Electronic invoicing, usually referred to simply as e-invoicing, is now increasingly popular internationally in both B2B and B2G sectors, steadily replacing the old-fashioned paper invoice and more recent PDF invoice. In recent years it has been accelerated by European legislation mandating the use of e-invoicing in B2G transactions therefore of the benefits associated with e-invoicing becoming more popular.
On the one hand, this shift naturally means an alteration in invoicing processes – something that some may view with trepidation. Alternatively, however, e-invoicing brings many advantages to supply chain businesses. In this specific article we’ll explore these briefly in the context of the other commonly-used alternatives.
Paper invoicing
Surprisingly, paper invoices still make up a sizable percentage of the invoices exchanged today. Yet as the diagram below shows, this technique isn’t only consumption heavy, it also requires significant effort compared to the alternative (e-invoicing).
The sender prints out the invoice, puts it in an envelope, stamps it and then posts it. However, the expenses incurred are not limited by those associated with postage. Rather, it’s the manual processes of invoice creation, that are reflected in personnel and infrastructure costs that produce the paper-based process expensive. Whoever has ever written several invoices can understand how complex and non-scalable paper-based invoicing is!
Interestingly enough, many also trust the postoffice “blindly” when sending invoices, simply assuming that the invoice will reach the recipient (which generally it can of course). However, a confirmation of receipt by the recipient is merely available with the classic paper invoice for an additional charge. For more detail please visit, الفاتورة الإلكترونية
PDF invoicing
Over the past decade increasingly more companies have moved from paper invoicing to PDF invoicing. That is due partly to the legal equivalence of the e-invoice with the paper invoice and the omission of the obligatory electronic signature. Instead of sending paper invoices, PDF documents are sent by email or offered for download. The latter option is principally found in the B2C sector – e.g. when downloading the telecom bill.
For the sender of the PDF invoice, effort is reduced to the generation of the PDF (which is usually done automatically from the IT system) and the dispatch (which is also mostly done automatically). Admittedly this represents a substantial improvement in comparison to paper invoicing.
However, the procedure continues to be problematic on the recipient’s side as they are still confronted with a media break, much like a paper invoice. Quite simply, the data can’t be transferred automatically from the PDF in to the ERP/accounting system. Instead, the recipient is required to type it in manually or transfer it using copy & paste.
The reason for this is actually the PDF format itself. Unfortunately many people mistakenly believe PDF invoicing comes under the banner of e-invoicing. Financial firms false as a PDF is not really a structured, machine-processable document format, but is instead made to be human-readable. Formats such as XML, CSV or EDIFACT are far more suited to automated document exchange.
E-invoicing
When an e-invoice is sent, the invoice is generated on the sender’s side in a machine-processable format (e.g. EDIFACT or XML) and then sent right to the recipient’s IT system. There the e-invoice is absorbed by the IT system without human intervention and is also immediately designed for further processing (e.g. invoice verification and approval).
In contrast to paper or PDF invoices, no manual steps have to be taken and the procedure can be fully automated.
Furthermore, the sender (with regards to the technical protocol used for invoice transmission) receives a corresponding confirmation as soon as the recipient has received the invoice.
The great things about e-invoicing instantly
So what will be the specific advantages of using e-invoicing?
Savings with time, shipping and personnel costs
The tedious paper-based invoicing process, from printing to postage, is totally avoided. Personnel who had been previously accountable for invoicing is now able to be assigned to alternative activities. The company can focus on its core business again and doesn’t need to spend resources on complex support processes such as accounting. The recipient subsequently is relieved from manually processing the received invoice, as the invoice data can be automatically transferred to the ERP/accounting system.
Reduced material costs
Costs for paper, printer, enveloping etc. are reduced.
Faster payment due to faster processing
The payment periods for invoices usually get started to run after receipt of the invoice. As an electronically sent invoice is immediately available to the recipient, earlier and (hopefully) timely payments will be the result.
Reduced amount of input errors
Using the continuous automation of the invoicing process and the elimination of manual intervention, input errors are reduced to the very least.
Simplification of archiving
According to legal regulations, companies must store invoices for future audits by the tax authorities. The length of time varies from country to country (usually between 5 and 10 years). Paper invoices are generally not well suited for long-term storage. Fire or water damage and mold to the archive could result in the increased loss of archived invoices. Consequences for the business in such instances can be quite expensive – the tax authorities then typically start to estimate – mostly never to the benefit of the company. Regarding electronic invoice transmission, the invoice data is already available in electronic form and can therefore be quickly incorporated into an electronic archiving system. With appropriate backups and data mirroring (that are standard in contemporary archiving systems), invoice data remains secure and available.