing service provider.
2. Electronic invoicing service providers tightly integrated with one ERP solution and vendor.

Service providers like OB10 promote their any-to-any data formatting and e-invoicing expertise.  They are a third party service provider unaffiliated with an ERP solution.  In contrast, an e-invoicing service provider like SAP's co-owned Crossgate is dedicated solely to supporting the global e-invoicing needs of SAP.

As discussed in Part 1 and Part 2 of this series the biggest challenges with supporting global e-invoicing requirements are often in the ERP processes themselves, and because of that fact, the closer and more tightly an e-invoicing service provider is aligned with the ERP vendor the better.  Service providers like Crossgate that are co-owned and deeply integrated with the ERP vendor (SAP in this case) find it much easier to coordinate changes to the ERP that are required to support global e-invoicing requirements.  Service providers like OB10, which are unaffiliated with an ERP, must simply wait for the dozens of ERPs used by their customers to figure out how to be compliant.  They have much less influence and control over when and how the ERP vendor supports a country's mandates and requirements.

For SAP users engaged in electronic invoicing, EDI and other B2B message exchanges, it is worth a long and hard look at what SAP is doing with Crossgate and the increasing value that the SAP/Crossgate services are offering SAP users. As the SAP/Crossgate business ready network swells with more and more SAP users, the value increases exponentially for the SAP community.

See related articles:

• Electronic Invoicing and ERP Processes, Part 1
• Electronic Invoicing and ERP Processes, Part 2

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Author: Kevin Benedict
Principal Consultant/Founder Netcentric Strategies LLC
SAP EDI Consultant, Mobile Industry Analyst and Web 2.0 Marketing Consultant www.linkedin.com/in/kevinbenedict
***Full Disclosure: I am an independent consultant that has worked with and for many of the companies mentioned.
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Electronic Invoicing and ERP Processes, Part 2

In Part 1 of this series we discussed the challenges third party, and ERP agnostic, electronic invoicing service providers experience trying to be compliant with government and tax authority mandates due to the need for ERP's to support specific and unique business processes.  The bottom line is that ERPs must be set-up and configured by ERP experts to support many e-invoicing requirements.

I worked on a project where an American equipment rental company needed to be compliant with Mexico's e-Invoicing requirements (Servicio de Administracion Tributaria (SAT).  They were required to use the Firma Electronica Avanzada (FIEL), an advanced electronic signature authorized by the SAT.  The biggest problem we had on this project was not in supporting the required data formats (something most electronic invoicing service providers like OB10 could do), but getting the rental company's ERP to support the required processes.  The key point is that the challenges were not in the messaging and formatting but in the internal ERP processes.

Electronic invoicing service providers, that are ERP agnostic, must simply throw their hands up in the air and step back when there is an ERP process issue.  That means they are increasingly throwing their hands up, because more and more countries are mandating major changes to the way the business processes, including the invoice, transportation, data warehousing, and bills of lading processes must be completed.

In the case of the Mexico e-Invoicing requirements, companies must archive digital signatures and unique invoicing numbers issued by SAT on the physical premises of the business location in Mexico.  This in itself is a new process not included in ERPs without some new configuration and design.

The bottom line - third party, ERP agnostic, electronic service providers cannot in themselves support electronic invoicing globally.  The ERP vendor must be involved as the processes in the ERP must be configured to support each country's unique requirements.

See related articles:

• Electronic Invoicing and ERP Processes, Part 1
• Electronic Invoicing and ERP Processes, Part 3

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Author: Kevin Benedict Principal
Consultant/Founder Netcentric Strategies, LLC
SAP EDI Consultant, Mobile Industry Analyst and Web 2.0 Marketing Consultant www.linkedin.com/in/kevinbenedict
 ***Full Disclosure: I am an independent consultant that has worked with and for many of the companies mentioned.
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Electronic Invoicing and ERP Processes, Part 1

The world is a finite place.  Companies have finite resources.  We all have a finite amount of time on this earth.  How can a third party electronic invoicing service hub be all-things-to-all-people?  The answer is, it can't.  The complexities that are mandated by the various country initiatives and tax authorities impact the way the business is run which is outside the expertise of third party e-invoicing service providers.

Let's first discuss independent and ERP agnostic, third party service providers like OB10, GXS, and Sterling Commerce.  These service providers often promote their any-to-any data formatting capabilities that enable their clients to send or receive invoices without having to agree on formats, file specifications, or communication methods.  That is a good feature, but it does not ensure compliance with electronic invoicing requirements.  The biggest challenges in supporting the electronic invoicing requirements of many countries around the globe are business process driven issues in the ERP which companies like OB10 cannot address.  Why?  Without knowing the intimate details of the customer's ERP they can't possibly manage compliance.

Let's take a quick look at Brazilian Nota Fiscal Eletronica (NF-e) requirements.   Under the new regulations, companies must prepare an outgoing invoice in an XML format mandated by the Ministry of Finance (SEFAZ) and have it authorized before a shipment can be delivered. The SEFAZ issues an electronic authorization key that must be transformed into a barcode and printed on the bill of lading (DANF-e) accompanying the shipment. Police or Customs Officials may stop the delivery truck and scan the DANF-e to ensure that the products on the truck match the authorization on file in the SEFAZ database. If there is any discrepancy, the company may face severe penalties or fines.

Notice that the SEFAZ requirement is for the XML formatted invoice to be authorized "before shipment."  Yikes!  This impacts all kinds of processes!  How does this new step in the process get added to your SAP ERP and transportation and logistics processes?  The key point to understand is that many of the business processes that are required to support electronic invoices happen inside the ERP, not in a third party ERP agnostic service provider's SaaS or hosted environment.  ERP experts must be involved in order to support many of these e-invoicing requirements.

See related articles:

• Electronic Invoicing and ERP Processes, Part 2
• Electronic Invoicing and ERP Processes, Part 3

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Author: Kevin Benedict
Principal Consultant/Founder
SAP EDI Consultant, Mobile Industry Analyst and Web 2.0 Marketing Consultant
Netcentric Strategies LLC
www.linkedin.com/in/kevinbenedict
 ***Full Disclosure: I am an independent consultant that has worked with and for many of the companies mentioned.
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Interesting EDI, e-Invoicing and Business Process Trends Reported

I read an interesting survey report from Fundtech Ltd. today about EDI, remittance, and electronic invoice presentment with the following results:

• 60% of bank respondents think that combining data, including remittance data, EDI data and electronic invoice presentment, with payment processing is an important trend and a value-added service they should offer to their business clients.
• Only 47% indicate their banks are already pursuing this strategy.

From this report it appears there is growing demand for these types of integrated and connected services.  I can attest from personal experience that e-Invoicing is a rapidly growing area, especially in Latin America and Europe.  I have personally worked on a number of e-Invoicing projects with Crossgate, a company that SAP co-owns.  Crossgate provides e-Invoicing services globally in a SaaS model that is operated in a cloud computing environment.

I spoke with the president of Crossgate, Scott Lewin, a few days ago about why e-Invoicing is a fast growing area, and he told me that companies are simply not able or willing to learn all the details of every country's electronic invoicing requirements.  Many countries in Europe and in Latin America (e.g. Brazil and Mexico) have very detailed business processes and tax authority mandated data formats that are hard to learn and support.  He said many multi-national companies have operations in dozens of countries, and it would take an army of staff to try to support all of the requirements for every country.  As a result, this seems to be a good area for BPO (business process outsourcing) services.

Nowadays companies like Crossgate are developing global e-Invoicing and other electronic business processing services for their clients in their central EDI/B2B exchange.  They have developed best practices for implementations and have global experts on staff to support e-Invoicing around the world.

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Author: Kevin Benedict
Principal Consultant/Founder
SAP EDI Consultant, Mobile Industry Analyst and Web 2.0 Marketing Consultant
Netcentric Strategies LLC
www.linkedin.com/in/kevinbenedict
***Full Disclosure: I am an independent consultant that has worked with and for many of the companies mentioned.
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EDI Competition in the SAP Ecosystem

For those of us who have been in the EDI and SAP ecosystem for many years, it is interesting to ponder how it has changed.  EDI vendors used to see supporting SAP and SAP IDocs as a sign of maturity, and SAP welcomed all EDI vendors into the SAP ecosystem.  Today, however, most of the legacy EDI vendors are competing directly against SAP which changes the dynamics of these relationships.

Take a moment to review the following list of application categories that legacy EDI vendors are now offering:

• Supply Chain Management
• Transportation Management/Logistics Management
• Global Trade
• Order Management
• Product and Price Management
• Catalog Management
• Supplier Web Portals
• Inventory Management
• Finance
• Master Data Management
• Enterprise Application Integration solutions

With these product offerings, traditional EDI vendors have chosen to compete against SAP in nearly every category.  It is not hard to understand why SAP has recently chosen to offer its own managed EDI service called the SAP Information Interchange.  SAP would rather displace the traditional EDI vendors from their customer base as they are considered direct competitors nowadays that have limited interest in supporting SAP's strategies, architectures, and future product roadmaps.

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Author: Kevin Benedict
Principal Consultant/Founder
SAP EDI Consultant, Mobile Industry Analyst and Web 2.0 Marketing Consultant
Netcentric Strategies LLC
www.linkedin.com/in/kevinbenedict  

***Full Disclosure: I am an independent consultant that has worked with and for many of the companies mentioned.
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Business Network Transformation, Mobility and SAP Information Interchange

I have been watching the evolution in the SAP mobility ecosystem with keen interest and pondering what it means to the EDI/B2B industry.  The mobility space is changing rapidly and dramatically as online mobile application stores take over much of the responsibility for connecting buyers and sellers of mobile applications.  Many of the traditional ways buyers and sellers connect and work together are being standardized in pre-defined business processes on these sites.  This is a great example of "business network transformation."  There are lessons here for those involved in EDI as well.

In the past, mobile application vendors each set up their own proprietary processes to upload software and/or update their customers' devices.  They all had different ways of marketing and selling their enterprise mobile applications and employed their own unique ways of developing applications and synchronizing data between mobile devices and backend databases.

Today in the enterprise mobility world there is a great deal of standardizing going on.  Apple and RIM have now defined many of the ways mobile applications work and move data.  What are the lessons for the EDI/B2B industry? 

Companies like SAP are now developing and launching their own EDI/B2B hubs with solutions like the SAP Information Interchange.  These are exchanges that define standardized ways for buyers and sellers and other trading partners to connect and share data.  This process is equally as interesting to watch evolve as it is in the mobile application industry.

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Author: Kevin Benedict
Principal Consultant/Founder
SAP EDI Consultant, Mobile Industry Analyst and Web 2.0 Marketing Consultant
Netcentric Strategies LLC
www.linkedin.com/in/kevinbenedict 

***Full Disclosure: I am an independent consultant that has worked with and for many of the companies mentioned.
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Brazil's Complex Nota Fiscal Eletronica (NF-e) Requirements

I spent many years in the EDI world.  Most of my challenges were from trying to understand the various standards to be used and the data semantics and syntax requirements of my trading partners.  Today, with the rapidly increasing number of e-invoice and other e-form requirements by various governments the biggest challenges are supporting the processes. 

I could handle learning one or two countries' requirements, but what happens when you need to support the data and formatting requirements of 30 different countries, plus each of their complex process requirements?  I have worked with many EDI departments tasked with supporting the global requirements of their multi-national corporation.  One of the biggest challenges is just trying to ensure compliance with all the different legal requirements of every country.

The botton line is that it is not the role of an EDI department to also be the legal compliance team.  It makes far more sense to outsource the global compliance of e-invoicing to a specialist in global e-invoicing that can manage all of the international requirements on your behalf.

Read the press release below to understand the complex business processes that must be supported in order to be compliant with just Brazil's new Nota Fiscal Eletronica compliance requirements.

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Atlanta, Georgia, April 6, 2010, Crossgate Inc., the global expert in business-to-business integration (B2B), has announced the successful go-live of a turnkey e-Invoicing service for seven SAP customers in Latin America to help them meet governmental mandates.

Brazilian regulatory compliance laws are changing, with the hard-copy nota fiscal (invoice) that companies have traditionally used being replaced by its electronic counterpart—the Nota Fiscal Eletronica (NF-e). Under the new regulations, companies must prepare an outgoing invoice in an XML format mandated by the Ministry of Finance (SEFAZ) and have it authorized before a shipment can be delivered. The SEFAZ issues an electronic authorization key that must be transformed into a barcode and printed on the bill of lading (DANF-e) accompanying the shipment.  Police or Customs Officials may stop the delivery truck and scan the DANF-e to ensure that the products on the truck match the authorization on file in the SEFAZ database. If there is any discrepancy, the company may face severe penalties or fines.

“The regulatory compliance processes in Brazil are among the most complex and unique eInvoice requirements in the world, and many companies do not have the required infrastructure to support the real-time interactions between a company’s IT systems and SEFAZ,” said Scott Lewin, President, Crossgate, Inc. “With compliance deadlines approaching quickly and new requirements coming in 2011, companies need to find a managed B2B service that can send and receive the required XML formats and adhere to the mandates defined by SEFAZ, while leveraging their existing IT infrastructure investments.” For another seven SAP customers in Brazil, that solution is Crossgate’s B2B 360 Services and e-Invoicing Network.

Crossgate’s turnkey NF-e Service is fully integrated with SAP and offers real-time integration with SEFAZ. When a customer creates a nota fiscal in SAP, Crossgate converts it from IDOC format to the SEFAZ-compliant XML format and sends it to the Crossgate e-Invoicing Network. There it is logged, digitally signed, validated for compliance, and transmitted in real time to SEFAZ servers for approval. After it is approved, the message is archived in the Crossgate e-Invoicing Platform before being routed to the customer for printing and updating to SAP. The approved XML file is converted into a DANF-e for shipping, and a copy of the NF-e is transmitted to the receiver in advance of the shipment. Throughout the entire lifecycle of the nota fiscal, status messages are monitored using Crossgate’s Nota Fiscal Cockpit within SAP.

If a nota fiscal is rejected by SEFAZ because it does not match their master data, the steps required for reprocessing it can be time-consuming and cumbersome if they have to be done manually. The customer must cancel all of the billing documents, correct the master data in their system, and then reissue the documents to start the process all over again. But with the Crossgate solution, the customer can simply correct the master data and click one button. Crossgate creates a new IDOC, sends it out again, and it is automatically approved.

Crossgate’s solution also supports complete SEFAZ integration for receiving and validating electronic invoices. Because the Crossgate solution is completely integrated with SAP, companies can integrate their eInvoice process with MIGO and MIRO receiving processes. One-click MIGO and one-click MIRO, based upon inbound NF-e data, gives financial managers tremendous power in further streamlining their receiving processes.

Crossgate’s turnkey enablement is fully integrated with SAP, supports full sending and receiving processes, allows business to continue even when connectivity to SEFAZ is interrupted, integrates with the MIGO and MIRO receiving processes, and fully complies with the Nota Fiscal Eletronica initiatives. “The Crossgate solution provides integrated monitoring and validation in real-time, to help SAP customers meet compliance regulations much more quickly and efficiently,” says Lewin. “And we manage everything as a service, with a local office staffed by people who speak the local language. We know the processes, and we can help companies avoid potential non-compliance fines and implementation delays.” Regulatory compliance efforts can be time-consuming and difficult, but Crossgate’s B2B 360 Services and e-Invoicing Network make compliance easy for companies in more than 38 countries.

About Crossgate, Inc.

Crossgate offers the world's first Business-Ready Network, guaranteeing 100% integration of business partners, clients and suppliers. A single connection to the Network means electronic data exchange with any business partner regardless of their technical capability. In addition, Crossgate's B2B-360° Services powered by SAP provide clients direct access to all integrated business partners in the B2B transaction network via their SAP systems. With its legally compliant e-Invoicing Services, Crossgate also provides an innovative and 100% secure solution to cover the entire process of incoming and outgoing invoices, including signatures, global compliance monitoring, and secure automated long-term archiving.  More than 40,000 business partners, representing over 10 industries, currently exchange documents and data via the Business-Ready Network.

Crossgate is represented at four sites in Germany, with operations in Atlanta, London, Milan, Paris, and AsiaPac.  For more information, visit http://www.crossgate.com/.

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Author: Kevin Benedict
Principal Consultant/Founder
SAP EDI Consultant, Mobile Industry Analyst and Web 2.0 Marketing Consultant
Netcentric Strategies LLC
www.linkedin.com/in/kevinbenedict

***Full Disclosure: I am an independent consultant that has worked with and for many of the companies mentioned.
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Why Does SAP have an EDI Hub Now in 2010?

SAP recently announced the availability of their new managed EDI service called SAP Information Interchange (SII), which is an EDI/B2B hub.  This was not totally unexpected as SAP was already a significant owner in Crossgate, but it does invite the question of why now in 2010?

I believe the answer lies in these numbers, "SAP currently serves the largest network of businesses in the world. Over 89,000 organizations utilize SAP technology to run their businesses.  Upwards of 70% of the world’s economy is executed by organizations running SAP Applications."

I believe the key statistic above is - 70% of the world's economy.  That is a massive number.  That means 70% of the economy is in known systems. That means systems where the source and destination of the data is a known variable - SAP.  The ability and strategy for integrating with this system is known (IDocs, tRFC, web services, NetWeaver-to-NetWeaver, etc.).

SAP, with their efforts around MDM (master data management) and GDT (global data types), also have a relatively good idea of what the data means when it comes from an SAP system and goes into an SAP system.

When so many of these EDI/B2B and data semantic variables are known, the opportunities for standardizing and reusing processes increases.

SII is an EDI/B2B hub for SAP customers.  It is designed to be a centralized B2B exchange where all SAP users can register their EDI and B2B formats and then simply connect with all other SAP and non-SAP users in a subscription model.  Under this model SII is a simple utility service run in a cloud computing environment, in the same manner as your electrical or water utility.  When you need it you simply subscribe and connect.

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Author: Kevin Benedict
Principal Consultant/Founder
SAP EDI Consultant, Mobile Industry Analyst and Web 2.0 Marketing Consultant
Netcentric Strategies LLC
www.linkedin.com/in/kevinbenedict

***Full Disclosure: I am an independent consultant that has worked with and for many of the companies mentioned.
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Operational Goals, EDI and SAP Information Interchange

This economic recovery looks to be a slow grind that will test management's capacity to increase production without adding significantly to headcount.  This will force companies to seek greater efficiencies in order to increase production.  Reducing paper processing and administration costs is one way to reduce costs.   Expanding EDI and B2B data exchanges with trading partners is an effective way to reduce costs, but not if it requires an increased headcount of expensive EDI professionals and consultants or more software and hardware.

Management today is wary of adding FTEs when the economy is still relatively unstable.  It is difficult to predict the speed and size of the recovery.  As a result, many recent studies have shown that business process outsourcing and hiring temporary workers seems to be the preferred first steps to increasing production.  Today, expanding EDI and B2B data exchanges can also fit into this category.

The SAP Information Interchange (SII) is a managed EDI service for SAP customers.  It is an EDI service sold and supported by SAP.  If a company determines that expanding EDI and B2B data exchanges with trading partners will enable greater efficiencies and cost reductions, then subscribing to the SII service for EDI/B2B is a very low risk and cost effective step.

SII requires a simple one time set-up for each SAP business process and then a low monthly subscription fee.  There is no requirement for more EDI consultants, staff, software or hardware.  All integration, implementation, operation and support is provided in the SII service.

Forrester's recent report stated that 85% of all companies (that participated in the survey) already use some sort of managed EDI services.  I believe that the number of companies using managed EDI services will rapidly increase for the following reasons:

• Companies must keep operational costs down but increase production now.
• The strongest survivors are now looking to gain through acquisitions of the weakerwhich will require more system consolidations.
• Companies are wary of hiring new FTEs (full time equivalents) until they are more comfortable with their sales forecasts and the state of the economy.
• Companies are adjusting to new economic models and views that they must be more flexible and be prepared to respond more quickly to changes around them.
• Companies must standardize more systems and processes to reduce complexity which causes higher TCO (total cost of ownership).
• Companies must shed non-core operations to reduce costs and increase staffing flexibility.
• Companies must focus their brightest minds on core value and competitive advantage processes and projects.  With fewer FTEs brain power must be focused on what will enable the company to survive and prosper, not on mundane and routine, non-core operational issues.
• Companies must focus on improving cash management - reducing DSO, recognizing early payment discounts from suppliers, reducing inventory, reducing transportation costs through better management visibility, etc.

SAP sales teams can answer your specific questions on how SII works with your current environment.

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Author: Kevin Benedict
Principal Consultant/Founder
SAP EDI Consultant, Mobile Industry Analyst and Web 2.0 Marketing Consultant
Netcentric Strategies LLC
www.linkedin.com/in/kevinbenedict
***Full Disclosure: I am an independent consultant that has worked with and for many of the companies mentioned.
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