The Real Shift to Digital: E-billing's Impact on the Retail Property Sector

Revolutionising Retail Property with E-Billing: A Vision for the Future

Gary Marshall, host of 'That Retail Property Guy,' delves into the evolving landscape of the retail property sector as it transitions from traditional paper or imaged invoicing to proper e-billing systems. With countries like Germany, which has legally adopted B2B e-billing, leading the curve, the shift seems inevitable, whether by market pressures or governmental mandates. Gary highlights the inefficiencies and challenges of current digital formats, explaining why existing OCR and AI technologies still fall short. Could there be an industry-wide standardised e-billing platform to streamline processes between landlords and tenants, supported by automated verification and payment systems? This episode underscores the universal relevance of e-billing beyond retail property, affecting all business contracts and legal agreements.

00:00 Retail Property Insights

00:14 The Shift to E-Billing in Retail Property

01:13 Challenges with Current E-Billing Systems

02:17 The Inefficiency of OCR and Image Recognition

06:46 Exploring AI in E-Billing

07:22 The future - an Industry-Wide E-Billing Platform?

11:35 The German Model and Its Implications

12:52 Conclusion and Call to Action
 
 DLPIPER paper on Germany’s e-billing practices

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Transcript

0:00

Welcome to that Retail Property guy with your host, Gary Marshall. Sharing stories and insights through Gary's unique lens. We hope you'll be entertained, enlightened, and may be a little inspired. Is our retail property sector ready for e-billing, e-invoicing, or e-billing? Same thing, but with a different label is a massive change from old fashioned paper invoices to a digitized system, especially for business to business scenarios, which are often referred to as B2B and generally. B2B includes those of us in the retail tenants occupy world, where the landlord is a business and the tenant is a business, and they exchange invoices and payments and VAT receipt. So everything from one business to another E-billing isn't with us in the UK yet, but the Germans are already introducing it. They got up early and they beat us to the pool, so they're ahead of this particular curve. It's coming, whether by natural free market pressures or by government mandates. Whether that's our domestic government or something from the EU red tape mill that we feel obligated to comply with if we want to do business across the channel. You might think of course, that we already have e-billing. If you receive a PDF of your latest rent invoice on an autogenerated email from a bot in the accounts receivable department at your landlord's managing agent, it's an electronic format. It's an invoice, so it's e-billing, right? Well, sadly, no, not right. It's just a digital version of an old fashioned piece of paper. It might as well be a fax or a photograph. You can pretty much do nothing with it to help streamline your business. My business services team at Smarter Estates see this a lot. We support retailers with property to mitigate their property costs, and we see a lot of property invoices and credit notes and VAT receipts and statements of accounts. Generally, they all arrive digitally in inverted comm, meaning as an email or attached to an email, or sometimes downloaded from a secure portal. But in terms of e-billing, those are all about as useful as a chocolate teapot'cause there's nothing about them that's efficient, consistent, analyzable streamlined, or integration friendly. Over many years, we've participated in numerous working groups, appraising various software applications that claim to be able to help with the laborious process of checking property invoices and creating the payments and reconciling the statements. We haven't yet found one that's robust or reliable, not one. Mostly this is because the originators. Those managing agents and direct landlords who issue the invoices are all rowing their own boats. We see huge variances in format and content, even from the different regional offices within a single firm. And we see flawed content driven by poorly maintained back office property databases, triggering correspondence with the wrong location, address, the incorrect tenant name, even the incorrect landlord name, and that's their own client. So any software that tries to use optical character recognition or OCRA form of image recognition that can recognize logos or words or numbers will always struggle with the variables in format and content. I wouldn't say they're hopeless, but. Well, actually, yes, I would say they're hopeless. These are not sentient applications. It isn't ai. They're smart, but not intelligent. They can recognize a lot of bits of content, but they really struggle to assemble those bits into a usable entirety. In one long running testing scenario, we couldn't get past 15% accuracy. We could probably have guessed the answer and been right more than 15% at the time. So that project went in the bin and we returned to the only viable method, which is people checking the pieces of paper or their digitized equivalent, whether those are system generated as A PDF or scanned and converted into A PDF, or still in basic word or Excel, where sometimes the originator hasn't even locked the file. So it's susceptible to manipulation. What we have is a wholly inefficient system where the landlord's agent's ledger produces an electronic copy of an old fashioned paper document with the same layout and logo and content as 50 years ago, and then auto emails it into a retailer's nominated mailbox where a dedicated team of AP then manually. Open each one and use their eyeballs to scan it and manually cross-reference it against an Excel spreadsheet or perhaps an onscreen report via their property database. This all sounds horribly inefficient. It's susceptible to human error. It's clunky, it's expensive, but even though it's riddled with opportunities to go wrong, it's still more efficient than an OCR image recognition system. A big part of the problem for OCR is bolting the bits of info together. Like I said, OCR isn't sentient. It has to be taught, or at least taught the basics. It might self-improve if it handles bucket loads of similar content. The system manager has to teach it initially to recognize the format or layout of any agent's invoices. Where their logo is, where they put the location address, where they put their VAT number, where they put the line of the net charge and the VAT element, and the gross element, and which type of charge it is. Is it rent or service charge, and which date does it cover? Is it the March quarter or the June quarter, or both? The OCR system doesn't know any of this data. It doesn't have it stored in a memory, so while it has one challenge to learn how to read the invoice. It then has the second challenge of how to validate it. Like the human team, it could do this against an external report, a table that holds the corresponding data. Where are the tenants leases? What are the charges? What values apply? And importantly, who do we think we pay them to? Even humans can fail at this bit. I've seen numerous cases for invoices being approved as factually correct, but nobody had noticed that they'd been submitted by the wrong agent. In the sense of the landlord had changed agents. The new agents were providing the invoices, but they hadn't formally notified the tenant's accounts team. Nobody was actually checking who the invoice came from. So inadvertently payment went to the bank, accounts at the old agent queue, lots of activity to recover it, and then reconciling statements to ensure that there were no other credits to be recovered. So I appreciate, I'm pretty much rubbishing OCR image recognition because it just can't recognize enough. Should we talk about ai? I mean, according to the hype, AI is wonderful. It can do anything. It can learn, analyze, process, who needs people. But if AI is checking invoices, it still hangs on the premise that it needs to recognize the content. And at this point we're still talking about a type of OCR, because even AI image recognition's, just a comparison of what its camera sees compared against what the database knows. I haven't yet seen an AI solution that would be better in this area than an old fashioned OCR. So what's the key to unlocking this impasse? Bear in mind that we are looking at it from two different perspectives. The landlord or their agent currently focuses on raising those invoices and allocating the incoming funds. The tenant focuses on checking those invoices against expectation, issuing the correct payment on time with an appropriate remittance. Everything in between is susceptible to lag, drag, error, and confusion. There are currently no systems or applications that reliably and consistently harmonize everything that join those dots and add value. How do we leap forward from eyeballing bits of paper to actually having an effective e-billing platform if it's gonna work for both tenants and landlords? It needs to be an industry-wide platform, maybe even a state sponsored platform. It needs to be competent to issue all invoices in a format which facilitates automated verification. The tenant side needs to be able to perform verification checks against known data, so their own property database must be accurate and with mutually aligned content, the tenant side should be able to flag and reject anything that doesn't match due to some discrepancy. That can then be ironed out to put the system back on track, but without throwing the whole process into tilt, we don't want to stop the conveyor belt because one tin of beans is dented the tenant's verification steps are many. Is it from the expected agent and landlord? Is the location correctly indicated? Can we distinguish unit A from unit B? Is the charge type clearly shown? Is it obvious whether it's the march quarter or the June quarter? What are those adjustments all about? Can we distinguish the net from the back, from the gross? Is there more than one line of charge? Maybe rent and service charge on the same invoice with different values covering different rental periods, and assuming it passes all those checks, the tenant side should be able to populate the payment system to avoid all those manual keystrokes and potential error and to improve efficiency. That system should generate the payment and send the supplier a remittance advice. Of course, from the landlord or their agent's side, the remittance should be in a format that their system can interpret, which streamlines their allocation process, ensures their accuracy. But of course, it would have to trigger an alert to a credit controller for any payments that don't match expectation. What to do with those unrecognized amounts. Don't just reject them or drop them into a suspense account. And once allocated, the landlord's side should issue a VAT receipt back through the same platform. The tenant side needs to be able to verify this receipt too is a very practical way to ensure the supplier who received the funds actually allocated them as the payer intended. Then the tenant side needs to finally archive the invoices and the VAT receipts ready for any inspection by the tax authorities. Indexed in such a way that the estates and accounts teams can identify them if any documentary evidence is required for any reason. All of this, it's not too much to ask, is it? Well, let's consider what if there was a commonly recognized platform? With a standardized format and style of content right across the industry. Okay. There would probably be exception for small tenant operators where the cost of admission to the party could be excessive. But otherwise, everyone shares an identical layout of invoicing. I. It could generate an image in PDF form for we puny humans to look at, but more importantly, it could interface directly and securely to its co-system. At the tenant's office, there'd be a standardized table running in the tenant's database to provide the checkable content and another interface directly into their payment system. The remittance would be issued in tabulated format and shared back through the interface so the landlord's agent system can allocate it and issue the correct VAT receipt. Easy, huh? Well, I'm not sure if I've just invented something or maybe taken inspiration from Isaac Asimov's robot novels. So before you all think it's so complicated, it'll never get off the ground. Just bear witness to what those Germans are introducing with their stereotypical efficiency they've introduced into law. Yes. Law, not just industry practice that business to business. Invoicing must now become e-billing based on a national format platform. Better for business, better for the tax authorities. It's not optional. German businesses have to adapt to the new law in order to survive. I'm sure it'll work well for what we know as GNFR goods, not for resale, where invoicing is just simpler and clearer than it is for UK property, which can be messy at the best of times. But it sends us a message in retail property that this technology and an obligation to embrace it is coming our way. If you want to know more about the German approach to e-billing, there's a link in the show notes to an excellent article by DLA Piper. And as tracking and recovering missed invoices and lost monies is the mainstay of our niche company Smarter Estates. I'm aware that I might be putting my own business. Outta business, but sometimes the big picture demands the same detailed attention. So if any of those software developers are looking for a committed partner in getting this right, for retail tenants and landlords alike, well, you know where we are. Thank you for listening to that Retail Property guy. I hope you enjoyed today's discussion and found it both entertaining and insightful. For more information, visit that retail property guy.com. Thanks again for tuning in.