E-INVOICING

Michael Salmony 0:12

Hello, my name is Michael Salmony and Javier and Ralf, and I would like to welcome you to another episode of the Payments Trilogue. And today we're going to be talking about e-invoicing. Now I've actually spent too much of my life on this topic, ⁓ but I do think it's quite important. Basically all payments, unless I'm paying Javier for a coffee, come with an invoice.

Javier 0:25

Okay.

Michael Salmony 0:35

and we send, I think, about 30 odd billion invoices around in Europe every year. And of course, it used to be all on paper and sent in an envelope and then typed into the other computer. And we're increasingly doing that electronically, hopefully not only just by attaching an image of the piece of paper ⁓ onto an email. So the fighting the good fight to get us to more electronic and structured invoicing is Charles Bryant.

Charles, maybe you can tell us a little bit of who you are and what you're doing and why e-invoicing is so important.

Javier 1:05

you

Charles Bryant 1:08

Yes, Michael, thanks very much. And let me introduce myself briefly. I'm a my background is banking and also had a lot to do with payments and trade finance. But about 15 years ago, 10 years ago, I started to take an interest

Javier 1:12

you

Charles Bryant 1:23

in e-invoicing. It actually fell out of my role in the European Payments Council because my very energetic boss at the time, Geert Hartsink, suggested I went off to a banking association and made a study.

Javier 1:24

you

Charles Bryant 1:36

of what was beginning to be what was called e-invoicing. And I followed it right through. I formed an association of service providers. I've sat on standards groups and expert groups over the years, one of which, of course, was with you, Michael. And ⁓ now I'm really playing a consulting role, trying to sort of help people to grasp what's going on.

So e-invoicing, an e-invoice is a summary of a transaction, just to be clear, it's a claim for payment, so it's the bridge into the payment, and of course it is a tax determination crystal, crystallization method. So it plays a fundamental role, it's a legal requirement to issue one, and the story I've followed has been, first of all, a period of legal clarification.

Javier 2:04

All right.

Charles Bryant 2:33

because it was not totally clear whether an invoice was legally the same as a paper invoice. And we had to deal with that. That was done. And then the European Commission in particular was very active and was promoting e-invoicing in public procurement. Not easy because the public sector is not necessarily the fastest off the rank as it were. But ⁓ that got going in ⁓ 2014.

Javier 3:01

you

Charles Bryant 3:03

We created a standard and now we've moved into a phase as I call is mandatory e-invoicing. So more than 60, more like

80 countries have now mandated the adoption of e-invoicing. This helped us a bit actually. It's a little bit like SEPA, the payment automation in the sense that the voluntary approach in an industry influenced so much by network effects.

needed a push and that's coming from a perhaps a surprising direction but many governments have recognized the value of the data that's inherent in an invoice process and therefore it's starting to replace what were paper VAT returns by having a reporting mechanism built in and often provided by the state and that's an interesting architectural issue as to whether who is playing the key role.

Javier 3:30

Okay.

Michael Salmony 3:47

Hmm.

Javier 3:49

Okay. you

Charles Bryant 3:57

But the market, the supply chain market, has developed its own networks, transmission methods, has adopted the standards that are being developed. And as I said, we're

now in a real tipping point. This is the decade when e-invoicing will become completely prevalent and replace the paper. ⁓ PDFs are not an e-invoice. We can have that discussion quickly. But is that enough as a sort of beginning of the discussion?

Javier 4:09

Okay. Okay.

Michael Salmony 4:23

That'll do it

as a start. And I think we've made good progress since we were both in the European Commission expert group where we changed the law, set some of the standards. So I think things have moved on a lot. But can you maybe just differentiate a little bit? Some people confuse an invoice with a payment and some people confuse it with a request to pay. And ⁓ just give us a little bit of how the various bits fit together.

Javier 4:38

you Okay.

Charles Bryant 4:48

Yeah,

yes, there is often some confusion there. An invoice is a distinct document. It has nothing to do with a payment. A payment instrument is something that follows on after an invoice is issued and sometimes too long after because we know that there is a tendency in the market for payments to be delayed, particularly to SMEs, and we see the invoice as a trigger.

for perhaps more prompt payment. So the invoice is distinct. It's a legal requirement. It contains a request for payment. So in the B2B market, that is it. And I know that there is an instrument which I've watched your ⁓ session on RTP. I was involved actually in Ralf too in the sort of early days of a scheme for that. Not really taking off. Two observations there.

just to get that out of the way. Number one, for pay later, which is the vast majority of invoices are paid after 30, 60 days. There are well-worn routines for the initiation of those payments. There's often quite a big firewall between the parties that approve invoices for payment and the people who actually release the payments because of checks and balances. And the payments go out in the usual way through credit transfers.

Javier 6:08

you .

Charles Bryant 6:14

type of operation. And so the RTP sort of is a sort of reminder. I just treat it as something I would call a reminder. And it can be an irritating reminder, I believe. And I think you need to rethink that from the point of view of the architecture of the RTP. I see the RTP actually far more interesting in the pay now section of the market, either in a physical

shop or in a online. It seems to me that

Javier 6:41

.

Charles Bryant 6:42

Having a standard

message with a set of standards embedded in it would be much better than having everybody developing proprietary standards that are set up inside all these various, whether it be online banking, whether it be ⁓ point of sale transaction processing. So that I see the pay now area very important for RTP and could make progress. Pay later, I think it's a bit of a sort of discretionary thing. But anyway, I've deviated a bit.

I don't know whether I've answered your questions enough yet on that, that you... Okay?

Michael Salmony 7:14

with you.

Ralf Ohlhausen 7:17

Could I ask you? ⁓ Could I ask you about? Well, it's to me, it looks like Europe is coming a bit late on all of this. And also from personal experience, actually, I saw Latin America seems to be one of the pioneers in it. And in the report that you

Javier 7:18

Cards.

Ralf Ohlhausen 7:40

have done, I think that is also mentioned. do you know why or what is it? Why is it that other regions seem to be quicker than Europe on this?

Charles Bryant 7:49

Right. Yeah.

Happy to answer that. Yes, you mentioned very kindly a report that I've just been editing and we've published a few weeks back and I'm sure you will provide the link to that. It's called the Global Shift to e-Invoicing and we provide in there things like a landscape description for the main parts of the market, continents and industries.

Javier 7:57

you

Charles Bryant 8:14

We talk about the models of the invoicing adoption. We talk about benefits. We talk about interoperability, famous word in quite close to all our hearts. in there, Latin America had a tax gap, horrendous tax gap. So they were not collecting their VAT or GST or whatever the sales taxes that were required. And so they implemented really a pure tax model.

And so the automation of the supply chain, which is where Europe, US, Asia has been coming from over the years, was really on an efficiency drive to take cost out of accounts, payable accounts, receivable, to make the whole thing more visible, less fraud, more transparency. That was the motive in Europe. And I would say actually Europe was in advance. It was in advance. I know Latin America started down their journey for tax.

And they've done very well with it, but they haven't got as far on the supply chain efficiency. So if you read the report, we spend a lot of time emphasizing the twin objectives of an e-invoice. One is to support supply chain efficiency, and two is to fiscal optimization or whatever polite word you want to use, in other words, the tax gap. So it's fair to say Latin America did make a lot of progress through

Javier 9:23

you

you

Charles Bryant 9:39

these various tax reporting systems. actually one of the confusions, because Michael mentioned confusion, is between an e-invoice and an e-report. So lots of people in the market say you've got to issue your invoice. And then they say that the report you give to the government, that's an invoice. Well, it often isn't an invoice. It's a subset, a data subset of the invoice. Sometimes it's the whole invoice.

Javier 9:55

Okay.

Charles Bryant 10:05

And these models vary considerably and we can perhaps I'll touch on that a bit later. Europe started, I would say in the sort of around the turn of the century by clarifying the things Michael mentioned, the legal status standards, these sort of takes years to do these things. I mean, I was well conditioned for this by SEPA because, you know, and I am of the opinion that any major market initiative like this

Javier 10:19

⁓

Charles Bryant 10:32

takes about 10 years to really get off the ground. And that's not because people are deliberately inefficient or deliberately using delaying tactics, although that does happen, of course. But it just takes a long time to get something like this out into the market. So the European Union, I think, was very successful in being a champion of it. And we got it going. We got the government procurement type invoicing.

Javier 10:46

.

Charles Bryant 11:02

And we've got a lot of very large corporates that have been doing this for 20 years or more with their supply chains, big multinationals. Funny enough, the US companies, although within America, because they don't have VAT, it is now beginning to take off within the domestic market in the States. The multinationals of American origin have been doing globally invoicing for many, many years purely for efficiency. So it's this balance. You've struck an interesting

Javier 11:22

Okay.

Charles Bryant 11:31

differentiation between supply chain efficiency and ⁓ the fiscal objective. I would say Latin America, big tick in the box for fiscal, not so good on the supply chain. Europe, Europe never came to ⁓ fiscal efficiency as quickly as some member states did. So this was an example where

Javier 11:33

you

Charles Bryant 11:52

there's a bottom up adoption of the invoicing by member states to encourage reporting of the invoices to

transform the VAT Italy is the classic example of that. They've really done a huge job on that. Um, and others have followed and now everybody's into it. And the European commission has something called the ViDA initiative VAT in the digital age where by 2030 to 35, everybody will be on e-invoicing and it'll suck in all the cross border invoicing, what we call cross border. think in

Javier 12:05

⁓ Okay.

you

Charles Bryant 12:28

official terms, I remember talking about this in payments, we call it intra EU, whereas cross border is something going in and out, you know, one leg out and all of that

Javier 12:37

you

Charles Bryant 12:38

sort of thing. So in the EU, you're going to get this rather complete standardization of where the invoice will be automated, and the tax reporting will be adopted over time. So that's the complete pack. Asia is doing something very similar in

many countries now, the Singapore's, the Malaysia's. United Arab Emirates is adopting a model for that. And that brings me to models, but I'll come back to that perhaps in another context.

Javier 13:09

Charles, I would like to establish a parallelism. Your days as a payment professional, I think you made a lot of contributions to payments, to SEPA you have been mentioning. One I would like to underline is that you helped change the mood, the attitude towards payments from several instances. Payments were dry, a dry subject.

Charles Bryant 13:23

Mm-hmm.

Javier 13:37

they were disdained if not despised as a banking activity. But you helped transform that idea and the approach professionals have. now it's a fancy position, it's a fancy job. A lot of professionals want to be in payment. So how could we do the same or similar approach with the invoices? Because as you said, invoices have this link to taxes. They are becoming

Charles Bryant 13:52

Mm-hmm.

Javier 14:06

mandatory, which is something people tend not to like. So how could we introduce the invoices to the people, to the professionals, so that I wouldn't say that they have to love it, but that this not to dislike the topic and approach them with a smiley face rather than an angry face. How can we help in that soft environment to provoke the adoption in a more, I would say, comfortable way?

Charles Bryant 14:20

Yeah.

Okay. Yeah, I could say several things about that. By the way, when we started on e-voicing, the round that occurred at the beginning of the century, there was a big push by the commission to say, you know, know, banking, you've done payments, go and get the banks involved, because they'll hold the key to this. Actually, they didn't. They weren't interested for good reasons, by the way, the ⁓ regulatory overhead in a bank.

probably doesn't quite suit a digital business, which such a degree of penetration into people, corporate supply chains, ERP systems, et cetera. And sometimes I think the customers have a view also that they don't want a bank ⁓ doing everything, know, doing the payments, holding the cash, doing the securities, and also seeing every transaction that passes through someone's business, which an invoice gives you visibility of.

So we found, I found a community out there, a very exciting community, which we brought together. We started with 10 players and it's now over a hundred within the global exchange networks association, which took over my association, the EESPA, the European e-invoicing service providers. I would say it's quite an exciting market. There are a lot of very committed people to this and they do see their mission to automate the entire supply chain, not just the invoice.

is often been treated as what you might call the fulcrum or the

Javier 16:05

Okay.

Charles Bryant 16:06

the doc, the thing around which the financial supply chain starts to add up between the payment legs, the contracting leg, the procurement leg. So there are people very committed to that. The number of moving parts inside an invoicing and supply chain automation process is quite large.

For example, the number of data elements in an invoice standard is much higher than a payment. Payments are fairly simple from an ISO 20022 point of view compared with an invoice. So standards are important. And I guess the next stage that we're now entering is AI. I mean, that is really the moment for process automation can be handed over to AI intelligence. so I see this when I read my

Javier 16:37

Okay.

Charles Bryant 16:57

part of the market in terms of market intelligence. hear

Javier 16:59

you

Charles Bryant 17:01

a lot of excitement about countries, about public private sector partnerships, about the AI community coming in, about corporates really embracing this to save money. So I think we're doing it actually, to be frank. It takes time as we said, but.

Javier 17:16

but

Ralf Ohlhausen 17:22

As you mentioned, AI, got to jump in here. So ⁓ you said earlier that, well, a PDF document is not an invoice because it lacks the structure. So the idea of the invoice is having very structured ⁓ data. But isn't AI there to bridge that gap, to basically have every document as long as it's electronic or consumable by an AI?

Charles Bryant 17:32

No.

Javier 17:36

.

Charles Bryant 17:45

Yes.

Ralf Ohlhausen 17:50

to turn it into whatever any given structure that could then be used and automate that part.

Charles Bryant 17:55

Yes.

Yes, I tend to agree with that. ⁓ There are also people who do quite, you know, have for some years, do work with PDFs, they can read them and they can convert them into digital objects. But you've got to have the data, you've got to have the data digitized to begin with. You have to start with somewhere. So actually, when I talk about e-invoicing, I really mean creating digital records of everything. And then if you render it as a PDF, because by the way, under the law,

Javier 18:02

Okay.

Okay. All right.

Charles Bryant 18:28

You have to make available a legible version. You can't just always produce the XML

string and expect people to cope because a lot of people want to look and envisage an invoice. So you have to provide facilities within the system or even a copy that goes along as a companion to a message with the PDF in it. So PDFs are not dead and they do need to link back to the digital, the data. So

That's what we're talking about. I don't want to get into a semantic discussion, but I think it's the digitization of the order, the invoice, the payment instruction, the reconciliation, the accounting, the archiving, all has to be consistent. And AI can...

Javier 19:11

Okay.

Ralf Ohlhausen 19:14

While we're on the technical

side of it, could I also ask you to tell us a bit about the different standards that seem to be around there, PEPPOL and others and what that means or why they are different?

Javier 19:15

.

Charles Bryant 19:26

Right.

Yep, two fundamental sets of standards are required and this is not dissimilar to

⁓ payment. One is the content, the format in which the data is presented. And the second is the transmission, the methods by which things are delivered from A to B. ⁓ So taking the first, the format or content we developed and I sat on the committee, a CEN ⁓ European standard.

Javier 19:39

you

Charles Bryant 19:59

EN 16931, we did that in period around 2015 to 2020. It's delivered. It is the world's basic standard. the Americans adopted it. In America, we talk about it as Oasis, you see. So you don't have to name everything the same. So it sounds like, that's a European standard.

Javier 20:26

you

Charles Bryant 20:26

Oasis sits underneath this EN16931. And most countries now are adopting this single semantic model,

we call it, so that the meanings of the terms, what is an amount, what is a quantity, what is a date, these are all determined by a standard. And I would say that EN16931, it's a simple statement. Some countries, some industries are still working with

older formats, but that format is beginning to be the universal standard. PEPPOL has adopted EN16931 and for all its formats, they call it the business, the BIS, the Business Interchange Software, but it's all this fundamental semantic standard. Standards are then expressed in syntaxes, and here you do get some choice, but there is a standard, UBL, OASIS UBL.

Javier 21:06

Mm hmm.

Charles Bryant 21:25

is a common standard for the expression of the data in an automated standard that a machine can read.

And then on the transmission side, we have a stack of standards there, largely embedded in a document I put together with a group called the Global Interoperability Forum, we call it now, which is about my last quote, real job is I facilitate a group of people who are

effectively the CEOs of invoicing infrastructure organizations like PEPPOL, like the American one, DBNA, and like my old association, which brings the service providers in. And in those groups, we talk about the transmission and we've developed a set of standards based on the internet, AS4, encrypted with a trust model.

Javier 21:57

you

Charles Bryant 22:20

with enveloping and all of that. So that exists as well. That's stack. And PEPPOL is becoming kind of the Swift of this business. mean, something you could imagine having been in Swift myself and having worked closely with Swift in the EPC. I never felt Swift was the right organization to be the message infrastructure because it's expensive and it's not pervasive. And

To be frank, the money movements in the payment market like swift payments, the sheer sort of criticality of it ⁓ is too much for invoicing. mean, an invoice can be replaced, it can be altered, can be, you know, things can be put right, whereas, you know, in a payments market, money actually gets moved. we, PEPPOL has developed its strength as... ⁓

Javier 23:01

Okay.

Charles Bryant 23:18

the invoicing delivery mechanism of choice, not everywhere, but in most of these mandated countries, they are now really, we, they are beginning to be very strong. The French have adopted it, Germany has adopted it, the Italians still have their old centralized model that they developed. Good for them. know, nobody's selling, everybody has to do the same thing, but I suspect PEPPOL will play a role there. PEPPOL is in

over 40 countries now. India has developed its own infrastructure, but Australia, New Zealand, Singapore, Malaysia, they're all on PEPPOL. Japan's moving into PEPPOL and the Americans have adopted the PEPPOL standards as well. So I think for transmission, because I think about this all the time, these two notions of standards are one is the thing you're trying to deliver standardized. You must do that.

And that's the data model I mentioned earlier. And that's EN16931 as the foundation. It has the ability to be extended and varied, but it's a model. And then there's the transmission model. I think the answer to that is we've kind of cracked that. We really have. But time will tell.

Javier 24:32

Okay.

Michael Salmony 24:37

OK, that sounds

pretty encouraging that sort of both on the content transmission there, looks like it's converging on various standards. But it still must be a bit confusing for a normal consumer or for a little SME how to sort of handle this invoicing. ⁓

Charles Bryant 24:44

It is. I think so.

Yes. Well, the SME is always, I just like

payments, just like SEPA, it's the preoccupation of many people, especially policymakers. They're very worried about inclusion and the bakery in a little market town in the middle of Bavaria needs to understand what they're expected to do. ⁓ And the service providers are on notice that they have to produce the solutions for this.

Michael Salmony 24:59

Mm-hmm.

Javier 25:11

Okay.

Michael Salmony 25:16

Thank you.

Charles Bryant 25:23

What's interesting recently is the ERP people were generally a little bit remote from e-invoicing. So, invoicing was carried out by a bunch of people who were very much network driven and they had a central processor and they were actually trying to onboard both the supplier and the buyer. So, they would, call those three corner models. Again, just like a bank, but just like a bank.

Javier 25:45

you

Charles Bryant 25:50

people want to make payments to people who don't bank with your bank. So that we need a exchange framework. And so as critical mass increases, this is where the PEPPOLs come in. And the four corner where you've got two service providers and two clients, this is where the SMEs really need help to connect to a network through an access point that they don't have to worry about the technology. And then where we brought in the ERP people.

Javier 25:52

. .

Charles Bryant 26:18

And there's a lot of ERP people, I won't go into names, marketing names, but there are some people who really specialize in any SME software, enterprise software at the level. these can be quite basic primitive systems, but the trick there is to take a bit like Ralf was saying, take the data that you would normally put in a paper or PDF invoice and have some conversion software that the SME doesn't have to see, worry about at all.

Javier 26:23

Okay.

Charles Bryant 26:48

They might get a legible version back and they may want to even see the archive, the XML message. But essentially we have to provide the tools that give them the ability to generate an electronic invoice in a fully automated form without it touching the sides, without them having to intervene.

Javier 27:09

. .

Michael Salmony 27:11

Can you make that a bit

more practical, Charles, because I'm still struggling to see how a baker in Southern Bavaria, you know, who's used to typing his invoice into Word and then sending it off to his flour supplier or getting an invoice from the company he delivers his bread to, how does he connect to your world of PEPPOL and IAN whatever?

Charles Bryant 27:27

Yeah.

Right.

Well, he might continue to do exactly what you've just described. He might. If that's at the basic level, he will enter into some, it might be on a spreadsheet or whatever. He will develop a data entry which will either go into an automated or semi-automated accounting tool that might be resident on his own computer, or it might be in the cloud that someone else has provided.

Javier 27:43

Okay. .

Charles Bryant 28:04

And it's though,

when it arrives in the cloud, then the data can be transformed into the XML invoice, into the automated invoice. So at the level of the SME, apart from encouraging them generally to adopt digital processes, I think there's a big issue there that we can't just sit still and say, look, your world will never change. People do have to be provided with fully digital processes and that will take a long time.

But in the early days, I see methods of transformation that are easier to use where our service providers, solution providers, cloud providers, ERP systems will do this for them. They will take the data that might be quite crudely expressed. Remember, an invoice for an SME could be quite basic. There might only be 20 fields in it, date, amount.

Javier 28:35

All.

Okay.

Charles Bryant 29:04

date of supply might be a small line item describing the goods, whereas if you're dealing with a very large invoice for an automotive supply chain and you've got 200 data elements or more. So as long as it's kept within bounds, I think the SME invoicing can be captured, but it is a challenge. It is definitely the big one, but it's surprising what

Javier 29:10

Okay.

Charles Bryant 29:28

you can do. mean, Belgium is in the middle of its conversion now and there's going to be

Hundreds of thousands of SMEs connected to PEPPOL to do this. And the trick now is to make sure the intermediate service providers, there's a lot of dependence in all these systems on the service provider who's acting for both buyer and seller. They may be different, they may be the same. ⁓ PEPPOL is not a magic wand. It doesn't do everything. It's a network.

Javier 29:40

Okay. Okay.

Charles Bryant 30:01

And these actors

who are at each end have a big responsibility for handling the data. I don't know whether I've answered your question, Michael, but it's...

Javier 30:08

Mm-hmm.

Michael Salmony 30:10

I mean, a simple

answer I once came across, I think even in our time was some service providers did ⁓ a printer driver. the baker, instead of printing his Word document on a printer and putting it in an envelope and sending it to, it would generate an electronic invoice, which would get sent to some service providers. So he basically does the same thing. He prints his invoice, except this time it gets sent electronically. I thought those kinds of things were quite clever.

Charles Bryant 30:18

Yes.

I couldn't do it.

Yeah,

Javier 30:35

Okay.

Charles Bryant 30:37

I couldn't have put it, ⁓ you you got it in one. What I was sort of badly explaining, I think probably is exactly that. That instead of it resorting to a printer, it goes as a stream of data into a conversion process and out pops out an XML invoice that goes into PEPPOL.

Ralf Ohlhausen 31:00

What do you think the pitfalls would be? So what could go wrong? So what are the mistakes that people make when implementing it?

Charles Bryant 31:11

In the invoicing, yes, well, of course, could make many, many, many mistakes are possible. ⁓ The invoice doesn't correspond to the order that was given. So buyers of goods are not going to pay for them if there's a mistake in terms of the identification of the actual service or good that was delivered. That shouldn't happen because ⁓

An order is increasingly itself becoming automated. And these people get to know each other so they know what they're delivering. you know, mistakes in the line items. Of course you get mistakes in amounts or rounding or tax computations, but this is all solvable, especially if the data is created in digital form, in my opinion, that this should iron. I mean, paper invoices create as many problems as

electronic, in fact, probably more. ⁓ So this is just part of life to solve those issues. don't see there's anything particularly endemic in intrinsic to e-invoicing that makes error more likely rather than reverse. fact, the you. Yeah, please. No, no, I was just going to say the UK has just and now I've been working on a project here in the UK because we were slow with Brexit.

Javier 32:28

So do you think, no, no, go ahead, go ahead.

Charles Bryant 32:41

I think there was a mentality back 10 years ago when we were discussing Brexit that they said this e-invoicing thing, some of the politicians said, this is coming out of Brussels, so it must be bad. So we got into a lagging mode. But now we have a new government about a year ago. And so we've now got a tremendous enthusiasm for this. they've announced a date, 2029, for mandatory invoicing in the UK.

And we've written papers for the government. They've done some very nice documents, I say myself, ⁓ which explain a lot of this sort of thing. And I think it's quite likely that people will get it, but it is challenging to get the SMEs all on board. That's all I could leave it.

Javier 33:28

But in the line, this is your train of thoughts. Do you think that in Europe we have passed the no return point for e-invoice generalization? I mean, it will take time. It will not happen in 2026, maybe 2027 more likely or even later, but that it will inevitably happen. And if so, then what would be the next steps for what you earlier commented?

the full automation of the whole supply chain and even adjacent services. I'm thinking of, for instance, financial services linked to voices like factoring. How will the e-invoice influence or help the birth of new services or evolve services, particularly in the financial realm?

Charles Bryant 33:58

Mm. Mm.

Yes.

Yes.

Well, it's two parts to my answer. One is how do you create a model for e-invoicing that guarantees the maximum success? So I'm afraid to say that a purely voluntary or casual approach or an approach with too many standards or approach that forgives people for too many variations will not work. that's point one. Point two in the

chance of a model succeeding is that they should include as much balance as is feasibly possible between supply chain efficiency, which gives a real benefit to the trading parties and the tax benefit. There are some countries who, I mentioned Latin America before we discussed it, where the whole focus was on the tax and so poor old supply chain efficiency got lost. As long as there's a balance there,

as long as we use structured data, as long as preferably one standard, as long as it's mandated. This is really important. So now that France, Belgium, Germany is mandating it in steps, sort of a longer run up as we say in cricket, they're taking their time to sort of feed. They've got a lot of complexity as we know, we won't go into that with the regional authorities, et cetera.

Javier 35:22

Mm-hmm.

⁓

Charles Bryant 35:47

Mandating, very important. So there is a model which we've described, by the way, in that document I referred to in the normative recommendations that are a subset. Because the document was produced by us, my group, and a university, we had to separate fact-based analysis from recommendations. we've earmarked some things we call the normative recommendations within that document.

What I'm now talking about are some of those recommendations, preferably a decentral,

Javier 36:20

you

Charles Bryant 36:21

mandatory, but decentralized, build on the service providers that exist, go for basic, straightforward, structured standards, not too many bells and whistles. This starts to get the generation going. And I'm confident that Europe will get there over the next 10 years or so fully. Then you talked about the extension to end to end.

I mean, the world is your oyster at that point, really. We can talk about embedded finance. I mean, I tried a lot when my association to reach out to the factoring market because, you know, what do they do? They deal in invoices, they finance them. But actually, it's a very, very, in a way, conservative industry. So they thought we were a little bit sort of exotic.

Javier 36:48

Mm Thank

Charles Bryant 37:15

that time for their

mentality, which is block financing. So they tend to take a whole ledger, a revolving ledger of invoices and finance them against a margin. And it works. I mean, it's a very, it's a beautiful business. No question about it. ⁓ what we, what some of our service providers have done of number one, they don't have any money, so they don't have any liquidity to use for finance. So they generally have to work with a partner.

financing part but there's lots of people like that with tokenizing and digitizing and so there are partners who will help them finance it and the approach to the invoicing finance embedded finance is based on the single invoice so in other words you give a person a click he's a click away she or he click away when they're looking at their cloud they see the invoices that are in train

Javier 37:53

Okay.

Charles Bryant 38:11

⁓ And they can click and say I'll finance that one and then they can finance as many as they want So that that's a very attractive product for SME Sellers to take advantage of so I see that as an opportunity I see end-to-end

Javier 38:15

Okay. Okay.

Charles Bryant 38:27

procurement procure as as you move away from the order and the invoice and the payment those three things order invoice payment are highly automatable ⁓

When you move up into the contracting part of procurement, you're still negotiating. You're not so automatable. So I would think the territory where these extra opportunities arise is in these three parts of the chain, order, invoice, payment. And there you can throw the finance, the advanced payment finance into it.

Javier 38:51

Okay. you

Ralf Ohlhausen 39:05

And

is it usually successful? are businesses getting the efficiency they expect our governance getting the extra tax they expect? Or is it like, you know, faster internet, once you have it, you will never come back? Or are there people finding out, okay, benefits are not coming along? Let's forget about it.

Charles Bryant 39:17

yes.

That's a good question. ⁓ The tax people are pretty happy. They are definitely seeing the VAT. ⁓

yield growing. mean, the Italians are very happy, by the way. So I think there's no question that once you have that, you must do an e-invoice and you must report it in near real time to the tax authority, either as a subset or even the real invoice. And then you can start to see things where the tax authority almost creates your VAT return. And you might be able to

look at it to check it etc. So the tax yields will definitely grow. That's why all these 60 countries are really piling in like mad. I mean, it's such an obvious one. On the efficiency side, I think the bigger people, the accounts payable orientated sort of people, the people doing ⁓ automation of supply chains where they might have 100,000 suppliers, of course, it's an 80-20 principle. ⁓

A typical supply chain of a large major corporate, about 20 % of their suppliers account for about 80 % of their mass. And in those areas, there's no question there are lots of stories of huge savings. It's again, down at the SME level and the smaller players that it's going to be perhaps a bit more difficult. And this is where the market has to develop.

Javier 40:42

Okay.

Charles Bryant 41:11

I think to deliver these savings, there's more to be done.

Michael Salmony 41:15

Very good, Charles, you've given us a lot of excitement about this topic. I think that's making a huge amount of sense. So unless there are any last minute questions, topics you want to raise, I would really thank you. I I find it surprising that also in this thing, this is a topic where everybody wins, right? The government gets more tax revenue, the corporates win, the suppliers win, we produce less paper. It's a win, win, win.

Javier 41:24

Hmm.

Michael Salmony 41:41

But still we have to mandate it. It just doesn't happen voluntarily and by natural evolution. That's a topic I think worth the reflection of. Why is that? But there we are and you're fighting the good fight to make everybody electronic also in this space. thank you, Charles and thank you, Javier and Ralf. And thanks to everybody who's watching. Hope you enjoyed this episode and we will add a link to Charles's clever paper. He's one of the best paper writers I know.

Javier 41:42

Yeah.

Charles Bryant 41:50

We're not alone in that area. We're not alone.

Michael Salmony 42:12

So I'm sure you will enjoy reading it. Okay, thank you to everybody and see you next time.