An Introduction to Electronic Invoicing
What is e-invoicing?
You are most likely already familiar with an invoice document. It is simply a document sent to a customer to bill them for their purchases, containing details such as quantity, description and price. Electronic invoicing (e-Invoicing) is the exchange of an invoice in electronic format.
Traditionally invoices were exchanged in paper format, however the past few years has seen a major increase in invoices being exchanging electronically, together with regulations being put in place to promote the widespread business adoption of e-invoicing. E-Invoices are a legally recognised alternative to paper invoices and carry the exact same validity, however they carry more benefits and lead to more cost savings from a business point-of-view.
E-Invoices are exchanged in a structured format that allows for automatic processing in the customer’s back office systems. The tangible nature of paper invoices means that the customer must enter the invoice data into their back-office systems manually, making the process more prone to human error, and ultimately resulting in increased costs for businesses.
E-Invoices can also be monitored visually and processed manually - if the user so prefers - so by adopting e-invoicing it doesn’t mean that there needs to be a radical change in business processes.
Types of e-Invoicing
On a basic level e-invoices can be categorised as ‘structured’ or ‘unstructured’.
Strictly speaking, only ‘structured’ invoices are true e-invoices; ‘unstructured’ invoices fall into the broader category of ‘digital invoicing’.
Unstructured invoices are the middle-ground between paper invoices and true e-invoices. The exchange of the invoice occurs electronically, however the invoice itself still needs to be read manually and entered into the customer’s back office systems. Unstructured invoices are sent in PDF/Word/Spreadsheet/JPG format, mainly by email.
What sets the structured e-invoice apart is that it contains data in machine-readable format that can be automatically imported into the customer’s back office systems, without any need for manual intervention. Structured e-invoices are issued in Electronic Data Interchange (EDI) or XML formats.
With structured e-invoices the computer does the work a finance/accounts/admin team (or even in the case of a small business, the business owner) traditionally had to in terms of managing the incoming invoice, and entering the details into back office systems. This frees up time for the staff to dedicate elsewhere.
For EU public institutions e-invoicing is becoming mandatory in April 2019 as a result of the Directive 2014/55/EU, as voted on by the European Parliament and Council in 2014. The objectives of this Directive are to create a standard that incorporates widespread adoption across the European Union. E-Invoicing also has numerous benefits for private companies.
Standardising invoicing contributes to the removal of technical barriers to trade, increases market access and international trade, enhances cooperation at international level, and helps EU organisations to access global markets.
To find out more about e-invoicing and the benefits to your business, click here to check out our extensive guide.