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Electronic invoicing could save state governments billions in cost and efficiency

Luke Graham, special to CNBC

With governments around the world seeking to reduce their costs and improve efficiency, a new white paper has promoted electronic invoicing as a way to shave billions off a government's budget. However experts warn that, without proper leadership, any initiatives could founder.

Government organisations could save up to 90 percent of the processing cost of submitting invoices by adopting electronic invoices, or e-invoices such as PDFs, according to the paper from e-invoicing company Basware.

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The white paper, titled "Why are governments not paperless?", states: "Replacing manual tasks with electronic and automated processes reduces the cost of invoices, speeds up processing time and boosts financial visibility for the overall state of the economy."

The potential for savings are large: figures from another e-invoicing company, Billentis, show that 170 billion business and government invoices are sent each year around the world. 

Esa Tihila, CEO of Basware, claimed the savings outlined in the report were realistic: "The savings are very achievable and this is the upper limit of savings, purely based on the automation of invoicing and removing the unnecessary handling of paper e.g. between different government bodies or departments or through postal services," he told CNBC via email. 

"The savings are dependent on the level of automation and how widely e-invoicing is used in a country. For example, the U.K. government sends an estimated 100 million invoices every year, with a collective £192 billion ($291.86 billion) in value. The cost of processing is £40 per invoice, which means that two percent of government revenue is wasted on administration. This could be reduced down to £4 per invoice if they were managed and sent electronically." 

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The benefits of utilizing e-invoices are diverse. Developed economies such as United Kingdom and Germany would gain cost and efficiency savings: for example, Germany would save 800 million euros ($873 million) per year on processing costs, claims Basware. 

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In a bid to help boost the adoption of e-invoices, European Union legislation has been introduced that will require all member states to be able to receive e-invoices by November 2018. Basware estimates that governments in Europe issue 3.15 billion invoices each year at an average cost of 60 euros ($65.94) per invoice.

However, there will be several obstacles in front of governments trying to meet this deadline. 

Canan Kocabasoglu Hillmer, a senior lecturer in operations and supply chain management for Cass Business school, explained to CNBC what these challenges would be. She said: "The challenges tend to be primarily driven by the complexity of the invoicing processes and leadership needed during the transition. The more complex the underlying billing and payment process, the more diverse the different parties taking part in the transaction are and the more uncertainty about ownership of different phases of the process, the bigger the challenge."

Tihila suggested governments intending to adopt e-invoicing should seek advice from the private sector. He said: "When creating infrastructure and processes for automation, invoicing and e-invoicing, governments can learn from businesses. Using the expertise of service providers to create the e-invoicing infrastructure is a stronger path to success and means that governments, businesses and citizens will see more benefit."

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Hillmer also suggested how governments could switch to e-invoicing. She said: "Successful adoption is mostly spearheaded when there are clearly identified leaders, who are accountable for the success of the transition, have the clout to push through resistance, are enthusiastic and are willing to communicate regularly with the various stakeholders. 

"There have been several lessons learned from the adoption of e-procurement, including e-invoicing, in the B2B context, which can provide great insights for the government sector."