Bridging the GAAP Podcast Series: The A to Z of e-invoicing

Speaker 1

Hello, and welcome to Medius' new podcast series, Bridging the GAAP. Together with Spend Matters, we've put together a podcast series exploring a wide range of topics from the evolution of technology and finance, to tax compliance to sourcing strategies to fraud risk and mitigation.

In today's episode, The A to Z of e-invoicing, Jason Busch, founder and CEO of Spend Matters, talks to Katta Andersson, VP of Capture and AI at Medius, about how e-invoicing has evolved over the years, the mandates that are being rolled out across Europe and what the future of e-invoicing might be.

Speaker 2

Hello everyone. I'm Jason Busch, the founder and CEO of Spend Matters. Today, I'm joined by Katta Andersson of Medius. We are going to talk about e-invoicing. I've been involved tangentially and directly in the e-invoicing market for what feels like two decades right now, going back to the original days of compliance in Europe, which has now expanded really globally, not so much in North America as we'll get into, but certainly in South America and throughout Asia, and has taken on very specific dynamics in different regions in Europe for different reasons. So with that, we are going to talk about past, present and future. And Katta, it's great to have you here today.

Speaker 3

Thank you, Jason, for having me. I've been really looking forward to this session since I know you have so much knowledge in this, and this is a subject that is very close to my heart as well. So I look forward to this conversation.

Speaker 2

So the first question is a little bit existential. What is e-invoicing and then probably the more direct one? How has it evolved over time?

Speaker 3

That's such a good question and I hear a lot of lot of times EDI in invoicing, don't you? Do you think there are the same?

Speaker 2

It's interesting. I think historically I look at EDI as broader signals between manufacturers and producers or within a specific industry like healthcare, which may involve trade documents, or it may involve other documents. So certainly e-invoicing is one of those documents, but EDI is, I believe, a little bit broader and certainly from a technology perspective and architecturally a lot more legacy.

Speaker 3

I agree. I agree. I would actually like you say, technology's point of view, EDI is point to point. It's like you're building an integration between the supplier and buyer and you're only focusing on the larger ones because it's so so expensive to build that integration. And invoicing is more like an invoicing network where you send out your invoice and it can be received by many because it's like one to many connections.

And I think that is something that needs to be cleared out because sometimes you are in discussions about EDI and e invoices, and there are two different solutions in my world at least. But I would love to hear what you think about that.

Speaker 2

Yeah, no, I would agree. I think there are certain standards which are evolving and we can even go back to the evolution, and I'll date myself here, of certain trade documents moving into CXML. So combination of POs, invoices, ship notifications, really replacing at least one standard. But if you look at EDI, there's probably, oh gosh, I don't know, 50 to 100 different standards for similar types of trade documents across industry and across geographies today. And historically, it has been point to point. There have been some really interesting plays recently in certain industries around different types of trade and quality documents and traceability.

But certainly, as we think about it from an AP perspective and AR perspective, yes, it has been point to point.

Speaker 3

Yeah, and if I remember correctly, I've been within this business so long and I'm not going to tell you how old I am, but PDF and e invoicing was about introduced the same time. But PDF is the preferred way today, or at least a few years ago.

But now it's starting to move into e invoicing. And it's not because our customers or the market wants to be more automated, it's actually because of COVID. That's at least what I think that e invoicing is really taking off now, because our countries need to collect taxes to build up the countries again. And that's to close the VAT or the tax gap. That's why invoicing is now coming on strong and replacing the PDF. So it's really evolving and it's going really quickly the last few years. And every day I hear of a new country moving into invoicing and mandating invoices.

Speaker 2

So I'd love to transition with that question. And as we talk about mandates and speaking to you from North America today, at least in the US, we're not there yet on mandates. We might get there in the future, but I would be very keen to get your perspective about the types of invoicing mandates that are being rolled out across Europe today.

Speaker 3

Oh, it's so much. I can barely keep up. I'm so happy to have partners to work with, very skilled partners. We all know about Sovos and a lot of service providers out there, van operators, also called van operators. But I agree, it's so much things that are going on.

Like Italy was the first one out mandating e invoicing. But actually, you go before Italy, it was the European Union that decided to help companies be more automated. So they started to mandate e invoicing, but they could only control the government owned agencies. They couldn't control the private companies, of course, but Italy took it another step.

They mandated e invoicing for both private and public organizations and companies and they called it the clearance model very similar to South America what's happening in Brazil and Mexico and so on. You know all about that. But I believe it's also moving beyond that the clearance model like Serbia today. They announced in May this year in May that they're going to do this clearance model as well.

But they also added the complexity to that you as a buyer needed to send back a message within twenty days that you are either accepting or rejecting the invoice. So it's a lot of technical things going on now. So I can really understand if our AP manager or AP departments out there are really scared because it's starting to be very technical, all these mandates and e invoicing. I still believe it's the right thing because the countries need to collect the taxes, but it's difficult at the same time.

Speaker 2

Definitely. And from my perspective as well, just in terms of how different organizations are preparing for these types of mandates, and my team works with a number of companies and consultants and advisors around it, but we're not an accounting firm or audit firm. But I'll put on kind of my CEO hat for a minute in that I'm, even in a small business, worried about compliance. And I'm worried about our compliance.

If I'm looking to acquire other companies, I'm worried about compliance and liability there. And so I think this question of e invoicing compliance in a world where there's more and more happening country by country is one where executives are not necessarily just going to trust their AP department or depending on the rules, looking at AR as well. I think they're going to look to partners. They're going to look to technology partners like Medius or Sovos.

But I think they're increasingly, if I again put on my hat as a business leader, I'm going to look to my accounting firms and my test and audit providers as well to make sure we're in compliance. And that if I'm diligencing another company as well, I'm gonna trust the third party perspective and view. This is not just AP automation. This is not just procure to pay.

I mean, this is a question of liabilities and fines.

So you got to make sure you're on the right side of the law.

Speaker 3

Exactly. And just like you say, you need to have someone to trust because there's so much to keep up with. Every company has their own tax compliance laws and mandates and regulations and whatever they call it. A lot of different rules and things. So I fully agree with you.

Speaker 2

So what is the role of a SaaS provider in this market like Medius? So where does Medius fit in?

Speaker 3

That's such a good question. And like I said, it's about building partnership with those who knows, who has the technology and has the knowledge about their expertise. And that's what we at Medius has done as well. We're building partnership with the preferred service providers out there, the van operators, who has the knowledge, who can really guarantee that when our customers receive an invoice, it's fully compliant and it's following all the laws and regulations and mandates in every country because they have that skill to have the teams to do that. And our CEO don't have time to do that or the AP managers or the AP team to control that. But with that said, it's not just delivering the invoicing to make sure they're following the tax compliance and the mandates. It's also about the problem when it's received to our AP departments.

It's like reading a book, a standard, the invoicing status, like reading a book. You like it, but I don't like it, but it's still the same book. But I interpret the content differently than you do. And that is with the standards in invoicing as well.

I can, for example, believe that the PO number should be in that tag or not in that tag, but you read the status in a different way. And that is causing a lot of issues at our AP department as well. That information is still following the standard with all the tags and format, but it's not putting the right content in the right tag. Are you following me?

Speaker 2

I am. Absolutely. Absolutely. And I feel a lot of AP managers and leaders feel like they've not signed up for this job.

Speaker 3

Exactly. That's so funny because sometimes when I go into a meeting and they like, oh, and this invoicing and you can really feel that the temperature in the room is dropping and they're afraid. They are really afraid, like the eyes are really scared. And that's when we usually present our solution. Because since we have this close partnership with the service providers, they can really feel relaxed and feel that we take care of the mandates and compliance.

But we're also helping them to do this remapping that usually the IT department would do or a developer would do or you would pay a consultancy firm to do it or the service provider and you pay a lot of money and it needs to be maintained. With our e invoicing patent solution, we can actually help our customers do that. You put the control back in the AP managers or AP users hands. You can then by double clicking and rub a value just like you do on a PDF but on an e invoice. And of course, if all the fields are correct, validated correctly, you don't never see the invoice. But sometimes you need to see them and you need to do that remapping. And honestly, this is really interesting because I've been in this business, the Capture business for so long.

We could see that when a customer start processing invoicing through our solution, they are usually reaching a 77% touchless rate throughout the whole process. But after our invoicing solution with sending them through Capture and you can do this remapping on those invoices that needs it, you can reach a 98% touchless rate throughout the whole process. So I would actually say I'm sweet. I'm not supposed to brag, but I think our solution is awesome. That's why we have a patent pending solution.

Speaker 2

That's great. As we wrap up, I'm going to throw out an idea in a few minutes around how I look at Medius in this world, which is quite different than how I looked at Medius a couple of years ago. I think going to the global complexity and everything you just outlined. But I think there's a bigger picture in terms of where all this is going.

And as I was taught to look at forecasting originally before I got into this whole world of procure to pay and AP, When I was a consultant in my early 20s, I did scenario planning. And I was taught at that point to work backwards from different scenarios. Think of a future state five years out or ten years out. What had to happen to get there?

And I think there are some macro trends which are absolutely going to occur regardless of where you believe inflation will go, for example, in the world and the world economy. But I think a few things really stand out if we take that lens of working backwards. The first is there's going to be more and more requirements across the world, are country specific and potentially regionally specific or trade block specific as well.

I think VAT compliance is just a start. It's no surprise when Italy got into this, I kind of went back to all my Sicilian mafiosa movies and I thought about how Southern Italy probably wasn't very compliant.

It's B2B transactions. But obviously you can't compare some Hollywood view of Italy in the South to the rest of Italy in the industrialized North, but the taxpayer wants to get paid. So I think there is a scenario for sure where the vast majority of world governments, as we look at VAT, as we look at minimum tax, The US is going to a minimum corporate tax, where invoicing is mandatory from a government auditing perspective. It started in Europe, it's moved to Latin America and India and China, and it will keep spreading and we'll probably get more specific. I also think too, kind of as a second scenario, e invoicing used to be standalone. It wasn't necessarily part of an AP solution, wasn't necessarily part of a procure to pay solution.

The invoice was sent, but I think increasingly it's going to be just part of digital and it's going to be embedded with AP and P2P and Source To Pay and broader finance suites as well.

I think we could even see it become a part of cloud financials in general outside of procurement and AP applications. But I think the third scenario, which I'm quite excited about where I'm spending a lot of my time right now on the side, kind of my 10% hobby as a researcher, is looking at kind of the re-rise of blockchain. And I believe for a whole bunch of reasons, we're going to see whether it's built on existing technology. Ethereum has gone through a lot of shifts in the past few weeks, for example.

I won't get into all the details, but I think we're going to increasingly see applications in the next decade integrate with various blockchains and be built on them as well. Anonymity is a major piece of that, but certainly allowing governments to look into pieces of a side chain, for example. So I think there's a lot there. And I do think as well, as we begin to wind this down, the role of a provider like Medius is changing, right?

It used to be simply a solutions provider with technology and integrated compliance, but increasingly, Medius is assuming the role of systems integrator around e invoicing compliance. You're looking to a provider like Medius to solve for a whole set of areas using its partners and its own technology. And that's a huge shift. It really is.

And I'd love to kind of get your thoughts as we wrap up here on that shift.

Speaker 3

I fully agree. Like you say, you need to be the trusted leader. You want to be the trusted leader and you want to help our customers become better.

But it's so much you need to keep in mind and to keep track of. So you need to build a partnership with the best in class to build the best in class solution. So I fully agree. And I really like your view on the Bitcoin.

And it's a very interesting idea and thought. And I agree. When you really think about it, I think that is probably where we're heading because of COVID, because of the invoicing. So it's very interesting.

Thank you for sharing that.

Speaker 2

Absolutely. Yeah, and for sure, it certainly encompasses crypto, but it's more than that. It's the whole architecture of public private keys, availability, traceability. I think we'll even see moves to proof of work and proof of state around the work done and behind this to clear transactions.

So I know it may sound like a decade out, but maybe not. We'll have to see. But Katta, it was absolutely great to talk today. Thank you so much for joining me.

Speaker 3

Thank you for having me.

Speaker 1

That was the A to Z of e invoicing. Special thanks to Jason and Katta for their time. If you like this podcast, please be sure to subscribe to catch our next installment of Bridging the GAAP. And to take all of your business spend management far beyond basic automation, visit medius.com. Thanks for listening.