Institutions at the national and international levels are mandating e-invoicing to enhance tax collection and eliminate fraud. Real-time reporting is another requirement often included with e-invoicing regulations.

Even companies in countries without any of the requirements or mandates will have to update their billing system. Timely reporting and electronic invoicing are crucial for businesses transacting with overseas clients.

Quadient has collected some ways the two concepts will impact businesses in the coming decade.

Real-time reporting, also known as continuous transaction controls (CTCs) is a mandate that requires suppliers to submit data on Value-Added Tax (VAT) to tax authorities. The information must be submitted through a network like Peppol in real-time or near real-time.

Real-time reporting spots anomalies in the billing process and detects fraud for timely action. Governments may also use the data to compute VAT income or economic projections.

The standards may vary across different jurisdictions. Real-time reporting could be part of the e-invoicing requirement or a stand-alone mandate without e-invoicing. The tax authority can still use real-time data from VAT, so electronic invoices are not always necessary.

E-invoicing 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.

Digital invoices are often just scanned copies of the invoice in PDF format. Extracting data from a digital invoice requires additional tools like optical character recognition software. That may require businesses to invest in resources and training for staff.

There is no universal standard for e-invoicing or real-time reporting. However, countries have implemented different standards for sending invoices over a digital network. Typically, an e-invoicing solution creates the bill in a universally accessible format like XML.

Countries like Germany, France, Spain, and Poland have mandated e-invoicing for companies transacting within their borders, and may have their own required formats. The process has benefits for consumers, vendors, and tax authorities. Governments can also use e-invoicing solutions to curb fraud and tax evasion.

Real-time reporting can be described as part of e-invoicing requirements. Most states with e-invoicing regulations may include a real-time VAT reporting mandate. The primary purpose of the two requirements is to stop tax evasion.

According to experts on e-invoicing and real-time reporting mandates, tax evasion is caused by several factors, including:

• Bankruptcies and insolvencies
• Tax fraud and avoidance
• Staff errors and accounting issues
• Unethical tax optimisation practices 

Manual paper-based systems do not provide quality and timely data to facilitate oversight for tax collection. Countries with real-time reporting require businesses to submit the invoice to the tax authority first. The tax authority evaluates the invoice before the consumer pays it.

The tax authority can also automate the billing process to improve error and fraud detection. Invoicing software online may use artificial intelligence to find discrepancies in large volumes of transaction data. The process is much more efficient and costs less for the government agency.

There are still countries that do not have any invoice billing mandates. But e-invoicing solutions have measurable benefits for governments and businesses alike. The VAT gap in the UE has been reduced by 38% since 2020 (from €99 billion in 2020 to €61 billion in 2021), in part due to e-invoicing measures, continuous transaction controls, and tax system digitalisation. 

E-invoicing and real-time reporting have many benefits for the business. Accounting staff can automate processes and reduce errors in their billing cycle.

Businesses can use applications from an invoicing software online service. The system formats the structure of the document to ensure compliance. The application simplifies data retrieval to provide information for business strategy.

Businesses are working on meeting the compliance requirements stipulated by tax authorities around the globe. Countries without the mandate still must consider the implications when transacting overseas. The migration to e-invoicing can be simplified by using our online invoicing software.

Contact Quadient today for business process automation and e-invoicing solutions.