Now that you’ve learned what invoices are, what their desired format is and the elements they should include, it’s time to learn about a mode of invoicing that has been gaining popularity for the past decade or so, called e-invoicing.
What is e-Invoicing?
E-Invoicing is short for electronic invoicing. It is a form of electronic billing used to exchange transactional documents between trading partners, such as customers and their suppliers. In recent years, e-Invoicing has replaced traditional, paper-based invoicing in various business sectors in different parts of the world and is becoming increasingly common. To avoid confusion, it should be noted that a true e-invoice is usually based on Internet web-forms and consists of structured invoice data issued in either an XML or EDI format. While many companies employ a third-party company for their e-Invoicing processes, others rely on an in-house e-Invoicing process.
Multiple Benefits of e-Invoicing
1) Lower costs
The automation of the invoicing process results in significant cost savings. For example, fees relating to processing, delivery, storage, postage, customer support and paper copies have all be shown to decrease upon replacing traditional invoicing with e-Invoicing.
3) Higher Productivity
Not having to rely on paper documents and postage and opting instead for a quick online delivery frees up a lot of time, which can be directed towards other tasks. In addition, e-invoices rarely get mixed up or lost in the mail, reducing associated customer complaints.
3) Faster payments
Sending and receiving e-invoices quickly online means no more mail-related delays. Receiving e-invoices on time also means they can be processed and paid in a timely fashion.
4) Improved accuracy
Before e-Invoicing, the manual process involved in invoicing meant possible data entry errors, which meant invoices often had to be rejected and re-issued. This was an intricate, and time-consuming process. The advanced systems on which e-Invoicing relies significantly reduce the occurrence of such errors.
Widespread Adoption of e-Invoicing Among European SMEs
Europe has embraced rudimentary versions of e-Invoicing since the early 2000s. The efficiencies and cost savings conferred by e-Invoicing are fueling widespread adoption of this electronic business medium. SMEs in particular stand to benefit from adopting this cutting-edge technology to streamline business operations and operate at maximum efficiency. Previously, the most effective medium for transmitting electronic business documentation was EDI (electronic data interchange) inside a VAN (value-added network).
e-Invoicing systems initially faced several challenges in the form of standardization, taxation issues, and frameworks. However, these issues were worked out to ensure synchronicity and congruence across European SMEs. In 2017, the EC mandated the standardization of e-Invoicing via EN 16931-1 (25 YES Votes and No NEGATIVE Votes) and EN 16931-2 (24 YES Votes and No NEGATIVE Votes). This paved the way for the adoption and implementation of e-Invoicing systems throughout Europe.
Countries like Slovenia have received CEF funding for e-Invoicing compliance with EU legislation, and much the same is true with Ireland, Poland, and other EU nations. As per Council Directive 2010/45/EU (discussed in the next section), the same standard binds all EU member states. This ensures harmony and synchronicity of e-Invoicing, among SMEs.
The European Standard for e-Invoicing
A key indicator of the way in which e-Invoicing is becoming standard around the world is the recent endorsement of the Directive 2014/55/EU by the European Union Parliament and the European Council. After the European Commission had mandated the CEN (European Committee for Standardization) to define the European standard for invoicing, in March 2017 the invoice model and its syntaxes, altogether known as the EN (European Norm) were unanimously approved. The EN is meant to be used for public transaction processes between member states of the European Union.
Key Features of the European e-Invoicing Standard:
- Compatible with international e-billing standards
- Technologically neutral
- Protective of personal data
- Supportive of user-friendly, practical, profitable and flexible e-Invoicing systems
- Consistent with Directive 2006/112/EC
- Suitable for business transactions between companies
- Supportive of the needs of small and medium business
Singapore: A Leader in e-Invoicing
Many countries around the world have adopted e-Invoicing in the past few years; however, Singapore is unique in this regard. This Asian Tiger has mandated e-Invoicing for suppliers of the Singaporean government since May 2008.