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Building a business case for e-invoicing
E-invoicing is a change that most companies will need to embrace, either now or in the near future. But, it’s not always easy convincing stakeholders that the investment is worth the payoff, particularly in today’s post-lockdown environment.
Going back to basics, a compelling business case is one where you can justify the costs of an initiative, demonstrating that it will result in a positive return on investment (ROI). As e-invoicing is a relatively new domain for many businesses, it can be challenging to overcome the concerns of budget-conscious stakeholders.
In this article, we take inspiration from our eBook How to Successfully Implement an E-invoicing Solution to discuss how businesses can tackle the challenges of e-invoicing adoption and get the relevant stakeholders on board.
Obstacles preventing companies from adopting e-invoicing
Some companies may view e-invoicing with trepidation for several reasons. But often these concerns can be overcome when looking at the benefits of adopting e-invoicing and choosing a flexible solution.
Below, we’ve outlined some of the main challenges preventing businesses from making the switch to e-invoicing – along with solutions to overcome them:
- Complex legal requirements. E-invoicing regulations aren’t straightforward. The country-to-country variations can cause a compliance nightmare for global businesses if they don’t have the right solution. However, robust e-invoicing software can cut out the bureaucracy and ensure compliance in just a few clicks.
- Large-scale change. E-invoicing affects more than just the finance department. Implementing e-invoicing will likely require an update on how transactions are handled throughout the supply chain. Effective change management is, therefore, essential. Otherwise, the switch to e-invoicing could overwhelm businesses with departments in various stages of technological advancement.
- Lack of budget. In today’s economic climate, a lack of budget will be a common barrier to e-invoicing adoption – particularly for those choosing to tackle it internally. Outsourcing to an expert will require an initial investment, but a company can quickly achieve significant savings compared to using paper invoices. Plus, they will earn back time and free up staff for higher-value tasks, thanks to process automation.
- Divergent requirements of trading partners. If no mandatory e-invoicing rules exist, trading partners may have different requirements regarding e-invoicing formats, methods and processes, which can turn stakeholders off the idea. But, outsourcing e-invoicing to a proven expert can provide the assurance they need to get on board. Third-party specialists will have the capability to address all sizes of trading partners with independent requirements seamlessly.
Building a business case for e-invoicing
Here’s a summary of the key steps involved in building a compelling business case for e-invoicing.
Step 1: Detail current state and desired future state
To analyse the current state, describe the processes currently in place, highlighting the major pain points and key issues that affect the organisation and AP/AR stakeholders. By doing so, you can establish a baseline for operations that will help determine the organisational readiness for digital AP/AR transformation.
Determining the desired future state involves determining gaps in existing capabilities based on your current state analysis and creating a set of proposed changes necessary to attain the desired future state. When determining the formal requirements for the project, you must include the desired functional specifications, technical considerations and relevant needs such as training and budget.
Step 2: Set realistic KPI’s
No initiative can be successful if success itself is not defined. KPIs enable businesses to track progress, but they only work when they’re realistic, measurable and precise. For instance, a core KPI for e-invoicing adoption could be the time saved on manual processes by AP staff. Try to relate your KPIs to the company’s overall vision to further bolster your business case.
Step 3: Build a logical argument for e-invoicing
The potential ROI of an effective e-invoicing solution will likely dissipate any doubt lingering in the minds of stakeholders at this stage. Consider weaving the following benefits into your business case to boost confidence in e-invoicing:
- Data quality. By removing the need for human interaction, e-invoices can’t be tarnished by human error. Instead, the data captured is accurate, structured and accessible, minimising the risk of non-compliance while expediting payments.
- Efficiency. Manual invoice processing is a time-consuming, tedious process for AP staff. Businesses free up valuable time, assigning employees to more high-value tasks through e-invoicing.
- The environmental aspect. By removing unnecessary paper waste from the back office, businesses can advance towards their ESG targets and lower their carbon footprint. In an increasingly eco-conscious world, the environmental benefits of e-invoicing could be a game-changer for companies that are still on the fence.
Step 4: Communicate the scope and timeline for approval
Although there’s no end date for any digital transformation project, it’s essential that stakeholders have a timeline to follow progress and ensure that the investment was a worthwhile one.
For example, you can determine the various stages of the company-wide e-invoicing rollout, when you expect to see results and when the business should reassess the situation if the ROI isn’t what was hoped. In the last instance, you must present a clear plan to pivot to provide stakeholders with reassurance should the worst happen.
Download our eBook to make your e-invoicing project a success
Setting up any new system for the first time can be a challenge. It’s not just the initial installation of software or training staff, but the continued smooth running of processes after that.
E-invoicing will be new territory for many AP/AR departments. A clear implementation plan is therefore required to make the switch to electronic invoice processing as smooth as possible for everyone involved.
Latest insurance tax changes in Poland, France and Alberta
Below is a summary of the latest Insurance Tax changes in Poland, France and Alberta
France
Tax Rate
France – National Health Insurance Fund exceptional contribution discontinued
Tax types
- Caisse nationale de l’assurance maladie
Products
- Group Health
- Private Health
- Accident & Health
Summary
It appears that the exceptional contribution on supplementary health insurance premiums, levied to combat the financial impact of the COVID-19 pandemic, has been discontinued in France following two years of implementation.
Applying since January 1, 2020, the French government imposed an exceptional contribution exclusively on supplementary health insurance premiums. The exceptional contribution was set at a rate of 2.60% for the year of 2020 and 1.30% for the year of 2021. Funds raised from this contribution were allocated to the National Health Insurance Fund.
There were initially discussions to increase the rate for the exceptional contribution in 2022, however, the proposal of raising the rate has been rejected. In addition to this, the Social Security Financing Bill for 2022 does not indicate that the 1.30% rate for 2021 will continue to be levied, therefore it appears that the exceptional contribution will not be levied on supplementary health insurance premiums for the year of 2022 and onwards.
Get the latest IPT news and tax rate changes sent directly to your inbox.
Poland
Tax Rate
Increase of Supervisory Levy (Ombudsman) rates for 2022
Tax types
- Supervisory levy (Ombudsman)
Products
- Multiple Products Effected – See summary
Summary
Insurers paying the Polish Supervisory Levy (Ombudsman) are reminded that the payment for Quarter One, 2022 is due and the rate has increased. Applicable from January 1, 2022, the rates are as follows:
- Up to 0.023% of gross premiums for domestic insurance companies
- Up to 0.025% of gross premiums for foreign insurance companies
The previous rate, applicable from January 1, 2020 to December 31, 2021, was up to 0.0184% for domestic insurance companies, and for foreign insurance companies, a rate of up to 0.02%.
EEA insurers operating a branch in Poland through Freedom of Establishment (FOE) are subject to the domestic insurance company rate. If an EEA insurer does not have a branch and conducts Polish business through Freedom of Services (FOS), the foreign insurance company rate applies. For foreign insurance companies, the amount is calculated based on gross premiums for insurance contracts concluded in connection with the performance of insurance activities in Poland.
Changes have been updated on the Avalara IPT Lookup and Tax Calculator.
Canada – Alberta
Tax Rate
Canada: Alberta – Release of Circular CT-21R5 on Insurance Premium Tax
Tax types
- Insurance premium tax
Summary
The Alberta Tax and Revenue Administration has recently published Circular CT-21R5. This information circular provides an overview of Insurance Premium Tax in Alberta and highlights legislation originally outlined in the Alberta Corporate Tax Act.
The circular confirms the following tax rates:
- 3% for contracts of accident, sickness, and life insurance
- 4% for all other taxable contracts of insurance
Insurance Premium Tax is not payable on life insurance when amounts receivable are considered an annuity contract, contracts of marine insurance with the exception of insurance of pleasure crafts, premiums that an insurer does not receive under a risk distribution program, and reinsurance.
As emphasised in our previous News Alert, published on January 14, 2022, IPT must be filed electronically through the Tax Revenue Administration Client Self-Service (TRACS) online portal, on or before the 75th day following the end of the insurer’s taxation year. Supporting documents are not required to be submitted at the stage of an IPT return, but they must be retained by the insurer to be provided upon request by the authority.
If you have any questions or comments regarding these insurance tax alerts, please do not hesitate to get in touch.
Read our latest whitepaper: The Digitalisation of the Insurance Tax Landscape
What’s inside:
- The race to digitalisation in the insurance industry
- Data digitisation and the impact on IPT
- Current state of IPT across the world
- The outlook for captive insurers
- IPT compliance under the microscope
- The boom in insurtechs
VAT compliance Key Performance Indicators – what is best practice?
Whether you prepare VAT returns in-house, outsource indirect tax returns to a third party, or use a shared service centre or centre of excellence, how do you assess performance and what success looks like? It is certainly best practice to set Key Performance Indicators (KPIs) in relation to indirect tax compliance. While these can be localised at a country or regional level, it is recommended that KPIs are scalable to have a consistent policy and for benchmarking and ease of comparison, as well as to identify best practice or flag common areas of risk.
Key performance indicators in relation to tax can help measure the company’s or a specific team’s performance against established goals, which can be set in alignment with broader organisational goals approved by management and the VP/C-Suite level that oversees finance, accounting and tax risk management.
Examples of KPIs that we see businesses adopting include:
- % of VAT returns submitted on time
- % of VAT payments made on time
- VAT returns are accurate (using exception reporting to assess this)
- VAT return numbers reconcile to the General Ledger (GL), with variances explained
- implement strategies to reduce tax process costs
- post VAT to purchase ledger with relevant tax code within 5 days of receiving invoice
- report all VAT return/GL discrepancies at least 72 hours before submission.
Some of these success metrics are easy to measure and relatively straightforward to quantify e.g.
- penalties raised by tax authorities
- interest on late payments or assessed tax
- date of submission of returns (evidenced by filing receipt).
Other metrics may require more sophisticated data analytics and exception reporting to identify possible discrepancies, errors, and incorrect tax calculations. Some examples of checks on VAT data that businesses can carry out as part of the VAT or GST return preparation process (for example using an automated VAT return compliance solution like Avalara’s VAT Reporting) include:
- duplicate supplier invoice number
- unacceptable exchange rate
- invalid customer or supplier VAT registration number
- output VAT is greater than expected
- input VAT is less than expected
- VAT has been charged in error based on customer location.
As the direction of travel for VAT compliance is clear – it is the digital submission of transactional data in real time to the tax authority (via e-invoicing and e-reporting), the importance of getting the VAT calculation and reporting correct first time becomes even more important. Tax authorities will be able to run their own analytics, exception reporting and even AI and machine learning over complete datasets, not only identifying errors and discrepancies requiring further analysis, investigation or audit, but also gaining insights that can be used across different taxes and areas of risk e.g. customs duty, corporate income tax and transfer pricing. Businesses should act now to future-proof their indirect tax function and consider how technology can automate VAT processes and reduce risk.
Speak to an VAT expert now to see how we can assist with VAT calculation, VAT reporting and e-invoicing.
Expanding to the US and beyond: don’t let tax hold you back
With business expansion front of mind for thousands of retailers, help is on hand for business leaders seeking to navigate through the world of tax compliance.
At this year’s Moonova, one of the largest marketing and digital commerce events for decision-makers across marketing, sales and product, attendees heard from Avalara’s Technology Solutions Manager EMEA, Dr. Florian Spendlingwimmer. Invited to lift the lid on the challenges DACH-based businesses are facing when considering expansion, Dr. Spendlingwimmer highlighted three key areas which require attention for ambitious business:
- Navigating through and understanding where the business has tax obligations
- The method and means by which you are required collect tax and submit tax payments in each market
- How to identify the correct tax rates when selling internationally.
Consider New Markets Carefully
At a time where change is constant, during the presentation, Dr. Spendlingwinner commented: “Since the introduction of the One-Stop-Shop in Europe, there is a smaller threshold for businesses selling across the region. Set at just €10,000 it impacts nearly every merchant. Online marketplaces, although a great way to enter and test a market, are now subject to increased regulation and careful consideration needs to be given to the channels which you plan to sell through”.
Dr. Spendlingwinner continues: “When you’re ready to expand internationally, you need to carefully consider what channels you want to expand into.
“In the example of a German businesses seeking to expand further afield, the natural first step might be to enter the Austrian market. This progression is made easier by the fact that there’s no need to translate your checkout or your website. This can be a good way of testing your expansion plans and building your understanding of tax requirements and compliance. However, where the complexity comes in, is when there is desire to expand further afield – into the United States for example. Business might understandably assume that having expanded into one market successfully, the route to entry will be similar. Unfortunately, it’s not the case. In fact, it becomes even more complex!”
Since the start of 2022 the industry has seen a raft of changes come in which have drastically changed the landscape. From updated HS codes through to new tax justifications in the US – staying on top of your obligations requires constant monitoring. For European suppliers selling into America, there may be a scenario where your business has stock across multiple states. With around 14,000 tax justifications on the continent alone, you’re likely to need some support navigating your way.
Understanding what might trigger new tax obligations for your business from the outset and staying up to date with the ever developing compliance sector is imperative to continued success.
Prepare for Change
If you’re a DACH-based business keen to expand into new markets or are scaling up operations, Dr. Spendlingwimmer’s presentation is available to playback (recording in German).
In addition – check out Avalara’s Tax Live blog, an up-to-date resource available to readers to help keep updated with upcoming changes. Our specialists have unparalleled knowledge and expertise in all aspects of tax compliance, wherever your business is based. From helping you understand your tax obligations through to automatic tax returns, we can help you grow.
If you’re ready to take the next step and want to take the complexity out of compliance, get in touch with us for a no obligation call.
Futureproof your business with e-invoicing
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.
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