Analysis of the adoption level and behavior of electronic invoicing in European countries

The e-Invoicing has become a subject of great importance and source of several benefits for the European industry, however there isn`t an realistic and clear view about the status of the e-Invoicing adoption in each country, by the contrary exists different figures and reports with unrealistic statistics and rates that creates uncertainty by the stakeholders inside the country. On this basis, this thesis pretends to go deeply in this subject, researching and analyzing the e-Invoicing European landscape, characterized with different regulations and conditions by each country, but without indicators and realistic figures to identify crucial factors and best practices that facilitate the interoperability and increase the adoption. The main objective of this research is to obtain a reliable and updated view of the e-Invoicing adoption in Europe, confronting the data with local stakeholders and establishing a methodology and criteria that permits compare and classify the different European countries and its behaviors and patterns. Is also a concern of this thesis, to identify the conditions, best practices, barriers and enablers that characterize the e-Invoicing in Europe with the aim of increase the interoperability and enable the interchange cross border of e-Invoices, especially in Italy. Contributing with the studies and research of The Observatory in Electronic Invoicing, in which the idea of this research was born and its support allowed the completion of this work. The methodology followed for perform this research is divided basically in two phases, the data collection and the empirical analysis that allows at the end identify summary notes, facts, measures that create awareness about the actual situation in Europe of the e-invoicing and suggestion to increase the adoption and diffusion of the e-Invoicing. The data collection phase consists first on the research, comparison and analysis of secondary sources that contains data about electronic invoicing in European countries and the related terms and subjects that are also interesting for an overall analysis. These additional concepts are basically the level of adoption, electronic archiving, Electronic Data Interchange and the penetration of e-Invoicing in the different markets and type of companies. The next step in the data collection phase after have analyzed and selected the significant data of the secondary sources for each country, was to identify contacts, experts and new possible sources for confirm the data and obtain new perspectives of the information analyzed. With this starts the phase of interviews and questionnaires to experts with the aim of confirm the previous data and to get new one, directly from the stakeholders of the e-Invoicing in the different countries. The questionnaire was designed with the aim of get more details about the situation is a specific country, confirm the data obtained before and collect perception from the industry, banks and government about the electronic invoicing status in Europe. At the end of the data collection phase, is reviewed the data collected of each country and are selected the countries with more significant data and which represents the real status of Europe in its different regions. The literature reviews is the conceptual basis of this research and consisted in read and analyze different kinds of information and concepts about electronic invoicing from specific sources. At next are listed the kind of literature that is of interest for this research: - Reports of vendors, government, banks and different stakeholders of the e-Invoicing market. - Articles and data from communities and organizations formed to promote the e-Invoicing. - Interviews and questionnaires made to e-Invoicing experts of each country. An important step in this section was to read and determine the correct definition for each concept of the research, which would be the ones that are used in the rest of the document. The concepts described at following are the ones of interest, which will be searched in the literature review for each European country. Electronic Invoicing is the interchange and storage of legally valid invoices in electronic format only between trading partners. The interchange does not use or require paper-based invoices and have legal and tax validity. A Regulatory Framework, is the set of laws and requirements established by the government agencies for the adoption of e-Invoicing; and a European Commission Recommendation, is a recommendation that is passed from the European Commission to the Member States and is a non-binding act, however coming with a 'good backing' since it will have been discussed with the Member States first. For this research we will refers to level of adoption, as the percentage of companies and public administration entities that are using the e-Invoicing in their normal an productive processes, not necessarily all the invoices have to be sent electronically, but the e-Invoicing must be implemented and is use. E-Archiving and Substitutive Conservation, are the electronic storage of invoices and depends of the regulation and conditions of each country, also must grant the originality and integrity of the invoice. In this Substitutive conservation refers to the use of digital signatures and other mechanisms to grant of the originality of the invoice stored. EDI (Electronic Data Interchange), refers to the structured transmission of data between organizations by electronic means. It is used to transfer electronic documents from one computer system to another (i.e.) from one trading partner to another trading partner. For electronic Invoicing there are specific standards as EDIFACT. The final important concept related with the research is Order to Payment Cycle, which is the full cycle since an order is made by a client until the payment is made to the provider, is present in all the companies and includes the Invoicing process as one of its pillars. The e-invoicing and automation of all the cycle include a lot of benefits and changes to a company. This research is made among the European Countries, especially the ones of the European Union, as the objective is to analyze the approach to e-Invoicing from countries different from Italy but that have similar conditions and regulation. However there are analyzed other countries from Europe that present interesting characteristics and conditions to get a low or high rate of adoption. Also the reference literature is focused in the adoption by large enterprises, SME‟s and public administration, identifying the most developed areas in each country and the presence of leadership in some productive sectors that have promoted the adoption of e-Invoicing. Empirical Analysis The empirical analysis consists in review the data one more time and analyze in comparison with the other countries, highlighting the conditions, enablers and barriers to the electronic invoicing adoption identified in each country. Each country is analyzed in the more important dimensions of e-Invoicing that would be the strictness, proactivity, interoperability, adoption in SME‟s, adoption in public administration, EDI and adoption in large enterprises. In this way is used a spider web diagram as an analysis tool with the aim of synthetize the more significant result and afterwards identify similar patterns between diagrams and classify the countries by clusters. Finally as part of the purpose of this thesis is to show and highlight the best practices, conditions and problems that have presented the electronic invoicing in Europe during the last years, in the summary notes are shown, analyzed and explained the most relevant results of this research that will be useful for further project of the observatory and also for the different experts and stakeholders of electronic invoicing in other countries that helped with this works and are interested in the results to take measures and propose new projects in their own countries. In this section also are described the different clusters and shown the countries that belongs to each one, highlighting the common facts, problems and conditions of the electronic invoicing in Europe. Also are identified and summarized the enablers and barriers of the electronic invoicing in Europe suggesting measures to incentive them and to overcome them respectively. Below are described the main facts and characteristics of the e-Invoicing adoption level in Europe: - E-Invoicing still in an early stage of adoption in Europe. - Clear superiority in adoption and better conditions for e-Invoicing in the Nordic and Baltic region. - Still divided the perception about the adoption rate between vendor reports and official figures. - Non EU members, which don‟t have obligation and recommendations by regulatory framework, have in average higher adoption. - Large Enterprises represents major part of the adoption, by the contrary the public administration and the SME‟s are the less developed in e-Invoicing adoption. Another important result from this research is the analysis of the status and behavior each European country towards the e-Invoicing and the following classifications in clusters with the aim of obtain a global view of the position and situation of each country. There are 3 models of behavior towards the e-Invoicing in the European countries. The adoption of EDI still low especially by the proliferation of SME‟s, however is the most used mechanism among MNC‟s and large companies. - The level of adoption in Europe still considerably low and only few European countries are increasing its adoption and have established a good basis of e-Invoicing implementation in PA. - The technical fragmentation, complex regulations, passiveness and lack of integration are the main barriers for the e-Invoicing adoption. - A simple and looser regulation, the standardization, the integration of stakeholders and the support to SME‟s are the main enablers for the e-Invoicing adoption.