23 Mar
Driven by emerging digital frontiers and globalisation, governments are increasingly leveraging technology to reinforce their indirect tax collection. The most recent tool in their armoury is e-invoicing.
If you’re immersed in the professional finance world, you may be aware that governments worldwide are rolling out e-invoicing mandates. While it makes sense for tax authorities to enhance their processes with technology, the varying national requirements make compliance more challenging for businesses.
In this article, we’ve taken insights from our latest e-book: The Rise of E-invoicing – The Direction of Travel, to explore the recent explosion of e-invoicing mandates and explain why companies must move now to reap the benefits of an upgraded invoicing process.
Back to basics: The definition of e-invoicing
E-invoicing is defined as the digital transformation of manual invoicing practices. The process eliminates the need for paper-based invoice documents by replacing them with electronic alternatives.
At a glance, PDF invoices may seem like e-invoices in that they are electronic documents. However, simply generating PDFs, emailing them to the recipient and processing them still requires human intervention. In contrast, e-invoicing involves automating processes across the entire invoicing lifecycle, from issuance to archiving. Governments and tax authorities are generally mandating specific e-invoice formats as well as specific e-invoicing platforms to be used.
Increasingly, businesses worldwide recognise the advantages of streamlined e-invoicing processes. Not only does e-invoicing ensure accuracy by removing the risk of human error, but it also helps to expedite time-consuming, tedious tasks for finance teams and boost efficiency.
Strategic and global versus tactical and local
The growing trend of e-invoicing mandates has been clear for several years now. In 2021, the global e-invoicing market reached a value of US$ 8.74 billion. Looking ahead, the IMARC Group expects the market to reach a staggering US$ 29.68 billion by 2027.
The astonishing growth trajectory can be attributed to the increase in finance automation, government initiatives and the globalisation of the digital economy – none of which are going away any time soon.
Indeed, it’s almost like businesses are playing “whack-a-mole” – It seems like every week there’s a new mandate in a new country, or a change to an existing e-invoicing and digital reporting requirement. Businesses suddenly need to get to grips with these new and emerging requirements, asking themselves “What is this mandate, how does this affect me, does it affect resident businesses, or non-resident businesses? Is it B2G, B2B, B2C? Classifying customers and revenue streams and waiting on the local detail”.
The direction of travel is clear, e-invoicing is spreading across the globe and businesses need to think more in terms of global and scalable – finding a solution and process that not only meets the requirements of today, but also one which meets the roadmap of requirements that are going to be introduced. It’s not so much just where businesses are today, but rather which markets businesses will be operating in tomorrow. It’s about moving away from tactical, local solutions to a more strategic global solution – a single scalable e-invoicing and digital reporting platform that is compliant across multiple jurisdictions – one that will flex and scale as the business grows, and indeed as the mandates grow.
Why act now?
There’s no more time to waste when it comes to e-invoicing. Businesses need to be proactive to stay compliant with future e-invoicing mandates and remain competitive in a complex, digital-first market.
Getting ahead of the curve and advancing finance functions through technology will also enable businesses to reap the benefits of invoice automation. Below, we’ve highlighted just some of the benefits of adopting e-invoicing now:
Finance Automation
Automation of the invoicing process opens up a world of opportunity for Accounts Payable (AP) and Accounts Receivable (AR) staff by transforming their roles from data entry clerks into business analysts. By eliminating tedious, paper-intensive processes, employees in finance departments get the opportunity to work on added-value tasks, leveraging data for business analysis and smarter business decisions.
The effective automation of finance processes also slashes departmental costs, making e-invoicing a much more affordable option compared to paper invoices. With paper invoicing, businesses need to budget for the direct costs of the materials, printing and delivery, plus indirect costs related to the time and labour sunk into manual processing.
In fact, a report by Billentis estimates that automated e-invoicing will result in huge savings of around 60-80% compared to conventional paper invoice processing. Additionally, by removing the need for human intervention, e-invoicing ensures data integrity, freeing up a significant portion of time that AP teams would otherwise spend rectifying data errors.
Compliance
Tax authorities all over the world might be on the same page when it comes to the perceived need for e-invoicing and tax digitalisation. However, compliance is never uniform. Each tax authority has its own independent requirements, deadlines, platforms… the list goes on.
The complex international landscape poses a significant challenge for global businesses, which must abide by each country’s e-invoicing and tax regulations. Failing to do so could result in hefty fines and disruptive audits. For instance, to ensure invoices are reported correctly, the Italian government has set penalties of €2 for each invoice not submitted to the SDI, up to a maximum of €400 per day.
A robust e-invoicing solution can continuously adapt to compliance changes. It will generate accurate invoices, issue them within the correct deadlines and ensure that they are submitted through the correct platform so that finance functions can rest assured of their business’ full compliance.
Sustainability
It can be easy to overlook the back-end running of a company when it comes to implementing eco-friendly initiatives. However, finance departments are a haven for paper-intensive processes that directly affect deforestation rates. E-invoicing gives companies a simple yet powerful way of contributing to their environmental, social and corporate governance (ESG) targets and reducing their carbon footprint.
Depending on the business size (and the number of invoices issued), companies adopting e-invoicing gain the economic advantages of an automated finance system while significantly reducing their paper waste and carbon footprint. Achieving a more eco-friendly back-office will also work in the company’s favour by catering to the eco-conscious stakeholders, employees and customers they target.
The Rise of E-invoicing – The Direction of Travel
Being proactive and adopting e-invoicing can save you compliance headaches down the road while incorporating time-saving automation into your finance department.
However, we understand that the e-invoicing landscape can be difficult to navigate. That’s why we’ve gathered our expert knowledge into an e-book and webinar to give you insights into the e-invoicing trends that so many countries are embracing.
