What is e-invoicing?
E-invoicing is the electronic exchange of an invoicing document between a supplier and a buyer. Sent and received via a structured electronic format allows the invoice to be automatically processed without the need for traditional paperwork.
E-invoicing is now common practice for businesses of all sizes across the globe and has steadily grown over the past 30 years.
Saving on paper, the process is entirely digital in its lifecycle with electronic formats for e-invoices including (but not limited to): XML, EDIFACT, CSV.
E-invoices are generally sent in two different ways. The first is through a point-to-point connection between the sender and receiver to exchange the documents - often known as electronic data interchange (EDI). Secondly, and becoming more popular in recent times, is a network model such as Unifiedpost Group’s Crossnet. Crossnet connects multiple buyers and sellers and allows different e-invoicing formats to be converted and exchanged. In our view, the only way forward for the modern network economy.
What e-invoicing is not
It can be easy to slip into the thinking that e-invoicing is just any invoice sent electronically, e.g. an invoice sent as a PDF, however this is not the case.
In the example of the PDF, this is what’s classed as unstructured invoice data and not an e-invoice as the receiver typically cannot automatically process the PDF file, nor can the sender fully track the file.
Paper invoices or OCR scanned paper invoices for example, have not been created using structured data. However, some leading e-invoicing providers can work with both structured and unstructured data to turn them into e-invoices.
This format allows the invoice to be processed automatically from one company to another without any manual checks.
Why e-invoicing is becoming more popular
E-invoicing, like traditional invoicing, is a key part of any buyer and supplier relationship. E-invoicing is a modern way for companies to automate processes and put actions in place that improve efficiency, which help future-proof business.
Whereas traditional invoicing processes are heavily paper-based, manual, time-consuming and prone to human error, e-invoicing simplifies the procedure and saves significant time. This streamlining of the process is valuable to businesses, with the ability to save on costs. For example, according to IOFM (Institute of Finance & Management), invoice processing costs can vary between $1 and $21.
E-invoicing also allows businesses to have full visibility and some leading e-invoicing providers are able to track when an invoice has been sent, received, opened, viewed and even paid. The importance of this function is not to be underestimated when selecting a provider as it allows businesses to have a 360° view of their process.
In addition, businesses get paid quicker as the process is automatic and instant with no need for physical print and post. For employees, significantly fewer mistakes happen, and employees can enjoy an innovative way of working without having to key in data and match financial documents – everything is done via one journey, instead of individual steps.
Automatic payment reminders are offered by some e-invoicing providers which can again help businesses get paid without the hassle. And, when it comes to security, encrypted file transfers and secure networks help the e-invoicing process become a safer one when compared to its manual counterpart.
How does e-invoicing work?
Three things are needed to make e-invoicing work:
- Address - Different identifications such as VAT numbers or/and GLNs are needed. Additionally, some networks such as the PEPPOL network have central address lookups.
- Format - There are many different formats. Some examples include EDI and XML. These are structured standard formats which can be automatically processed and converted by leading e-invoicing providers. Meaning that when one business creates an XML e-invoice, the recipient can receive it in whichever format they require, it does not have to be XML.
- Infrastructure - Both the sender and receiver need a compatible system in place in order for electronic documents to be supplied by e-invoicing providers. This can be as simple as having a mailbox for emails in order for the documents to be exchanged.
There are an increasing number of legal requirements for e-invoicing, especially in Europe. More visibility of VAT is required to combat fraud, therefore governments/tax authorities are putting e-invoicing regulations in place.
Different governments will have different rules to their mandates e.g. which businesses have to comply, which e-invoicing formats and models they must use etc. To keep up-to-date with this, Unifiedpost Group has developed a tax compliance world map to keep you up to date with which countries currently have e-invoicing mandates in place.
Want to know more?
Explore your options and learn more about automating your invoicing processes by using Unifiedpost Group’s invoicing solution.
- With Crossnet, Unifiedpost Group operates the leading network for e-invoices, e-payments, e-orders and e-financing. By connecting you with your stakeholders we automate your purchase and sales transactions and unlock liquidity for you.
- Over one million companies already exchange their documents through Crossnet using our products of Banqup, Collect and Channel.
- Across the globe, tax compliance and e-invoicing regulations are changing on a regular basis. We meet tax regulations in over 60 countries worldwide, keeping track of current and global developments.
- The main benefit for your business is that just one single technical connection to our network enables you to communicate with all other participants. And by doing this, your IT infrastructure doesn’t need to change. In times of limited internal IT resources, this is a real plus point.
Get in touch to find out more about how we could make a difference to your business.