The terms ‘digital invoice’ and ‘electronic invoice’ aka e-invoice are regularly used interchangeably. The evolving invoicing landscape can sometimes lead to confusion, especially when understanding the nuances between these two invoice types. In most cases, people mean the same thing, namely moving a paper process to an automated process. There are, however, important differences, particularly in how both are processed.
Let’s test your knowledge! Of the following statements, which are true, and which are false?
- A digital invoice is an invoice that can be viewed and processed digitally.
- An e-invoice is always in a digital file format, much like how a PDF or Word file is in a digital format.
- A digital invoice is not always an e-invoice.
- An e-invoice is an electronically (or digitally) delivered invoice.
If you answered that all statements are true, you are correct. And if you are confused, let’s get into the next section.
In this post, we explain both electronic and digital invoices and their differences.
What is the difference?
An e-invoice is sent directly to the buyer's financial system in a structured data format. This format allows the buyer's system to automatically recognize and prepare the invoice for subsequent processing without any human intervention. There are many different formats for e-invoicing, but no current global standard. E-invoicing standards are a set of specifications that define various invoice types, formats, and syntax. We break down the most common formats in this post here. Electronic invoices are produced by software, without human intervention.
On the other hand, a digital invoice is designed to be viewed and processed digitally. While both electronic and digital invoices are delivered in digital file formats, it is essential to note that a digital invoice is not necessarily electronic. The critical difference lies in the level of automation and integration with the buyer's financial system. A digital invoice tends to come in two forms: PDF or Word files, and scanned paper invoices.
Electronic invoices simplify the invoicing process by eliminating manual input, whereas digital invoices still require human intervention for processing. Understanding these distinctions is crucial for organizations seeking to optimize their invoicing systems and adopt the most efficient methods for their needs.
An evolution in invoice formats
Navigating the digital and e-invoicing landscape can be perplexing. Invoicing has evolved tremendously over time, developing new formats and delivery methods. Traditionally, invoices were prepared, printed, and distributed through postal channels, which involved a relatively straightforward, but manual, process.
The next wave of innovation introduced an additional internal process. Instead of sending physical invoices directly to a designated individual or department, these invoices were first sent to the receiving organization, where they were opened, scanned, and distributed internally—usually via email—to the appropriate recipient. This step marked a significant shift in how organizations managed their invoicing process.
The advent of digital invoices marked the first accurate migration towards digital invoicing. Invoices were created and sent in digital formats, such as PDF or Word documents, with email being the preferred delivery channel. The introduction of e-invoices took this process further.
Generated automatically and intended for systems rather than individuals, e-invoices deliver structured data directly to the receiver's payment system, eliminating the need for human processing. This progression illustrates the continuous evolution of invoicing practices as businesses strive for greater efficiency and automation.
Many countries globally are implementing mandatory e-invoicing or digital reporting requirements. Specifically, the European Union is implementing mandatory e-invoicing, and businesses will no longer be allowed to handle invoices manually. In the US, the Business Payments Coalition (BPC), a group of more than 600 organizations, is currently piloting an e-invoicing solution in the US. As much of the world moves towards standardizing e-invoicing, businesses must prepare for potential mandates. Companies all around should be looking into adjusting to ensure that they are able to transact in the future.
Say goodbye to paper invoices
In conclusion, as a key takeaway, know that electronic invoices are a form of a digital invoice, but conversely, a digital invoice is not an electronic invoice (the confusion is not lost on us).
The world is moving towards digitization. Less paper pushing and manual labor mean more visibility, more compliance, and more savings across businesses everywhere.
Decision makers need to start looking into e-invoicing today – as e-invoicing mandates are enforced in Europe and e-invoicing is implemented in more countries around the globe, businesses will be forced to adopt e-invoicing to remain competitive and to access these markets. It’s highly likely that in less than a decade, e-invoicing will become a standard solution. If you’re ready to make a switch to a more digitalized future or if you’re looking to explore e-invoicing, now is the time to look into teaming up with a quality service provider.
To learn more about the benefits of digitization or how we can support your journey to e-invoicing for your business, contact us here.
