How to E-invoice

Up until around five years ago e-invoicing solutions were principally developed for large enterprises. However new solutions, specially developed for SMEs (Small and Medium-sized Enterprises), are gaining market share. By making the transition from physical to digital invoicing SMEs are reaping the benefits of a more reliable, secure, traceable and streamlined process.

Two Different Formats for E-Invoicing

The first format for electronic invoicing is a PDF. The supplier who decides to send an invoice by PDF has 2 options: he can send a simple PDF and, in this case, the supplier and the client have to ensure that internal business controls are in place to create a reliable audit trail in case of tax control. Or he can use an electronic signature which guarantees the integrity and the authenticity of the document.  This PDF method is quite easy for the sender, but implies that the recipient has to either input the invoice data manually into his Accounting system or automate the process using a data capture solution.

Another option for e-invoicing is  EDI (Electronic Data Interchange). With the EDI solution, the customer and the supplier have to set up a specific invoicing data format (such as XML, EDIFACT…). It is often the customer who imposes his format on his suppliers as this method allows recipients to automate their entire invoicing process. The EDI solution is complex and costly from a supplier’s point of view as he has to manage a different EDI invoicing format for each customer. By implementing EDI, the supplier and customer have also to adhere to specific legislation on EDI such as for example the mandatory trading partner list in France.

Authenticity and Integrity for E-invoicing

The authenticity and the integrity of the electronic invoice (either in PDF format or EDI format) can be guaranteed by an electronic signature. By using an electronic signature, the sender has to make sure whether the electronic signature required by his country is an advanced or a qualified electronic signature. An advanced electronic signature is a software-based electronic signature whereas a qualified electronic signature is a hardware-based one.

Depending on local regulations, some countries may ask parties to store the invoice in its original format. This means that if the invoice was sent in an electronic format, it will have to be archived electronically during all the legal archiving period of time.

Different E-invoicing Methods

PDF and EDI files can be delivered in different ways. Firstly by email. This way of delivery may seem to be the simplest, but it could lead to complex and time consuming retrieval if it is not properly archived in an electronic way. In order to be properly handled by the recipient, it is recommended to send it to a department email address and not to a personal accountant's email address.

Secondly via a web portal. In this case the customer asks the supplier to manually input all the data from the invoice onto a web portal. This is extra work for the supplier who has to input data into both his accounting system and the customer’s web portal. Such a method increases the risk of human error. However it often allows the supplier to track the approval and payment of his invoices. The main benefit is on the customer’s side as it allows him to automate his entire invoicing process (invoice data input, invoice matching with delivery, invoice approval and payment).

E-invoicing service providers can also be used. This solution involves a third party, an e-invoicing service provider, who implements and supports e-invoicing processes and archiving on behalf of suppliers and/or customers. This third party deals with the complexity of different EDI invoicing formats and interoperability between the different service providers.