Today, the fast pace of transactions is prompting businesses to adopt electronic billing solutions, enabling companies to better manage cash flow and stay on top of their bills more efficiently. E-invoicing (online invoice) can be described as a digital form of the traditional invoice, without all the challenges that come along with traditional, paper-billing systems.
The invoicing process begins when the customer indicates they want to make a purchase. If the buyer and seller agree on the terms, the accounts payable department creates a purchase order.
The purchase order is a legally binding document that validates the terms of the trading agreement. It stipulates how the vendor will deliver goods, the unit costs of each item, and the total amount owed. The invoicing phase starts when the seller fulfils the order.
The invoice is a critical part of the company's internal operations. Businesses can use invoices to improve operations by retrieving documents to determine supply chain inadequacies. Invoices are also a record of transactions that can facilitate tax compliance. An e-invoice maintains the same content and validity as a traditional paper invoice, but in a structured format. Electronic invoicing makes it easier to manage and monitor transactions between different parties.
E-invoicing, in simple terms, involves shifting traditional paper invoices to a digital format that is machine-readable. It is an electronic billing process between a supplier and buyer on an electronic data interchange system. An e-invoice has information like the contents of the paper invoice. But it is more than simply a digital version of the invoice.
An electronic invoice has a structure enabling the bill to integrate with other accounting software or ERP systems. The e-invoicing requirements allow the application to quickly archive and retrieve data when needed. It speeds up the billing process, reducing errors that could cost the business and encourage fraud.
Studies suggest the electronic invoice format may save businesses between 60-80% compared to paper-based processes. Digital billing also enables real-time reporting and facilitates contract and tax compliance.
Physical invoices generate a lot of paperwork that can be cumbersome to manage and monitor. Sometimes businesses create multiple hard copies of the invoice to ensure all parties get a copy. Depending on the organisation, it can generate thousands of documents that can be difficult to track.
When a customer calls, the accounts payable clerks may find it hard to locate a physical copy of an invoice. Your staff may spend a lot of time searching for the invoice in heaps of paperwork when a customer requests a payment status. An electronic invoice enables the business to meet the demands of a fast-moving supply chain by saving valuable time.
Paper-based processes involve manual data entry, often fraught with human errors. Mistakes may result in the delivery of invoices to the wrong address, or the wrong price charged to a client. Accounts payable clerks may spend hours correcting errors, increasing the cost per invoice.
Lost documents and human errors may lengthen the approval process. As a result, manual reconciliation of purchase orders, invoices, and contracts can be challenging to complete on time. These challenges can negatively impact vendor relationships.
Governments around the world are rapidly adopting electronic invoicing regulations. Several countries in the European Union (EU) have already implemented regulations that compel organisations to provide electronic invoices through their ERP systems. The primary goals of e-invoicing regulations are to reduce procurement costs and to facilitate real-time tax reporting. Additionally, e-invoicing provides governments with more up-to-date data on how their economies are performing.
Learn more about e-invoicing regulations.
E-invoicing automates the invoicing process and eliminates the need to manually enter information.
An electronic invoicing system reduces the time accounting clerks spend validating traditional paper-based invoices. And businesses receive fewer service calls from customers seeking information about transactions.
E-invoicing systems work in tandem with ERP systems and other digital tools to speed up the invoice creation process. Consolidation with digital tools enables businesses to manage product and service transactions with ease, and boosts transparency and confidence in the process, speeding up the invoice-to-payment cycle, resulting in faster payments and improved cash flowAnother advantage of the electronic format is it enables faster and more efficient data analysis. Businesses can monitor and check the document's status in real-time, eliminating the risk of privacy violations and the organisation can adapt quickly to rapidly changing supply-chain demands.
Even though e-invoicing is not yet mandatory in every country, it can facilitate contract and tax compliance. For example, the digital invoice will auto-populate fields, making the tax return process simpler and error-free. You can also configure the system to operate within specific business rules. Accounting clerks may quickly retrieve documents to access historical business data.
E-invoicing is becoming a critical management tool in the ever-changing business and government regulatory landscape. It integrates with your existing ERP platform and other systems in your organisation. The process ensures consistent results and can help companies grow. While it may seem daunting, shifting from a paper-based system to an electronic invoice is quite simple. Your business will simply require a digital platform that communicates seamlessly and integrates effectively with your existing operations.
Adopting turnkey e-invoicing solutions that can incorporate into legacy systems can dramatically improve invoice processing speed. A flexible and user-friendly platform allows for tailored processes and scalability. With multi-channel document automation, time wasted on invoice processing can be refocused on other critical aspects of the business.