E-invoicing, short for electronic invoicing, is when invoicing is conducted via exchange of electronic documents in a structured data format.
E-invoicing is not the same as sending digital invoices, such as PDFs, by email. This is because digital invoices are not machine-readable and require manual viewing and handling to enter them into Accounts Payable (AP) systems. With e-invoicing, the data is automatically imported into and processed by these systems, without any manual data entry.
Essential data, without visual presentation
Digital invoices, whether issued as PDF, jpeg, Word or any other electronic file type, are essentially paper invoices in digital format. These are primarily designed to be read by humans and render all the essential invoicing information, such as amounts, descriptions, reference numbers and quantities, in a visual layout. E-invoices, by contrast, share this same essential information without any visual presentation, although this can be rendered if necessary.
The key to e-invoicing is its standardised structure which seamlessly transfers data from the seller’s to the buyer’s system. The European standard on e-invoicing, EN16931, defines the structure of an e-invoice, and the full EU definition of e-invoicing can be found in Directive 2014/55/EU. This EU definition of e-invoicing only applies to B2B and B2G scenarios, although a form of B2C e-invoicing, typically executed via QR codes, also exists.
What are the benefits of e-invoicing for B2B?
B2B e-invoicing is beneficial to businesses in many different ways.
Prevention of invoice fraud
E-invoicing closes the door on those who seek to commit invoicing fraud, as well as preventing overpayments caused by unintended human error.
In order to send e-invoices, vendors need to satisfy strict requirements and verifications. These make it impossible for fraudsters to invoice from fake accounts.
Alongside this, because e-invoices move from vendor to buyer via a secure route, it is impossible for fraudsters to intercept and manipulate them. There is also no way for fake invoices to join the ride.
Lower risk of error
With e-invoicing, vendors’ payment requests are automatically entered into buyers’ AP systems, with minimal manual data entry at the recipient end. This significantly reduces the risk of errors.
Lower costs
Automation lowers the administration workload and associated costs, and sending an e-invoice is cheaper than printing, handling and mailing a paper invoice.
Easy access and management
E-invoices can be stored in cloud-based systems, making them easy to manage, search, and retrieve. This feature is especially handy for internal or external audits.
Faster processing
E-invoicing can significantly shorten the invoice processing cycle, improving cash flow management and efficiency.
More environmentally-friendly
E-invoicing doesn’t use paper or result in emissions from physical delivery.
What is PEPPOL?
PEPPOL is an open e-delivery network widely adopted throughout the European Union (EU) and around the world. Open e-delivery networks provide a common infrastructure and standards for cross-border procurement. As such, they enable secure and standardised exchange of electronic documents, including e-invoices, from one system to another.
PEPPOL is approved for upcoming European mandates for B2B e-invoicing that apply to both the public and private sector, and is used by many governments. This is because of its demanding technical standards, service specifications and regulations, which include:
- Typical requirement for trade partners to be authenticated through their business numbers
- Use of European servers, which enable compliance with EU mandates
These attributes have contributed to PEPPOL becoming the world’s most popular and reliable e-delivery network for e-invoicing.
E-invoicing options: how can software companies and businesses get on board?
E-invoicing is built around data exchange via an approved e-delivery network, such as PEPPOL. There are four different ways for businesses to achieve this:
- direct connection via an off-the-shelf e-invoicing API
- connection via a software company’s access point
- integration with a third-party e-invoicing platform
- utilisation of a document service provider
Direct connection via an off-the-shelf e-invoicing API
Connecting directly into an e-delivery network via an off-the-shelf e-invoicing API is the simplest, fastest, and often the most cost-effective route to achieving compliant e-invoicing.
This achieves seamless integration, without software companies having to create and maintain custom environments.
Discover more: Flowin’s, off-the-shelf e-invoicing can be implemented in less than a month.
Direct e-invoicing through an API connection avoids going via intermediary solutions and facilitates full process automation, meaning less work for business personnel and less room for human error.
Connection via a software company’s access point
Software companies can provide connectivity to PEPPOL and other e-delivery networks developing their own certified access point. This can be appealing to software developers, as it avoids reliance on third-party design and decisions, while providing all the compliance and practical advantages business customers need.
However, building a certified e-delivery network access point is a major undertaking that can take up to 12 months. It requires substantial financial investment, extensive technical resources, dedicated customer support and perpetual updating once in service.
Integration with a third-party e-invoicing platform
Utilising an existing third-party e-invoicing platform can be a fast and easy route to obtaining e-invoicing functionalities. Setup is simple, as there’s no need to build a new dedicated environment, and these platforms can connect into multiple e-delivery networks.
The downside of this approach is it makes for a fragmented experience, as users have to switch between two separate platforms – one for standard ERP or CRM activities and another for e-invoicing – which can disrupt workflow and reduce productivity. Achieving the necessary integration often requires development of bespoke API connections, and any glitches in this integration could result in data discrepancies.
Utilisation of a document service provider
Document service providers enable businesses to process any invoice format (including paper hard copy) via e-invoicing, by handling all the necessary conversions and channelling through any of the e-delivery networks. Alongside this, they also perform printing, archiving, storage, file conversion and multi-channel reporting.
This multi-functional, all-in-one solution is great for businesses who want their invoices as a flat file and can make use of the wide range of services included in document service providers’ packages. But if the only requirement is to achieve e-invoicing compliance, it is unnecessarily complex and expensive as customers end up paying for features they won’t use.
What is an e-invoicing API?
As the full name – application programming interface – suggests, an API is a set of rules that enable different applications to communicate with each other.
An e-invoicing API supports the exchange of invoices between ERP/CRM (issuing) and accounting (receiving) software via an e-delivery network, without having to work via an external party or platform. When used to connect through an approved e-delivery network, such as PEPPOL, an e-invoicing API facilitates compliance with (upcoming) governmental mandates, including those which require integration of tax authority systems.
Are e-invoicing APIs safe?
E-invoicing APIs are specifically designed to ensure safety and security around invoicing and payment transactions by protecting all the relevant data from unauthorized access, tampering, or fraud.
However, e-invoicing APIs may vary in quality, depending on the provider they are built and maintained by. The safest e-invoicing APIs incorporate robust authentication, verification and other security measures, including SSL/TLS encryption, OAuth for authorization, and being subject to regular security audits. A safe e-invoicing API will also comply with relevant standards and regulations in countries where e-invoicing is mandatory, and have sufficient firewall and backup capabilities.
E-invoicing legislation
Just over a decade on from the establishment of open e-delivery networks such as PEPPOL, which make e-invoicing accessible to all, e-invoicing is becoming mandatory in many countries. This move is largely driven by governments’ recognition that e-invoicing can significantly reduce the amount of revenues lost to tax evasion. The imminent mandates, however, do not yet require tax authority integration. This will be introduced at a later point.
While legislation is coming into force at different times, with varying requirements, B2G transactions are being prioritised and e-invoicing is already mandatory in many cases. Mandatory e-invoicing for B2B is currently being rolled out, but there are no plans as yet with regard to B2C transactions.
The timelines per country reflect e-invoicing’s differing levels of maturity and complexity, country-specific regulations, market penetration and technological infrastructure.
In Europe, the e-invoicing Directive 2014/55/EU was implemented in 2018. This requires all public administrations across the European Union (EU) to comply with the European Standard on e-invoicing, in order to reduce trade barriers arising from different national legal requirements and technical standards.
Country-by-country details on mandatory B2B e-invoicing across Europe can be found here. However, these timelines are constantly being revised, so further checks should be made to establish up-to-date information.