Electronic invoicing – the future of invoicing

Electronic invoicing has been around for several years already. Back in 2005, the Danish Government made it mandatory by law that all invoices to the public sector must be delivered in XML format. So pretty much as a supplier, the only way of getting paid is to deliver your invoices as XML.

This has gradually over the years been increasing to most of the European countries these days covering both the private and the public sector.

In Germany, we are currently implementing ZUGFeRD as well as XRechnung with a lot of our customers. ZUGFeRD is a “funny” format. Basically, it is a combination of PDF and XML where a structured/formatted XML (XRechnung format) is embedded in the PDF. This way you can visually view the format as well as set up an automatic process for reading and processing the XML document.

Currently the federal authorities and federal public institutions in accordance with the E-Rech-Vo request suppliers to submit E-invoices. But also in the public sector, we have seen several industry leaders adopting the requirements, requesting their own suppliers to adopt ZUGFeRD and/or XRechnung.

This “new” way of invoicing has the potential to replace traditional invoices and several other business documents in the future. More and more companies are switching to electronic invoices when conducting their business.

What is electronic invoicing?

An electronic invoice is a type of invoice that is issued, sent and received, and paid in an electronic format.

There are a lot of e-invoice types, but the main distinction is between:

• Structured data (for example the XML format)
• Unstructured data (PDF, JPEG, or Word documents)
• Hybrid data (for example, ZUGFeRD)

Naturally, structured and hybrid e-invoices are superior to unstructured ones. This is because structured data formats can be opened and viewed with different software solutions. The sender and recipient of the invoice don’t have to use the same programs to open the invoice.

Advantages of electronic invoicing

Doing business electronically is becoming more common in companies all over the world. As one of the steps of conducting business digitally, e-invoicing can benefit a company in many ways.

Electronic invoicing reduces costs

Probably the most important benefit of e-invoicing is that it reduces the usual standing business expenses.

Regular invoices are printed on paper, sent by mail, or scanned and printed later. Businesses also usually archive physical copies of invoices. Imagine the sheer amount of paper that businesses use for this every year, not to mention mailing costs. Invoicing clients electronically will remove the need for so much paper, and you can send e-invoices for free via email. In addition to all of this, reducing the amount of paper you use is good for the environment. Thus, by digitalizing your business you’re protecting the environment and improving your CSR profile.

Reduces the chances of human errors

Electronic invoicing removes the need for transcribing invoices manually into your ERP or accounting software. Obviously, this saves a lot of money on man-hours a business owner would usually have to pay. Instead of having someone transcribe, scan, and/or check all the invoices for mistakes, you can automate the process.

E-invoices are generated directly from the information gathered directly from the ERP of your choice. Invoicing in this way reduces the chances of human error by a lot.

Improves cash flow and workflow

Another huge benefit of electronic invoicing is that it’s easier to automate than regular invoicing. Automating e-invoicing is a faster and cleaner solution for improving your cash flow. Since taxes and returns are automatically filled out, there’s no risk of filling in the wrong taxes or forgetting to file your returns. All this allows you to substantially improve your workflow and allows for faster payment processing and management.

Electronic invoicing makes B2G procurement much easier and faster

E-invoicing started by being the default business to government invoicing tool. Since the European Directive 2014/55/EU was passed, governments in the EU require businesses that apply for public sector contracts to submit their invoices in electronic form. And a lot of other countries have followed this example since 2014.

This means that if your business plans on working on any government contracts, it needs to have e-invoicing capabilities.

Secure and completely transparent

Electronic invoicing is more secure than the usual methods of invoicing. It is immune to physical damage – such as tears, coffee spills, or getting misplaced. Additionally, it is a transparent way to do business.

Facilitates international trade

Electronic invoicing helps make cross-border trade easier. If two or more countries are using the same e-invoicing format (for example, countries in the EU), trade is easier.

E-invoices are more transparent and secure. Since the information is generated automatically, there are fewer chances for human error. Likewise, there’s no way that any info can get added, lost, or altered without you knowing about it.

Regulations for electronic invoicing (in the countries of EU)

Since e-invoicing is the go-to solution for getting paid for work done on projects in the public sector, there are a lot of regulations tied to it.

• Unified format – e-invoices need to be in a single format which will depend on the country they are being used in.
• Legally compliant – all e-invoices are compliant with the legal standards of the countries using them.
• Mandatory – this type of invoicing will become obligatory soon.

Overcoming the e-invoicing challenges

While electronic invoicing is the fastest way to invoice clients and it still comes with its share of challenges. Overcoming these is what e-invoicing software is supposed to help with.

• Different regulations and requirements – some countries still have different rules regarding e-invoicing which may present some challenges with using this form of invoicing.
• It’s a daunting task – switching your business to e-invoicing can take a lot of time and effort, unless you have the right assistance.

If you’re considering switching to e-invoices and digitalizing your business, InterForm will help you make the change. We enable businesses to get the most out of their ERPs and improve their workflow with the best output there is.

How can InterForm help you with your e-invoicing?

Most customers have made the move from print to pdf/emailing invoices. But many customers are quite frustrated when they reach out to us as they simply don’t know what to do. The guidelines are very technical and for many difficult to understand. But the “problem” is not that big, and we have already helped many customers set up XML invoicing.

There is work to do and most of it concerns preparing data as the data required for e.g. XRechnung (German format) is nothing like your standard printed invoice. Thus, it requires some additional work for preparing the data.

We have designed a package, based on the many installations we have done, that has reduced the implementation time to less than a third of the first many installations. We achieved this by standardizing as much as possible. Basically, we have created templates that enable customers to adapt to a new electronic format much quicker and more intelligently. This is the power of Output Management.

Reach out to us to learn more about how you can get ready for creating ZUGFeRD, XRechnung, or any format you need.