The directive established:

Background

The manual processing of paper invoices is labour intensive

and time consuming with high associated administrative costs.

The processing of paper invoices accounts for two thirds of the

total transactions costs of the Purchase to Pay (P2P) process.

The processing of paper invoices is time consuming and

common practice across the European public sector.

The EU e-Invoicing Directive (2001/115/EC) was implemented into national law on the 1st of January 2004. The Directive introduced a simplified set of rules on invoicing that are valid throughout the EU and replaced legislation from individual member states. The Directive requires member states to recognise the validity of electronic invoices and allows for cross-border electronic invoicing and electronic storage. The result of the application of e-Invoicing will be a significant reduction of firms’ administrative costs, in particular for medium-sized and small firms and provides an important boost to electronic commerce.

The directive established:

• Simplified arrangements for small companies and small-value invoices • The requirement of Member states’ tax authorities to recognise the validity

of electronic invoices

• The possibility of outsourcing invoice operations to a third party or to the customer (i.e. self-billing)

• Free choice of the place and method of storage of invoices and the acceptance of electronic storage including on-line storage

The i2010 eGovernment Action Plan identifies e-Invoicing as a high impact key service for citizens and businesses. Electronic invoicing became mandatory in Denmark on 1 February, 2005. All former paper based invoices sent to

government on all levels, from large agencies to nursing schools are now managed electronically. The new set-up has resulted in savings of 120 – 150 million Euros per year due to the elimination of keyboarding and postal handling.

The Zanzibar Managed Service and the Government

Procurement Card (GPC Visa) enables the implementation

of the EU e-Invoicing Directive (2001/115/EC) to deliver

back-office efficiencies

E-Invoicing in Denmark is the result of a public/private partnership that makes use of successful and established technology. The set-up for e-Invoicing is based on proven market solutions, including the infrastructure and the systems that can receive and process e-Invoices. The solution is independent of the companies’ sophistication and is highly flexible.

The opportunity

• Approximately 500 million paper invoices are processed manually each year across the UK public sector. The Gershon efficiency review highlighted the need to realise back-office efficiencies through replacing manual administrative processes with automated electronic solutions. The Zanzibar Managed Service is a public sector eProcurement solution – available to all English, Welsh and Northern Irish public sector organisations via an OGCbuying.solutions framework with PA Shared Services Limited.

• Zanzibar is a web based Purchase to Pay and electronic marketplace solution. It provides a common hosted platform for e-procurement and e-Invoicing. The EU e-Invoicing Directive (2001/115/EC) recognises and promotes invoices despatched and stored in an electronic format. Through the Directive there is acceptance of electronic storage, including on-line storage. Self-billing by the customer is also acceptable. In some member states electronic invoicing was previously prohibited or had to be accompanied by parallel transmission of paper invoices. Zanzibar complies to the e-Invoicing Directive through being able to generate invoices in an electronic format to be uploaded onto the various finance systems and general ledger. The Zanzibar Supplier Portal (e-Invoicing hub) facilitates e-Invoicing free-of-charge across the whole supplier community.

Sustainable development and environmental benefits

Zanzibar is not only a platform enabling the roll-out of e-Invoicing across the public sector. It also reduces environmental damage by vastly reducing paper consumption within the purchase to pay process. The OGC has calculated that the typical paper process requires at least 6 pieces of A4 paper per transaction e.g. purchase orders, invoices and approval sheets. Zanzibar eliminates paper consumption and the usage of printer ink, cartridges and other associated consumables. Waste paper accounts for 35% of the UK landfill which emit CO² gases. Zanzibar delivers a positive environmental impact by moving from paper based to electronic transactions.

HM Revenue and Customs

OGCbuying.solutions and the Zanzibar service provider PA Shared Services Limited have worked closely with HMRC to ensure that Zanzibar is compliant with all HMRC requirements for e-Invoicing and VAT compliance.

Electronic Consolidated Invoice

An electronic consolidated invoice is an electronic file containing all relevant financial information for the upload of an aggregated invoice onto the finance system. The electronic consolidated invoice addresses high volume invoices from major transactional suppliers through the upload of an electronic file on a weekly or monthly basis (e.g. – interim staff, business travel, car hire, stationery, internal catering hospitality etc). This eliminates the need for the manual re keying of high volumes of invoices within accounts payable. Procurement Cards result in an electronic consolidated invoice being submitted by the bank through an electronic file rather than multiple paper invoices from suppliers.

e-Invoice

Electronic invoice process – receipt, reconciliation and match are all electronic.

cXML

a form of XML used for eCommerce

e-Invoice – an invoice sent in electronic format

Procurement Card (PCard)

A corporate charge card used for purchasing non personal goods and services. Procurement cards can deliver e-payments for low value, high volume purchases.

embedded PCard

use of a PCard within an electronic ordering system where the number is held within the system and transmitted with the order.

Lodge PCard

The “lodging” of a PCard number and authorisation details with one or more contracted suppliers to enable transactions to be charged against it. This is commonly used for Corporate Travel payments.

Physical PCard

A plastic PCard. The user usually enters the PCard number at the point of requisition or order for each individual transaction

PCard Reconciliation

the automated reconciliation (and matching) of electronic order transactions to PCard payment transactions. Electronic file received from p-card provider or alternatively data reconciliation can be put in place through established third parties.

Self billing

commonly known as on-line billing or evaluated receipt settlement. The purchaser can check consumption on-line from the suppliers website and authorise payment to be made directly without the generation of a paper invoice.

GPC Visa

The Government Purchasing Card is a Visa PCard supplied free of charge from 6 banks via an OGCbuying.solutions framework. Over £2 billion of expenditure has been placed and paid for through the GPC since inception in the UK.

XML Extensible Mark Up Language

a computer language which can represent documents in an electronic format. For example: purchase orders, change orders, invoices and credit notes. XML is recognised as the standard for e-procurement and e-Invoicing.

Zanzibar Supplier Portal

The supplier portal allows all size of suppliers to participate in a paperless purchase-to-pay process free of charge to deliver on the efficiency agenda.

e-Invoice glossary

e-Invoicing solutions for small and medium enterprises (SMEs)

through Zanzibar, for the electronic transmission of Invoices and

GPC Visa payment instructions

Common off the shelf electronic invoice and request for payment products are available through Zanzibar. Invoices can be consolidated and automated to enable them to be placed seamlessly into finance systems. Furthermore the Zanzibar Supplier Transaction Portal provides a free-of-charge solution for medium and small enterprises.

There are four broad types of invoice received by the UK Public Sector. We have suggested ways in which the Zanzibar service and the GPC Visa can deliver e-Invoicing solutions:

Characteristics Recommendation for e-Invoicing

Low value invoices

• Low transaction value, typically less than £5,000

• Non-repetitive ad-hoc invoices

• Process costs can exceed cost of goods or services purchased

• High supplier set-up costs

There are two recommended methods for addressing this type of invoice:

1. These invoices can be the ‘focus’ of GPC Visa programmes. Zanzibar can be used to support the common type of Purchase

card, e.g. GPC Visa, used with systems: Physical cards, Lodge cards and embedded cards (see glossary for more details). To ensure that the whole transaction is electronic, card transaction

files prepared by the card issuing bank can be automatically uploaded and matched onto finance systems such as accounts payable and general ledger.

2. Zanzibar has the capability to allow suppliers to submit electronic low value invoices from small and medium sized enterprises at no cost through the Zanzibar Supplier Transaction Portal.

Mainstream Invoices for major transactional suppliers

• High volume, repetitive invoice activity • ‘Repetitive’ transactional purchases. May

currently be the subject of consolidated invoices. In the main catalogue based: central contracts and framework agreements, e.g. for stationery and office consumables.

Automated reconciliation of payment. This can either be: 1. Electronic consolidated invoicing via supplier file upload or 2. Embedded Purchase card, e.g. GPC Visa, with bank file

auto-matching

Infrastructure Invoices

• Demand cannot be forecast although unit costs may be agreed in advance

• Low-mid transaction value

• Facilities and estates services, utilities

• Self-billing is available through Zanzibar reducing purchase-to-pay process costs. Consolidated Invoicing through Self-Billing. • For ‘infrastructure’ suppliers. The Zanzibar web based solution

offers the capability to review consumption on-line. Self-billing can be put in place for ‘infrastructure’ suppliers (e.g.: facilities and estates services suppliers, utilities (electricity/gas/telecoms). No paper invoice is produced. The customer punches out to the supplier’s website and reviews consumption. Payment is then authorised and made to the supplier.

High value project or programme related invoices

• Low transaction volume • High transaction value • High total expenditure • One-off

• New IT system, building works, project related

• For major programme expenditure payments can be scheduled against deliverables. High value projects can be paid in a phased manner dependant upon completion of various stages of the project – milestone payments can be made.

Further information on the

Zanzibar Managed Service

For further general information on how Zanzibar can help your organisation, please contact us:

• By email at [email protected]

• Or phone us on +44 20 7333 5444

• Or by mail to Omer Wilson

Zanzibar Managed Service PA Shared Services Limited 123 Buckingham Palace Road London SW1W 9SR.

www.zanzibaronline.gov.uk

This document has been prepared by PA. The contents of this document do not constitute any form of commitment or recommendation on the part of PA and speak as at the dateof their preparation.

© PA Knowledge Limited 2006. All rights reserved.

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