In this final episode of 2022, Sidetrade’s AVP of Product Management for e-Invoicing, Bryan Pederson discusses how to prepare for global e-Invoicing mandates, if continuous transaction controls will come to North America, 2023 automation, technology and data trends, and how to avoid AP portal headaches in the New Year.
In this final episode of 2022, Sidetrade’s AVP of Product Management for e-Invoicing, Bryan Pederson discusses how to prepare for global e-Invoicing mandates, if continuous transaction controls will come to North America, 2023 automation, technology and data trends, and how to avoid AP portal headaches in the New Year.
Welcome to Finance to Futurist, a Sidetrade podcast series on how innovation data and AI are disrupting order-to-cash.
Natalie Silverman:Hi, this is Natalie Silverman for Sidetrade. Welcome to Finance to Futurist. On today's episode, we're discussing how to prepare for global e-Invoicing mandates, 2023 automation technology and data trends to look out for and how to avoid AP portal headaches in the New Year. Please welcome Sidetrade's AVP of Product Management for e-Invoicing Bryan Pederson. Good morning, Bryan and thanks for sitting down for Finance to Futurist.
Bryan Pederson:Hey, Nat. How are you?
Natalie Silverman:I'm doing really well. Welcome back to the podcast.
Bryan Pederson:Awesome to be here.
Natalie Silverman:You know, this is my favorite time of the year. We love to look at what's coming in 2023. And I thought all right, let's talk e-Invoicing. And I want to spend some time talking to you about predictions or where you think finance teams will focus their efforts. Because I know we've talked previously, there's some regulatory mandates coming, you know, in about a year from now. And there's a lot going on in the invoicing side. So I thought, let's get your expertise here. First thing's first. For those listeners that might not have been familiar with you, would you remind people what your background is and what you do here at Sidetrade?
Bryan Pederson:Yeah, absolutely. Bryan Pederson, I'm the AVP of Product for our what we call our augmented invoice and augmented order product. It's really when you boil it down. It's the interaction and the connectivity that we built in order to enhance our collection solution and make it richer, and invoicing is a huge topic. And I'm glad you brought this up. And I'm glad we're having this podcast. Just looking back on this year, we've seen some shifts in momentum. And I guess a couple of areas. One of the biggest areas I guess is government mandates in certain countries. We don't see this as much in North America. But when you look just south of us and I'm in Houston, who looks out the bus at Mexico, they've had these mandates in place in South America. What I mean by these mandates is it's a regulation by the government to make sure that your taxes are reported and reported in real time here in North America. We report our taxes quarterly as a corporation or annually as your personal income taxes. And what they're doing now is giving a stronger mandate to businesses operating within certain countries. And Europe has seen a big shift in this to make sure that they're reporting their taxes as they happen, literally, in some cases before they happen. So you actually have to report your intentions to do business in some South American countries in order to get those transactions approved by the government that your taxes are reported. And they just really want transparency. So what we're seeing in the next couple of years is a big uptick in activity in Poland, France, big issue on France, right now we're moving forward with implementing a new strategy or with the French government lockstep on their strategy. And the reason why we need to be a part of this and organizations as a whole need to be part of this is really truly understanding what's going to be required from them, you can no longer send paper in these countries that are pushing for E invoice mandates. And so why they're doing this is because it's proven to show you can reduce your your VAT gap by over 50% in almost overnight by having this visibility and reporting. But we're also seeing on the commercial side, an uptick in more AP portals being pushed out onto the marketplace. And it's a very similar process for business where you have to log into a system in order to transact or if you're doing business. In countries where there are government mandates, you have to use the government portals. If you're doing business with a larger commercial enterprise level organization, you likely have to use their portal. And so these portals have matured enough that they're now asking for more and more information. And so what's happened is the AP digitization market continues to mature, which causes a bit of an imbalance because the AR automation hasn't quite caught up at least as an entire market. Now, this is the area that we knew was coming. And this is why we're focused on both commercial customer mandates as well as government mandates.
Natalie Silverman:All right, Bryan. Well, I was gonna say you stole my thunder a little bit. And so I'm gonna get into a couple questions that might go a little bit further into things about the mandates, and we'll talk about AP portals a little bit later. If you're a finance leader, where are you placing your bets in 2023 when it comes to e-Invoicing?
Bryan Pederson:So we have to make sure we use the term e-Invoicing as we see it. Like I said, the e-Invoicing market on the AP side, the consumption of electronic invoices has already matured. I'm placing my bets heavily on the AR side. The complexities that have grown in this market because of data requirements by both customers and governments has put pressure on organizations to just keep hiring labor and cheap labor and what we're seeing is this shift to offshoring. I shouldn't say it's shifted, it's already shifted to leveraging offshoring to just pound invoices into customer portals, but that is no longer viable solution because of the data requirements and you just can't expect somebody that you're paying $2 an hour to go in and figure out where all this data needs to go. And the data requirements that are in place for their customer base with the offshoring decreasing is what we're seeing a decrease in the offshoring and moving towards more automation and connectivity. So where would I place my bets, if you're looking for a solution provider specifically, and to do this on your own is a very significant task. We haven't seen an organization be able to solve government mandates, as well as customer requirements on invoicing. That's where I see the AR market, it just it has to mature because it's put a lot of pressure, there's a lot of imbalanced right now on suppliers, having to do more for the customers where the customers are requiring more and the same with governments, governments are requiring more now.
Natalie Silverman:All right, let's get into e-Invoicing mandates. Because I know you mentioned France, which I know is coming in 2024. And yeah, maybe you could go through a couple of the other countries where you have your eye on. And my question for you a follow up to that is what do companies need to start doing in this coming year in 2023 to prepare?
Bryan Pederson:Great question, I think it's such a moving target. But there is so much information out there available, if you look for it, it's not easily provided. You need to be aware of the country that you're operating in, and what's coming. So on the European side, namely, for countries like France, as we mentioned, Poland, has now been approved by the European Union to be able to push their invoice mandates, Slovakia, Denmark, Spain and Belgium. They're all moving towards instilling they've been working on this project for the last couple of years just to get things rolling. But now the mandates are actually going to come in place at the start of 2024 in some cases, mid-year 2024. So I think it's being prepared for it. And going even beyond the European market, we're seeing Japan now get interested in this, Egypt is moving forward with their mandates. But again, you have to also understand where your organization fits in their scope. Because what they typically do is roll out to large enterprises, they're under the mandate first, and then they slowly start to move it down to small to medium sized businesses. So it's just very important to either, hey, have a partner ready to go to be able to inform you of when we're going to be going live in certain countries, but also be aware of it from a scoping standpoint where you fit in this whole process.
Natalie Silverman:All right, let's talk a little bit about CTC or continuous transaction controls, right, which is kind of on the back of it. It's a follow up question to the mandates that are coming. Do you think continuous transaction controls are eventually going to come to the US?
Bryan Pederson:Yeah, absolutely. So CTC is is what I had mentioned at the beginning, whereby you have to report your taxes and be basically certified by the government in order to move forward to both invoice and collect payment from your customers felt that certification if the government isn't aware of the transaction, the buyers are not obligated to pay you and you are not legally allowed to be doing business until that approval has happened. And so it's certainly a lot more rigid than the honor system. I would call it the honor system that we have here in North America whereby we report our taxes based on the transactions that we're showing the government, this is what happened for our business, even though when you look at some organizations that have cash transactions or doing things I wouldn't say under the table, but with less transparency and less traceability. So in North America, and specifically in the US, what I think is going to happen is we're going to start off with a much less rigid model, we do want to see, I think even moving more towards electronic invoicing not as a mandate, but as a best practice, but I think most organizations are getting there that the government hasn't really caught up on the electronic side. I mean, if anyone has had to deal with the IRS, I'm sure that you can nod your head and agree that they're not exactly you know, moving forward, or leading the world as far as electronic invoicing. But what I can see is the US will only sit back for so long, they're going to see countries like Brazil, where they've reduced their VAT gap to I think 5%. So in other words, they have visibility on 95% of all the transactions under collecting tax on those transactions in their whole economy. And so if the US can see that, and I'm sure the US right now doesn't even have an idea of how much they're missing out on tax revenue, but it would be significant, and to sit back and just hope that everyone's being honest and not follow these types of processes. And then also participating in the G7 and the G20 Summits. They're going to hear about this, and likely it'll start to we'll probably see an uptick, I would say in the next five years.
Natalie Silverman:All right, I love this. This is like Nostradamus being on the episode. I feel like you're giving us all these good insights and good things that are gonna happen probably this year. But let's go back to what you said earlier about AP portals. Years ago when I worked in order-to-cash, I just heard about the complexity that's caused by these AP portals and it seems like over the years, it's just gotten even more complex around e-Invoicing. So where do you think AR departments need to focus their attention for next year to avoid some of these AP portal headaches?
Bryan Pederson:Well, I'm gonna say I think connectivity is going to be the word of the year making sure that companies both internally and externally have a layer of connectivity that is going to be able to solve the customer's requirements. What we've seen this year, and I think it was kind of a fallout of COVID is a lot of ERP upgrades. And ERP upgrades are great. I mean, you're getting newer software, newer technologies put in place, but the connectivity still isn't there. And ERP systems, you have to remember are built for your organization, they're not built for your customers. And so there's a requirement for you're building your your ERP system, you don't want to put all this customization and try and satisfy all your customer requirements, the data that your customers are requiring, often will exist in both internal and external systems. And so that's where that connectivity layer comes in, to be able to pull data to be able to complete invoice requirements to be able to augment invoices are going to be very key. Otherwise, you're going to be left doing a lot of manual work a lot of manual lookups, in order to satisfy those requirements. And it's a challenge, because nobody's really pushed back on the buyers requirements, we're almost treating them like a government, we're not going to tell the government now we're not gonna follow your requirements, you have to and for certain buyers, that's kind of what we continue to do is just we have to, and I just hope that these AP systems will start to mature so that the data that they're requiring from a supplier will actually be able to be auto populated or using smart logic to put less requirement or less onus on the supplier. We're not there yet. I don't think we'll be there yet. Until these AP systems, I guess, reduce the buyers power to push all of this requirement on the supplier, I think that's really what we need to do is figure out how to have a more connected ERP and ERPs aren't good at certain things. They're not good at completely doing collections or distributing invoices or accepting orders, and you have all these different standards that you have to follow. So it's I've said this before, it's really important to have a strong partner that understands that connectivity environment.
Natalie Silverman:All right, Bryan, last question for you. Let's talk about where do you think the e-Invoicing landscape is headed in terms of technology and data?
Bryan Pederson:Well, I think what we're seeing is a greater appetite for collaboration amongst peer companies. And I would say even our own competitors, technology, service providers are looking to figure out a way to streamline this layer of connectivity. As I mentioned before, no one really thrives on complexity the buyers don't, and nor do the suppliers. And I would say maybe some technology service providers might argue that complexity is their friend, because it gives them business that allows them to solve problems for their customers. But I think we're all hoping to see a drive to some level of standardization. And when it comes to e-Invoicing, there are initiatives that are happening on a global scale, when you look at something that we're a part of, and something that is continuing to increase with the government mandates is this idea of a global interoperability framework. This is currently being adopted and tested by the Business Payments Coalition here in the US, which is backed by the Federal Reserve. And their whole objective is to let's build this digital railway, if you will, in order for us to be able to interact and transact, we're not going to be able to tell the buyers or the customers what the rules are going to be. We have to follow their rules still. But being able to do this on a standard network using the same sort of rules in order to transact and transact securely is where I think we're going to be headed. I think there's an acceptance of this. When you look at how many people are involved in these pilots, I would say every competitor on the technology space is out there being a part of this because they know if they're not on this railway, they're not going to be able to compete. So I think that's where I see where we're headed on the e-Invoicing side. I really hope that there is some I guess, awareness by both the governments and these AP portals to simplify things, simplify the requirements and really truly understand what they're asking for and if it's going to provide value to their their both their suppliers or the customers doing business with them.
Natalie Silverman:Thanks, Bryan, for your insights into the future of finance, For Sidetrade, this is Natalie Silverman.
Conclusion:This has been another episode of Finance to Futurist, a Sidetrade podcast series. Make sure you catch every episode by subscribing to our podcast on Sidetrade.com or through your podcast platform of choice. Thanks so much for tuning in. This podcast is brought to you by Sidetrade and is for general information purposes only. All rights reserved.