Readsoft: trends in legislation governing accounts payable processes.

w h i t e pa p e r trends in legislation governing accounts payable processes. this whitepaper provides some examples of recent international legislation governing invoice processing, ap processes, e-invoices etc. author: readSoft aB Copyright © 2007 readSoft - www.readsoft.com trends in legislation governing accounts payable processes. page 2 Introduction: Legislation forces companies to improve their ap processes All companies want to pay their invoices quickly and efficiently, using as few resources as possible. Document Automation software helps companies to automate their invoice processing which lowers costs, speeds up payment times, and improves control. However, changing internal processes is not always easy. In any organization, there is always some initial resistance against new ways of working. Even if everybody realizes that it is a change for the better, it can still be hard to change behaviors. Consequently, many companies are stuck with inefficient, manual invoice processes which result in lack of control, late payment fees, and frustrated AP staff. Constantly delayed payments and lack of corporate transparency is a problem for the whole economy. Therefore, more are more countries are now legislating about AP processes, invoice payment times, and e-invoicing. This whitepaper gives a few examples. a 30-day payment limit for invoices in France The French 2006-10 law stipulates rules for invoice payment within the transportation sector. The basic requirement is that all invoices must be paid within 30 days or penalties will apply. This requirement is very hard to meet with a manual invoice process. How ReadSoft software supports 30-day payments By automatically extracting information from invoices and automatically matching this information against a business system, processes become substantially faster. But the major time-saver is an electronic workflow, where people can approve or reject invoices online, regardless of whether they are in the office or not. This really speeds up the approval process and makes companies able to pay invoices well within 30 days. readSoft - white paper © 2007 trends in legislation governing accounts payable processes. page 3 e-invoicing in Scandinavia In December 2005, a revolutionary e-invoicing law was passed in Denmark. The law stipulates that any company sending an invoice to a public authority must be able to send the invoice electronically. In other words, the public authority has the right to reject invoices arriving on paper. If a supplier cannot send an e- invoice, they have to send the paper invoice to a service center which transforms it into an e-invoice. The purpose is of course to speed up payments and AP processes at government agencies, but also to cut down on paper pushing and put Denmark at the forefront of technology. Many other European countries have taken interest in this new law. Sweden, for example, is implementing similar legislation in 2009. How ReadSoft software supports e-invoicing ReadSoft’s e-invoicing solution, ReadSoft DOCUMENTS for EDI, allows users to send and receive invoices electronically. A small software product called EZ-OUT is installed by the invoice sender. This software simply sends any invoice that the sender is typing as an email attachment. On the receiving side, the information is extracted from the e-invoice and interpreted by ReadSoft DOCUMENTS for Invoices. Electronic Invoice Supplier Customer Typing the Printout Mailroom Snailmail Mailroom Sorting Registering Accounts Pay- invoice able process By sending and receiving e-invoices, many steps of the invoice handling process can be abolished. The results are lower costs, faster payments and increased efficiency. readSoft - white paper © 2007 trends in legislation governing accounts payable processes. page  the Sarbanes Oxley act (SOX) The Sarbanes-Oxley Act of 2002, or SOX, is a US law passed in 2002 to strengthen corporate governance and restore investor confidence after accounting scandals that had recently surfaced (Enron, etc.). Although it is a US law, it is applicable for most companies wanting to business internationally, since they are most likely to recieve or send invoices to American companies. The Sarbanes-Oxley Act contains 11 sections, but the section that is quoted most often is the Sarbanes-Oxley Act section 404 (S404), which specifies the level of internal control and the auditing standards needed. An efficient and transparent accounts payable process is a key area for a company wanting to become SOX compliant. How ReadSoft software supports SOX compliancy A software solution in itself can never be compliant with, or certified for SOX. Only the company using a product can comply with the law. But software systems can help companies comply with the law. ReadSoft DOCUMENTS for Invoices is one such system. OCR / ICR technology is very effective for getting correct data into systems. It is generally recognized that using this technology results in significantly fewer errors than entering data manually. The quality of the data can also easily be improved by validation routines, either internally (for example, by checking the sum of the items against the total) or externally (for example, by comparing extracted data with external databases or other systems). A digitized document is also the basis for digital archiving, another technology that offers additional support toward compliance. Adding an electronic workflow, where users can approve and reject invoices online, also improves the Digitizing invoices hepls companies compky with SOX. company’s transparency and gives it a complete audit trail. readSoft - white paper © 2007 trends in legislation governing accounts payable processes. page  eU directives on invoice processing In Europe, the European Union is currently developing legislation similar to SOX (to be called EuroSOX). But there is already a EU directive (2001/115/ EC) regardining invoice processing and corporate transparancy. Although the directive does not give any details about which technologies to use, it does say that companies need to be able present an audit trail of the entire invoice flow, from invoice arrival to payment. In other words, you must be able to show what has been done to each invoice, who has done it, and when each action took place. This is often referred to as “Non-repudiation.” When it comes to e-invoices, the EU stipulates that countries can choose from three levels of security. The lowest level means that you only have to be able to prove where the invoice comes from, while the highest level sets tough demands on encryption levels for both sender and receiver. How ReadSoft software supports the EU directive With ReadSoft DOCUMENTS for Invoices you can always see exactly what has been done to each invoice, when , and by whom. This complete audit trail does not only give companies better control, it also improves corporate transparancey and facilitates audits. Furthermore, ReadSoft’s solution for e-invoicing can be configured to meet the requirements of each of the three security levels for e-invoicing. readSoft - white paper © 2007 trends in legislation governing accounts payable processes. page  Conclusion Many governments are looking into legislation about invoice payment time and accounts payable transparancy. Automating your invoice processing today will not only boost your accounts payable efficiency, it will also make you able to comply with increasingly tight rules and regulations that may come into effect in the near future. about readSoft ReadSoft creates software and services for Document Automation. This means automating the handling of all types of documents such as invoices, forms, orders, claims etc. With offices in 16 countries and partners in an addtional 70, ReadSoft is the major player on the global market. Since the start in 1991, the company has distinguished itself through continous technical innovation and and smart solutions. Some 5000 companies all over the world use ReadSoft software to boost their business efficiency. They include IKEA, Siemens, ThyssenKrupp, Sony, BASF, Carlsberg, SEB, TeliaSonera, Volvo, MIT, HSBC Bank, SAS, Audi, Porsche and many more. Read more on www.readsoft.com. readSoft - white paper © 2007