Lesley Meall.

The days when Adam Smith, Charles Darwin and Sir Edward Elgar nestle side-by-side in your wallet, purse or pocket increasingly seem numbered. Credit and debit cards have overtaken cash as the most popular method of payment in the UK, you can already pay for a train ticket or buy a burger using your mobile phone, and cheques will soon be as useful as clay tokens. But numerous businesses still manage much of the purchase-to-payment process manually.

'Of all the procedures that are conducted in the back office on a daily basis, invoice processing still stands out as an area that is remarkably inefficient, time-consuming and a large drain on the finances and resources of many companies,' says Jamie Gunn, CEO of OB10, the global e-invoicing network.

Paper invoicing is labour intensive, uneconomical, error prone, outdated, expensive, and represents an unnecessary waste of natural resources. But most organisations can minimise these problems by automating all or some of their purchase-to-pay processes.

At the very simplest level, just using a word processor to produce an invoice and sending it via email can help to speed up the process, so even small businesses can take steps to keep their debtor days to a minimum and improve their cashflow. 'I invoice via email and my clients pay me electronically,' says business consultant Naz Gladwin. 'It's quick and simple, and it doesn't require any special software,' she adds, 'and I don't have to worry about problems with the postal system.'

This is about as automated as purchase-to-pay (P2P) gets in a lot of small businesses, but it doesn't have to be a barrier to doing business with organisations that take a more sophisticated approach. Many accounting packages also provide an email e-invoicing option, even when they also offer the potential to automate the entire P2P process. By using a package that supports the eBIS-XML standard (www.basda.org), you can exchange orders and invoices automatically with other compatible systems, while recipients without compatible systems can process the invoices in the same way as emails, then print them off on paper.

'In the forthcoming year, invoicing electronically will save us from printing and posting over 5,000 paper invoices,' says Mark Salmon, at Access Accounting, where the management accountant uses the software supplier's own package. As well as saving the company time and money, e-invoicing makes the P2P process more efficient, minimises errors and improves management reporting. 'It's one of those great win-win situations,' he adds, 'because it's good for us and the customer.'

In their attempts to ensure that P2P information is channelled efficiently and cost-effectively from its point of entry to its point of need, some organisations are supplementing their accounting software with document management and imaging software, in a process that is often referred to as purchase invoice automation, or PIA.

This automates the capture and processing of supplier invoices, from the point when a document is received electronically or in the post, through data entry, checking, matching, authorising and posting into the ledger; while the imaging and storage of supplier invoices eliminates the need to retain the physical documents, it also provides on-demand access to the relevant information.

By supplementing its OpenAccounts eFinance system with Version One's imaging solution, the children's charity NCH has been able to eliminate some of the costly and time-consuming problems that previously dogged its accounts payable (AP) process. The charity now electronically stores 180,000 documents every year: all incoming AP documents are scanned, bar-coded and tagged to the appropriate record in the OpenAccounts system, and they can be accessed through this ledger or a browser.

'It's now possible for AP queries to be resolved within seconds,' says Paul Addington, finance change programme manager at NCH, freeing-up staff time. Purchase invoice approval times have also been cut, providing greater control over how and when the charity pays suppliers. 'All importantly,' he adds, 'costs have been reduced by many thousands of pounds, freeing-up funds that can be used by the charity more effectively.'

Organisations that want to take this sort of approach have various options when it comes to sourcing the necessary software and systems. Some specialists focus on PIA, and some document management specialists provide invoice automation among a range of products and services. You can get an idea of what's available by visiting the following websites:

•    www.accountis.com

•    www.datacapture.co.uk/basware/basware.htm

•    www.efstech.co.uk

•    www.invu.net

•    www.versionone.co.uk

Some suppliers specialise in offering products that meet industry-specific needs. X Trak from Teoco (www.teoco.com), for example, provides communication and entertainment companies with the capacity to capture and process bills received in a wide variety of printed and non-standard electronic formats, by utilising Monarch Data Pump software technology from Datawatch (www.datawatch.com).

Rather than manage purchase-to-pay automation themselves, some organisations choose to outsource some or all of the process. The options range from simple electronic invoicing, through paperless invoice discounting and e-invoicing networks, to automating the entire electronic payment and presentment (EIPP) cycle.

At one end of the spectrum you can find online offerings such as Kashflow (www.kashflow.co.uk /invoices.asp), which provides low-cost, browser-based access to software that can be used to create, send and monitor invoices (in addition to other bookkeeping and accounting functions). At the other end of the scale, full-blown EIPP services can be used in conjunction with accounting applications to automate the entire payment cycle.

Bottomline (www.bottomline.co.uk) and the Open Business Exchange (www.ob10.com) are among those offering various levels of outsourcing, while Close Invoice Finance will even automate the invoicing process as part of the factoring and invoice discounting services it offers (www.cif.co.uk).

'While the idea of moving from paper to electronic invoicing was compelling, we didn't want to insist on a specific electronic invoice format for our suppliers to adhere to,' says Paul Owen, the service development manager with Fisher Scientific. The UK company has more than 3,000 international suppliers, and distributes more than 80,000 laboratory products to over 40,000 end-user customers. But opting for OB10's invoice delivery network meant that everyone involved could benefit from e-invoicing.

'As a small business, it is crucial for us to be paid promptly,' says Allen Matthews, the founder of Glenammer Engineering, one of Fisher's suppliers, and OB10 facilitates this. 'We know when our invoices have been successfully delivered and are being processed by Fisher,' he says, and they find out quickly if an invoice has been rejected for some reason, such as the lack of a valid purchase order number.

As Gunn of OB10 observes: 'Companies involved in business-to-business relationships are increasingly realising that e-invoicing can provide guaranteed delivery and immediate processing of invoices, which improves audit and controls, leads to fewer disputes and significant cost-savings, as well as benefiting the environment in the process.'

If you go to the VAT section on Revenue & Customs' website, and click on 'Latest updates', you will find an update on the revision of Notice 700/63 (dated 14 July 2007), which provides a useful overview on the benefits of electronic invoicing, as well as information on the contents of VAT invoices.

Note: Since 1 January 2006 it has been possible to invoice electronically without notifying the Revenue. Prior to 1 January 2004 you needed Revenue permission, and between this date and 31 December 2005 you had to inform the Revenue within 30 days that you had commenced electronic invoicing.