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Electronic invoicing

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UML class diagram depicting a invoice

Electronic invoicing (also called e-invoicing or einvoicing) is a form of electronic billing. E-invoicing includes a number of different technologies and entry options and is usually used as an umbrella term to describe any method by which a document is electronically presented from one party to another, either for payment[1] or to present and monitor transactional documents between trade partners to ensure the terms of their trading agreements are being met. These documents can include invoices, purchase orders, debit notes, credit notes, payment terms, payment instructions, and remittance slips.

Purpose

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The accounts payable department ensures all invoices from its suppliers are approved, processed, and paid. The main responsibility of the accounts receivable department is to ensure all invoices are created, delivered and subsequently paid by their vendors. Processing an invoice includes recording relevant data from the invoice and feeding it into the company's financial or bookkeeping systems. After the feed is accomplished, the invoices go through the company's business process to be paid.[2]

An e-invoice can be defined as structured invoice data issued in electronic data interchange (EDI) or XML formats, possibly using Internet-based web forms.[3] These documents can be exchanged in a number of ways, including as EDI, XML, or CSV files.[4] The company may use imaging software to capture data from PDF or paper invoices and input it into their invoicing system. Many companies hire a third-party company to implement and support e-invoicing processes and to archive the data on their own servers.[5]

The file extension .INV could be used. The .INV file can be in standards-compliant XML format.

History

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Since the mid-1960s, companies have begun establishing data links with trading partners to transfer documents such as invoices and purchase orders. Inspired by paperless office, they developed the first EDI systems. At the time, there was no standard for electronic data interchange.

The Accredited Standards Committee X12, a standards institution under the umbrella of ANSI, moved to standardize EDI processes. The result is known today as the ANSI X12 EDI standard.[6] This remained the main way to exchange transactional data between trading partners until the 1990s, when companies began competing. New web-based applications allow for online submission of individual invoices as well as EDI file uploads, including in CSV, PDF, and XML formats. Suppliers could also see a history of all the invoices they submitted to their customers without having direct access to the customers' systems. This is because all the transactional information is stored in the data centers of the third-party company that provides the invoicing web app.[7]

According to a 2012 Global E-Invoicing Study, 73% of respondents used electronic invoicing to some degree in 2012, a 14% increase from 2011. Supplier resistance to e-invoicing has decreased from 46% in 2011 to 26% in 2012.[8] By 2022, a leading provider reported a 78% increase in the number of invoices processed through its platform over a two-year period.[9] According to a report done by the GXS in 2013, Europe is adopting government legislation encouraging businesses to adopt electronic invoicing practices. The United States Treasury estimated that implementing e-invoicing across the entire federal government would reduce costs by 50% and save $450 million annually.[10]

Standards

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Various standards exist. The EU's Directive 2014/55/EU on electronic invoicing in public procurement noted that "several global, national, regional and proprietary standards exist; ... none of them prevail and most of them are not interoperable with one another".[11]

  • EDIFACT
  • UBL (Universal Business Language)[12]
  • Finvoice (Finland)
  • EHF (Elektronisk Handelsformat) (Norway)
  • E-Invoice (Estonia)[13]
  • FacturaE (Spain)
  • Factur-X (France)
  • FatturaPA (Italy)
  • CFDI (Mexico)
  • ISDOC (Czechia)
  • E-faktura (Poland)
  • OIOUBL (Denmark)
  • PEPPOL BIS (various countries)
  • Svefaktura (Sweden)
  • UBL-OHNL (Netherlands)
  • ZUGFeRD, XRechnung (Germany)
  • Nota Fiscal Eletrônica (Brazil)
  • Facturación Electrônica (Ecuador)
  • DTE (Chile)

Under EU Directive 2014/55/EU on electronic invoicing in public procurement, the EU commissioned the development of a "European standard on electronic invoicing".[14]

Usage

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To enable e-invoicing, there must be an existing method of viewing the transactions, typically an ERP (enterprise resource planning) or accounting system. Once routing is established in the system, validation rules can be set up to reduce the number of invoice exceptions. Once the e-invoicing specification testing is complete, the business's suppliers will be connected electronically.[15][16]

Government-mandated

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Several governments and tax administrations imposed e-invoicing formats in their respective jurisdictions for business-to-business (B2B) transactions, and required that the emitted documents be stored in centralized repositories, often controlled by the tax administration. Mexico, for example, introduced the CFDI format in 2004 in Appendix 20 of its Tax Code, requiring that all invoices be stored with the Mexican Tax Administration.[17] Non-standard invoices have been banned by law since 2012. Chile implemented a similar system in 2003,[18] and Colombia in 2020.[19]

In the European Union, France introduced mandatory government-controlled B2B e-invoicing starting in July 2024.[20] This obligation has existed in Italy since 2019.[21]

The primary goal of government-controlled e-invoicing is to reduce corporate tax fraud. Per a research paper published by the Harvard Kennedy School of Government, Mexico's tax-to-GDP ratio rose from 12.6% to 16.2% between 2012 and 2017, driven largely by a 48% increase in revenue from tax on goods and services after e-invoicing was made mandatory.

The Malaysian Government declared in the 2023 Tax Budget that mandatory e-invoicing will be introduced for businesses with an annual turnover exceeding RM100 million starting in June 2024. By 2027, all businesses will be required to adopt this electronic invoicing method.[22][23]

The United Arab Emirates announced its e-invoicing initiative in July 2023. The Ministry of Finance plans to roll out mandatory e-invoicing for B2B and B2G transactions by July 2026.[24] This system will follow a decentralized model, initially covering domestic transactions with potential future inclusion of B2C transactions. The initiative aims to enhance tax compliance and reduce administrative costs.[25][26]

See also

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References

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  1. ^ tieto. (2009). The future of E-invoicing, Pg. 5. Retrieved from digitdoc: "Archived copy" (PDF). Archived from the original (PDF) on 21 October 2012. Retrieved 17 June 2013.{{cite web}}: CS1 maint: archived copy as title (link)
  2. ^ Accounting Tools. (2013). Accounts Payable Controls. Retrieved from accounting tools: http://www.accountingtools.com/accounts-payable-controls Archived 13 June 2013 at the Wayback Machine
  3. ^ "e-VoicingBasics". 13 May 2011. Retrieved 13 April 2017.
  4. ^ GXS. (n.d.). Lost? Don't Know What to look for in an e-invoicing solution? Retrieved from GXS: http://www.gxs.co.uk/eBooks/eInvoicing/e-invoicing_ebook_uk.pdf Archived 29 October 2013 at the Wayback Machine
  5. ^ US Bank, Scott Hesse. (9 August 2010). Electronic invoice Presentment and Payment (EIPP): Streamlining the Payment Process. Retrieved from nasact: http://www.nasact.org/conferences_training/nasact/conferences/AnnualConferences/2010AnnualConference/CS7_Hesse.pdf Archived 29 October 2013 at the Wayback Machine
  6. ^ Hill, M. G. (n.d.). A brief history of Electronic Data Interchange, pg 6. Retrieved from BizTalk Server 2000: A beginner's Guide: http://books.mcgraw-hill.com/downloads/products/0072190116/0072190116_ch01.pdf Archived 9 March 2014 at the Wayback Machine
  7. ^ GXS. (2013). A brief history retrieved from einvoicingbasics: http://www.einvoicingbasics.co.uk/what-is-e-invoicing/a-brief-history/
  8. ^ The Institute of Financial Operations. (2012). A shift toward e-invoicing ecosystems, pg. 6. Retrieved from baseware: http://www.basware.com/sites/default/files/restricted/2012-global-e-invoicing-study.pdf?rrt=21 Archived 23 September 2015 at the Wayback Machine
  9. ^ "Proactis reveals record levels of invoices processed through its managed service". Proactis Ltd. 21 February 2022.
  10. ^ Bruno Koch, G. (April 2013). E-Invoicing/ E-Billing. Retrieved from GSX: http://www.gxs.co.uk/wp-content/uploads/billentis-2013-report.pdf Archived 2 November 2013 at the Wayback Machine
  11. ^ European Union, Directive 2014/55/EU on Electronic Invoicing in Public Procurement, 16 April 2014, Preamble, section 1
  12. ^ Digital Business Council, eInvoicing Implementation Guide: Australian implementation of e-invoicing using UBL
  13. ^ Description of Estonian electronic invoice
  14. ^ European Union, Directive 2014/55/EU on Electronic Invoicing in Public Procurement, 16 April 2014, Article 3
  15. ^ E-Invoicing and Supplier Connectivity. (2015). Transcepta. Retrieved from transcepta: http://www.transcepta.com/wp-content/uploads/2015/05/Transcepta-Building-the-Business-Case-for-E-Invoicing-and-Supplier-Connectivity.pdf Archived 30 September 2015 at the Wayback Machine
  16. ^ "Online invoicing software". Retrieved 14 May 2023.
  17. ^ "La historia de la facturación electrónica en México – Bind ERP" (in Spanish). Retrieved 26 February 2023.
  18. ^ Emprendedores, Hispanos (12 October 2020). "Cómo funciona la facturación electrónica en Chile". Hispanos Emprendedores (in Spanish). Retrieved 26 February 2023.
  19. ^ "Cómo es la factura electrónica en Colombia| EDICOM CO". edicom.co (in Spanish). Retrieved 26 February 2023.
  20. ^ "Obligation d'émettre des factures électroniques : un changement majeur dès juillet 2024". entreprendre.service-public.fr (in French). Retrieved 26 February 2023.
  21. ^ "1° gennaio 2019: la fattura diventa elettronica". MEF (in Italian). Retrieved 26 February 2023.
  22. ^ "E-Invoice (Electronic Tax Invoice)". 9 March 2023.
  23. ^ "Malaysia's E-Invoicing System: Key Requirements". www.cygnet.one. 9 July 2024. Retrieved 7 August 2024.
  24. ^ Asquith, Richard (14 February 2024). "UAE B2B e-invoicing July 2026 - vatcalc.com". Retrieved 7 August 2024.
  25. ^ "Comprehensive Guide to UAE E-Invoicing Mandate". www.cygnet.one. 28 June 2024. Retrieved 7 August 2024.
  26. ^ "Digital invoicing | The Official Portal of the UAE Government". u.ae. Retrieved 7 August 2024.
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