Electronic invoicing to the public sector in Denmark (EID)

Published on: 26/01/2007

Since February 2005, public authorities in Denmark primarily receive invoices in electronic format. This measure has been stipulated by law to encourage companies to do more electronic invoicing. It is estimated that 18 million e-invoices sent in one year save approximately 94 million Euros a year due to time saved from invoice handling. The current e-invoice infrastructure in Denmark is built around traditional EDI technology with a network of 5 value-added-network operators (VAN). Due to the achievements in terms of eGovernment interoperability, the project has been evaluated by the MODINIS Interoperability Study consortium on behalf of the European Commission.

Policy Context

The initiative for electronic invoicing in Denmark came from the Danish Ministry of Finance. In cooperation with Local Government Denmark and Danish Regions, they developed the ideas, and parliament passed the necessary legislation behind eInvoicing in Denmark.

Description of target users and groups

Business working with the Danish public administration.

Description of the way to implement the initiative

In a partnership with the private sector, it is important to manage clearly and decisively. This requires a clear role allocation and the assurance that system suppliers can live up to the demands placed upon them. EID has demanded a considerable, professional communication effort. We have learned that a project of this size requires a detailed communication plan as early as possible. Communication itself should be a structural element of the project, and it should be aggressive and differentiated in relation to all the various interests to be served. EID has led to an increased priority of resources for communication. Multi-channel issues: A private company can send an electronic invoice to a public authority in three different ways: An invoice can be sent directly to the authority if the private company is connected to a VAN operator. The invoice may also be re-typed into an invoice portal on the web. The last possibility is to send a normal paper invoice to a scanning agency that will transform the invoice to a digital invoice and forward it to the public authority. The current infrastructure, however, has had its focus on supporting business to government (B2G) invoicing. Only a few private companies are using the invoicing standard and the VAN infrastructure to exchange invoices with each other.

Main results, benefits and impacts

- Economy. The efficiency benefit of the conversion to EID itself was estimated at about EUR 120-150 million a year, with approximately ¼ coming from national government and ¾ coming from local government. This saving is over the long run earmarked for the national treasury. Part of this was accomplished through a reduction of allocations for 2005. For local and municipal governments, this was accomplished through reduction of state government subsidies. Overall, the cost of implementing EID in the public sector is estimated to take about 1/10 of the expected savings. This includes the acquisition of new systems and their interfacing with existing systems, plus expenses related to the free scanning-in services offered to most small companies. No costs have been incurred in establishing the VANS network or the Read-In bureaus. - Public-sector entities receive electronic invoices. The basic infrastructure of the VANS network and Read-In bureaus works according to plan, and the utilisation level is relatively high, even though some institutions still accept paper invoices from certain suppliers. Public authorities receive an estimated 1.3 million invoices per month. In April 2005, about 900,000 invoices were carried over the VANS network, which is equivalent to a utilisation level of about 70% of the full potential. At least a half-million invoices were sent in fully-digital mode, and about 350,000 via Read-In bureaus. The purpose of the EID project is to establish the central infrastructure. Afterwards, it is up to the individual public institution to choose the solution and timing of its own adaptation to internal processes and systems. This local freedom has helped make the system durable, but its contribution to higher efficiency for the individual institution will be realised gradually. - Companies who sell to the public sector. A condition of EID was that it should not 'force' private companies to go digital. The EID solution is independent of their IT sophistication and is highly flexible. Read-In bureaus ensure this. From 1 February, two such bureaus have been converting paper invoices to electronic ones. Smaller companies can use the Read-In bureaus free of charge, while larger ones are required to pay a modest fee to the bureaus. In April, the Read-In bureaus share of the market was about 40%. - System development. EID has worked like an engine for technological development. IT vendors have developed new solutions from simple printer drivers to advanced e-commerce systems and made the transition for companies both manageable and not very expensive. Innovation: Before February 2005, public institutions would receive a paper invoice by mail and this then had to be handled by several employees for approval of entry and filing. Only one person at the time had access to the invoice and for future reference it was filed in the archives. Invoicing based on EDIFACT (as it has been usual between companies) did not exist in any big extend between public institutions and private sector. Only small projects existed but without any significant numbers. Today, the invoice arrives directly in the electronic accounting systems and is subsequently approved online by employees; a process that involves no paper and takes only a few minutes. Furthermore, the invoice can later be retrieved in a matter of seconds. This process considerably reduces the processing time for the private companies (about 440,000 in Denmark) and all Danish public institutions.

Return on investment

Return on investment: Not applicable / Not available

Lessons learnt

Lesson 1. Provide a clear vision and market it to make the goal obvious to all partners. For projects involving many players, all of whom must do something for the project to succeed, it is important not to just force the change, but to formulate a clear vision and market it. This reduces resistance by giving the various players, who temporarily must carry a heavier burden, an understanding of why the digital conversion is a good idea. Lesson 2. Provide strong political support to speed up transition and reduce resistance. The success of this project was reliant on the political steer to embrace electronic initiatives, thus creating the right environment to successfully re-engineer a high volume clerical process. With the proper political support, a common transition reduced resistance to change and speed up the transition phase. I.e. regulation by law contributed to a swift conversion of all administrative processes for the parties involved and consistency in the technical infrastructure. Lesson 3. Projects of this size require clear role allocation including a detailed communication plan as possible. Communication itself should be a structural element of the project.

Scope: National