E-invoicing: An overview

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“Opening up the books” takes on a whole new meaning with the introduction of e-invoicing. While paper invoicing has been on the decline for decades, the increased impetus on corporations to provide more data, more transparency, and more cooperation with governments around the world has led to e-invoicing taking center stage as the next revolution in indirect tax accounting, auditing, and reporting. Selecting the right e-invoicing solution in an ever-changing, complex world is likely to be on the agenda in the coming months and years for many MNCs, but finding a comprehensive, integrated, compliance solution will reap major benefits in the short and long term.

What is e-invoicing?

E-invoicing, or electronic invoicing, is the process of generating, sending, receiving, and storing invoices in a digital format.

E-invoicing differs from digital invoicing in a couple of ways. Where digital invoicing refers to invoices that can be sent electronically, in a format such as a PDF, e-invoicing refers to digital invoicing that contains structured data. E-invoicing creates invoices in an XML data file format where more descriptive information is coded into the invoice, including direct and indirect tax data, to comply with domestic and international government standards for financial reporting. It also allows companies to send and receive invoices electronically, process invoices faster and with fewer errors, and allow for a more accurate and expedited audit and reporting process.

E-invoicing solutions will typically speak to business systems, such as procurement and inventory management, to create a single source of data that mitigates the need for additional resources in reporting and analysis. Businesses that exchange e-invoices will find a lot more automation in data input, shortening the payment cycle as less time will be required to verify the invoice information.

Corporations will also be able to meet government standards for on-demand, real-time reporting through the creation of single e-invoice marketplaces and secure data portals.

The evolution of B2B payments

In B2B sales, there are several common types of invoices including:

• Sales invoice
• Proforma invoice
• Commercial invoice
• Timesheet invoice
• Recurring invoice

Once computers became a mainstay of business operations, the possibilities of improved invoicing expanded. Envelopes and stamps turned into email attachments, and accounts receivable and accounts payable departments decreased the number of employees required as accounting and bookkeeping software developed the ability to generate and process multiple invoices and payments faster. The use of digital signatures, encryption, and other security measures improved the number of ways invoices could be sent, and the number of payment options expanded.

Governments were paying attention to the development of B2B invoicing and payments as the digital age began and saw an opportunity to tighten up auditing and reporting for improved capture of direct and indirect taxes.

• 1960s – Electronic Data Interchange (EDI) was developed allowing companies to exchange structured data electronically.
• 1980s – Large corporations began adopting EDI in their business operations; however, the cost and complex integrations were prohibitive to all but the largest MNCs.
• 1990s/2000s – The rise of the internet and web-based technology, including eXtensible Markup Language (XML), offered more flexibility for information exchange and standardized data.
• 2010s – Governments began to recognize the benefits of e-invoicing invoicing and began implementing frameworks to capture the benefits from a compliance standpoint.
• 2020s – Global cooperation on implementing standardized invoicing mandates and regulating indirect taxes are made possible by the advancement of e-invoicing through new software, such as ONESOURCE.

Benefits of e-invoicing

As with most things that have been impacted by the digital age speed, efficiency, and accuracy have improved with the introduction of e-invoicing. Where paper, and even digital invoicing, remains a very labor-intensive process plagued with errors and the need for complex processes and systems, e-invoicing is set to revolutionize the way companies do business. E-invoices are easier to track, store, and audit for increased efficiency and improved accuracy. Streamlined processing and payments reduce the amount of time between invoice and settlement which leads to better supplier relationships.

The costs associated with printing and mailing paper invoices are eliminated, as is the need for multiple tools with advanced accounting software that provides a single source of truth. There is a reduction in the amount of time spent auditing and preparing financial reports and reporting is more secure and transparent.

The timing for e-invoicing couldn’t be better for governments and MNCs as governments and governing bodies around the globe look to crack down on tax evasion and address the way corporations are sheltering and obscuring their revenue and profits through complex cross-border accounting.

Perhaps the greatest benefit of e-invoicing is that it addresses the increasing compliance required globally, such as continuous transaction controls (CTC) that require mandatory real-time invoice reporting. While the ever-changing landscape continues to present numerous challenges for keeping compliant with continual updates and new compliance standards at state, domestic, and international levels, the ability to provide real-time reporting with tools, such as the Thomson Reuters/Pagero ONESOURCE solution, reduces complex indirect tax calculations and automatically scans for and includes the updates calculations within the program itself.

In the U.S. the Business Payments Coalition reported a 25% adoption by U.S. companies of e-invoicing. The introduction of a single platform for sharing e-invoicing data, PEPPOL, is already in effect to support the growth of e-invoicing, cooperation, and transparency.

In the E.U. the European Committee for Standardization published the standard on European e-invoicing with the European Commission publishing fact sheets on each country’s requirements as a supporting function in the European Commission’s new proposal on Value Added Tax (VAT) reporting.

Other countries implementing standards include Brazil, Mexico, Chile, Australia, Singapore, and India.

Challenges of e-invoicing

Adopting e-invoicing requires a sound plan for implementation and deployment. As with the introduction of any new platform, compatibility will be a primary challenge for the immediate future as structures and compliance frameworks are introduced and companies adopt e-invoicing at different rates.

While automation will take over for e-invoicing, there will remain the need for manual entry of data for invoices that are not machine-readable. Consequently, there may be resistance to workflow changes and processes, both internally and externally, with customers and suppliers. And though the invoices will offer improved data security and encryption, invoices sent via email may be subject to spam filters from email service providers and company firewalls.

ONESOURCE E-invoicing software    Comply with global e-invoicing mandates by leveraging a fully integrated electronic invoice compliance solution. E-invoicing overview ↗

E-invoicing

With so much tax revenue for governments and the potential for non-compliance fines and penalties on the line, the future of e-invoicing is strong. Over the next few years, the expectations are for:

• Wider adoption of e-invoicing as more governments implement mandatory reporting systems and standards.
• MNCs will be required to improve on real-time, accurate, and transparent reporting by adopting e-invoicing practices.
• The increased level and detail of data available will offer a greater scale and scope of information for decision-makers.
• The European Union is leading the way in creating a single market for e-invoicing, making it easier for businesses in different countries to conduct transactions.
• E-invoicing will become more attractive as part of ESG  initiatives.
• The global e-invoice market will continue to expand, making it an attractive investment opportunity.
• Artificial intelligence may also elevate the user experience and automation of traditionally labor-intensive, manual processes.

Choosing the right solution

With the expanding e-invoicing market, there are many options to choose from, and finding the right one can prove to be tricky. Thomson Reuters and Pagero have partnered to create a “best-in-class” solution that combines the power of e-invoicing efficiency with automated updates to compliance standards built directly into the system’s calculations. Capable of calculating the tax on all sales and purchases from 250 countries and territories, with compliant e-invoicing/CTCs for over 70 countries, ONESOURCE is a robust platform capable of comprehensive compliance in an integrated solution. The cloud infrastructure is fast and secure with a scalable model able to connect to any government or business network. In an effort to help businesses reduce costs, improve efficiency, reduce errors, support their ESG initiatives, and meet the demands of government for more real-time data in less time, ONESOURCE is helping one e-invoice at a time.