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GE unit e-commerce settlement system makes dramatic savings

A spin-off from US conglomerate General Electric is marketing an e-commerce settlement service that saved a GE subsidiary 75% of its invoice reconciliation costs.

General Electric's GE Transportation Systems unit expects to save almost £640,000 a year by using the new process for processing 100,000 invoices covering $20m (£12.87m) in purchases from 4,000 suppliers

It started using the service with its maintenance, repair and operations suppliers in January and has seen a dramatic reduction in the work needed for invoice reconciliation, said Ken Marshall, business leader for indirect sourcing at the GE division.

The service is being marketed by GXS services, which was spun out of GE earlier this year. "They [GXS] are clearly reducing our costs," said Marshall. "I can't tell you the savings to our suppliers, but their reaction to the new system is, 'Where can I sign up?'"

The service uses GXS's e-commerce trading hub and ePcard XML, an XML-based corporate purchasing card technology developed by GE Capital Financial, another unit of GE.

Purchasing card tools have had slow take-up because many corporate users are worried about the potential security problems raised by purchasers giving credit account numbers to their suppliers, according to analysts.

"I hear over and over again that businesses are nervous about putting financial information out on the Web," said Aaron McPherson, an analyst at IDC.

But ePcard XML sidesteps the security worries by essentially giving suppliers a "pseudo-account number instead of the actual account number," McPherson said.

A purchase order is associated electronically with a unique account number and is also packaged with information such as preset percentage limits for shipping and incidental costs as well as limits on when the purchase order expires, he said.

"I think it's a really significant development in B2B payments," McPherson added. "I haven't heard of anybody else doing this."

The GXS system matches purchase orders with data about products or services from different suppliers, making it easier to buy goods that qualify for prenegotiated discounts.

According to Marshall, the process forces GE Transportation Systems to validate process with suppliers. "It locks the pricing with the supplier. If we agree on an amount, that is all the supplier can charge when they get the account number."

GXS said it would charge users of the settlement service a fee of $1.75 (£1.13) to $2.50 (£1.61) per transaction. Marshall said that's much less than the $15 (£9.65) to $50 (£32.17) it costs to process a purchase order manually.

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