E-invoicing is significantly improving processes in construction accounts payable departments. Let’s see how.  

Consider the following scenario. Your accounts payable team has just received an invoice through the post from a supplier. Scanning the document, they see that the supplier has failed to provide enough detail in the line items area and forgotten to add the purchase order (PO) number. 

As a consequence, they will need to contact the suppliers requesting they resubmit the invoice.   

Non-compliant invoices are a real problem, with incorrect information responsible for over 15% of payment delays. This means that suppliers are paid later than they expect. They cause unnecessary friction between your business and your supply chain, and also create more paperwork for your own employees.  

And these are the problems that e-invoicing aims to solve.  

What is e-invoicing? 

At its simplest, e-invoicing refers to the use of electronic means to submit invoices to accounts payable departments.  

While some definitions include submitting PDF invoices via email (as well as the use of OCR software), ‘true’ e-invoicing is EDI (Electronic Data Interchange), which is the exchange of documents in a standard electronic format and completely paperless. 

True e-invoicing works like this:

  • The buyer has an account with an e-invoicing platform 
  • Suppliers are given access and when it comes to requesting payment, they simply enter data into a form and submit
  • The invoicing system will include all the required information - such as a PO number – follow the correct invoice format and provide an option to add attachments
  • After the supplier has completed the invoice, the system checks and matches the PO to invoice data and either sends to the buyer's ERP for processing or automatically rejects it and sends back to the supplier
  • Payment is made according to payment terms

7 benefits of e-invoicing for the construction industry 

Why should construction accounts payable departments use e-invoicing? Here are seven benefits to deploying this kind of system with your suppliers: 

1. Avoid mistakes and delays 

If your supply chain submits paper or PDF invoices via email, there are several points where mistakes could be made:

  • The supplier may add incorrect information or use the wrong invoice format
  • The invoice might get sent to the wrong department or not be rerouted to your accounts payable team
  • When manually rekeying invoices, accounts payable staff may make mistakes when transferring data into your ERP system 

By comparison, true e-invoicing systems like Tradex bring the risk of making mistakes close to zero. The system includes predefined rules that prevent a supplier from submitting an inaccurate invoice. As a result, the possibility of submitting incorrect information is greatly reduced.  

At the same time, all data automatically gets sent to your ERP system, so there is no risk of invoices getting mislaid or of staff making mistakes when entering data into your accounting software. 

2. Prompt payment improves your reputation within your supply chain 

Did you know that nearly a third of suppliers are still waiting more than 60 days for payment? If a company pays promptly, this improves goodwill with their supply chain and also boosts their reputation in the industry, making people keener to work with them. 

Since most payment terms only begin when an invoice is correct and accepted, any mistakes will delay payment. Tradex prevents these mistakes, meaning only accurate invoices are submitted. Your business will pay invoices sooner, helping to improve relations with suppliers.  

3. Helpful for winning government work 

The government has made it clear that companies which pay suppliers late will be disfavoured when it comes to accessing government contracts. Reforms to the Prompt Payment Code which came into effect in July require signatories to pay small businesses within 30 days of delivering their invoices.  

While you may not be legally obliged to meet this 30-day target, demonstrating that you pay suppliers fast will certainly help when bidding for government work.  

4. Reduce costs

An e-invoicing system can reduce costs for construction companies significantly. By using a cloud or web-based system, you:

  • Save time by improving straight through processing rates
  • Automatically process construction-related complexities, such as domestic reverse charge and plant hire
  • Reduce the cost per invoice
  • Save on storage space for paperwork
  • Give staff time back to focus on more value-led tasks
  • Cut back on material costs such as ink and paper  

Document storage: How digital file storage helps construction 

5. Streamline data collection and management 

Accounts payable departments in construction typically use multiple systems to log and store information about cash flow, invoices, create POs, etc. An e-invoicing system makes things much more efficient by collecting and collating all relevant data into a single platform while automating many complex processes associated with construction invoicing.  

6. Reduce risks

Another benefit of e-invoicing is that it can reduce certain business risks:

  • Invoice fraud: E-invoicing systems make it almost impossible for fraudulent invoices to succeed. Every invoice must match up with the system and you cannot accidentally process payments.
  • Cyber security: A major risk of accepting electronic invoices over email is the problem of phishing. To view them, accounts payable staff must open attachments to view PDF invoices – and this can give hackers an entry point to your systems. On the other hand, if the only way to invoice is through a cloud-based invoicing system, this risk is avoided entirely.
  • Errors in manual rekeying: According to the Accounts Payable Association, 3.6% of invoices in the UK are inputted incorrectly. This represents a serious financial risk to businesses. Just look at what happened to the Irish Insulation Specialists in 2017. A simple decimal point error led to an employee being paid €19,636 instead of €196.36 - for two days work - and the business never recuperated the funds. 

How could e-invoicing benefit your teams? 

Think back to your accounts payable team who received an invoice in the post containing incorrect information. If your company used an e-invoicing system, the daily friction that comes with incorrect invoices would be avoided. 

Supplier information would be collected automatically, your team could do more valuable work, and the contractor would get paid sooner.  

If a system designed specifically for the construction industry sounds right for you, see how e-invoicing with Tradex can help here.

Let’s build the future together

Discover how we can transform your business, making every project flow and the industry more sustainable.