E-invoicing integrates several technologies that send transaction data to vendors and customers through an Electronic Data Interchange (EDI) system. Statistics suggest electronic invoices may save businesses between 60-80% compared to paper-based processes. Digital billing also enables real-time reporting and facilitates contract and tax compliance.
Governments around the world are rapidly adopting electronic invoicing regulations.
Here we discuss how electronic billing regulations will impact private organizations and public administrations across the globe.
The digital economy has created opportunities for global businesses looking to expand to new world markets. Organizations must be efficient to meet customer demands and remain competitive.
Electronic billing is becoming a critical driver for business efficiency. E-invoice systems can capture data and automate transactions. Automating processes reduces errors and saves time spent on redundant administrative tasks.
Paper-based systems rely on manual data entry, which is susceptible to errors. Mistakes may force accounting clerks to spend time re-entering data. Accounts payable may send invoices to the wrong address, resulting in delays that can incur interest and payment penalties.
E-invoicing can increase cash flow for businesses by reducing the resources wasted on correcting mistakes. E-invoicing is also more efficient at monitoring and managing invoices and may prevent fraudulent transactions. It improves data collection and analysis, helping businesses find new growth opportunities in emerging markets.
The benefits of e-invoicing go beyond companies looking to enhance accounting efficiencies. State agencies are leveraging electronic billing technologies to optimize tax collection and ensure compliance.
Several countries have already implemented regulations that compel organizations 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.
The challenge for public administrators is how to automate e-invoicing formats. Organizations will also need to integrate and manage ERP invoice processes seamlessly to improve clearance. Different jurisdictions have developed varying e-billing formats and rules.
Some countries like Mexico are already using e-invoicing to create a reliable audit trail. The state mandates the use of stamps that indicate the country of origin and validates the digital document. The data is in XML format and clearance happens in real-time for all B2B transactions.
Many countries in the European Union have also adopted e-invoicing for tax compliance. Some countries like Italy and Germany require businesses to use e-invoicing when transacting with the government. France recently changed its stance on e-invoicing after years of opposing the EU’s mandates.
Other jurisdictions worldwide implementing electronic billing regulations are Greece, Saudi Arabia, and China. Other countries, like Indonesia, Croatia, and the Philippines, require e-invoices to be sent to the government for all transactions.
The United States has been one of the last countries to implement regulations on e-invoicing. A 2015 government mandate required federal agencies to adopt electronic invoices by 2018. Currently, e-invoicing is not mandatory for businesses but is required for procurements by the federal government.
However, many organizations in the US are already abandoning paper-based billing in favor of e-invoices. E-invoices in the US must be in the XML-UBL (Universal Business Language) format. The XML-UBL format simplifies the process of sending electronic invoices to other parties. Compliance rules require the system to integrate a digital signature and strong security protocols.
The e-invoicing regulations in the US apply to federal agencies under the Business Payment Coalition (BPC). The BPC is a group of 600 companies taking part in the pilot to test e-invoicing systems. The US Federal Reserve is collecting data from its pilot project as the agency works on a roadmap.
The roadmap by the Federal Reserve seeks to have a working e-invoicing solution by 2023 for all B2B transactions. The electronic billing system will allow businesses to connect to government agencies through specialized access points. The model will enable trading parties to send and receive invoices without unique software applications.
E-invoicing reduces the processing time and resources spent on paper-based systems. Statistics from the US Office of Management and Budget (OMB), indicate the agencies saved between $150-200 million dollars. Electronic invoicing also eliminates the need for postage stamps and printing paper.
As more jurisdictions issue mandates for electronic billing processes, businesses are under pressure to comply with the rules. The challenge for companies is to ensure e-invoicing standards and data transparency. However, organizations are already using e-invoicing even in jurisdictions where it is not mandatory.
The benefits have compelled organizations to consider e-invoicing systems as an investment that presents new opportunities. In the digital economy, many companies now realize access to real-time data is an asset to their long-term survival. Contact Quadient today to get more information about e-invoicing and how it can help your business.