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What is e-invoicing?

September 28, 2023

Written by: Erik Stening, Product Marketing Manager

Invoicing is essential to any business, but traditional paper-based invoicing methods are often time-consuming and error-prone. Amid advancing digital technology and new government mandates, electronic invoicing has gained prominence. It is quickly becoming the preferred solution for businesses seeking to streamline their invoicing processes, reduce costs, and improve efficiency. But what is the meaning of e-invoicing? In this article, we explore its ins and outs to give you an overview of the topic.

What is e-invoicing? Definition and meaning of electronic invoicing

E-invoicing, or electronic invoicing, refers to the digital transformation of the invoicing process. Utilising specialised software or services to automate various stages of invoicing — from the creation and distribution of invoices to the reception and archiving. This method helps businesses speed up billing, improve accuracy, and follow invoicing and payment rules in different countries.

What is an e-invoice?

An electronic invoice (e-invoice) is a document that facilitates a seamless exchange of invoice information between a supplier and a buyer. It is issued, transmitted, received, processed, and stored using specific data formats such as XML or other structured data formats that can easily be processed by ERP systems. Unlike other types of invoices, an e-invoice remains digital throughout its entire life cycle, from issuance to archiving.

What is not considered an electronic invoice?

Here's a quick overview of the most common types of invoices that are not considered e-invoices and how they compare:

Paper or printed invoice

Paper invoices are often created digitally, printed, and sent by post to the counterpart. It takes time for the invoice to reach the recipient, and there is no traceability of the delivery.

PDF (and other image files) invoice

Invoices exchanged over email as PDF, Word documents, or other image files are a first step away from a paper-based invoice flow. These types of invoices are commonly mistaken as e-invoices. However, these are not true e-invoices because the recipient must manually key in or capture the data using OCR technology. In addition, emailed invoices often need to be printed in paper for matching and archiving purposes.

Other types of invoices

The terms "digital invoice," "online invoice," and "e-bill" are sometimes used when referring to "e-invoice" or "electronic invoice". However, it's important to note that these alternate terms may not always encompass the same definition. So, keep in mind that not all digital invoices are genuine e-invoices. When in doubt, always refer to the previously mentioned definitions. 

  Paper invoice PDF invoice E-invoice
No system changes  Yes  Yes  Yes
Cost-effective  X  Yes  Yes
Increases efficiency  X  X  Yes
Secure  X  X  Yes
Real-time delivery and processing  X  X  Yes
Enables touchless operations  X  X  Yes
High data quality  X  X  Yes
Track and traceability  X  X  Yes
Better cash flow and low DSO  X  X  Yes
High ROI  X  X  Yes
Environmentally friendly  X  X  Yes

Table: Comparison of the benefits of different invoice types


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Do small businesses need to adopt electronic invoicing?

The adoption of electronic invoicing can be beneficial for businesses of all sizes. While larger organisations may experience more immediate cost savings and efficiency gains, small businesses can also benefit from reduced paperwork, faster payment processing, and improved accuracy. In today’s business landscape, understanding the meaning of e-invoicing is becoming increasingly important as the demand for streamlined solutions is growing and is often a requirement from customers. 

What are the benefits of e-invoicing?

The Billentis Report reveals that "Compared to conventional paper invoice processing, automated e-invoicing will result in cost savings of 60-80% in most cases" (Bruno Koch, "The E-invoicing Journey 2019-2025," 4.1.5).

So, where do all that savings come from? When done right, e-invoicing gives you an overview and insight for cutting costs and increasing profit margins that aren't possible with PDF and paper-based methods. Here are some of the advantages of e-invoicing that add up to high ROI, long-term savings, and better results in general:

Time savings: Automating the invoicing process saves time by reducing the need for manual data entry and processing. This allows businesses to focus on more strategic activities.

Accuracy and efficiency: Using digital methods reduces the risk of errors and inaccuracies that can occur with manual invoicing processes, such as data entry errors and lost invoices. It also enables faster processing and approval of invoices, leading to improved efficiency.

Improved cash flow management: E-invoicing allows businesses to receive payments faster, improving their cash flow management and lower DSO. Electronic invoicing also provides greater visibility into invoice status and payment history, making it easier to track and manage payments.

Secure document and data exchange: Encrypted file transfer, digital signatures, and secure networks all make e-invoicing the safest way to send and receive invoices. There's also no risk of invoices being lost in the mail or sent to the junk inbox.

Environmentally friendly: E-invoicing not only helps you reduce paper use and lower CO2 emissions; it also lowers operational costs, and helps create a transparent, trustworthy brand reputation.

Fulfil legal requirements: With the right service provider, e-invoicing ensures you are always up to date, and compliant with local and international invoicing, tax, and archiving regulations.

Real-time delivery and processing: A good e-invoicing solution will enable a live view of documents' delivery and processing status via cloud-based platforms or directly from your ERP.

High-quality data: Going digital lets you access and analyse line-level data that drives business growth through better financial and procurement decisions.

Track and traceability: E-invoicing automatically tracks transaction history and the entire document journey, so you don't have to spend time doing it manually.

Remote work-compatible: Using cloud-based invoicing solutions means that tasks can be completed from anywhere without the need for extra resources like printers, scanners, or the postal service.

How does e-invoicing work?

E-invoicing streamlines financial operations by facilitating systematic management of accounts payable (AP) and accounts receivable (AR) through digitalised workflows in both customer and supplier invoicing. Here's a step-by-step breakdown providing a quick overview of each process:

Customer invoicing (outgoing invoices)

  1. Invoice generation: This stage marks the beginning of accounts receivable management, where an e-invoice is crafted within an ERP system or e-invoicing platform to bill the customer for goods or services rendered.
  2. Integration and data delivery: The created invoice is then transmitted via an operator to the customer in a structured data format through secure, integrated solutions, which helps maintain the accuracy and integrity of data.
  3. Validation: Before its delivery to the customer, the e-invoice undergoes automated validation to assure compliance with the established rules and standards.
  4. Delivery to recipient: The validated e-invoice is then dispatched to the customer in their preferred format, accommodating their specific invoicing preferences and requirements, facilitating swift and smooth transactions.

Supplier invoicing (incoming invoices)

  1. Invoice receipt: This process initiates the accounts payable management cycle, starting with receiving an electronic invoice from a supplier, integrated directly into the recipient's financial system or ERP.
  2. Integration and data processing: At this juncture, the system processes the invoice data in a structured format, prepping it for further review and validation, ensuring seamless integration and data flow.
  3. Validation: Like the outgoing process, the e-invoice undergoes automated review to verify its compliance with established regulations, fostering accuracy and transparency in transactions.
  4. Final Recording: After validation, the invoice data gets automatically registered in the financial system, which streamlines the payment process and effectively handles accounts payable, marking the completion of a cycle of seamless business transactions.

What are some common e-invoicing formats and standards?

E-invoicing relies on standardized formats to ensure consistency in the structure and content of invoices, enabling seamless exchange of data between different systems. Some widely used e-invoicing standards include:

JSON (JavaScript Object Notation): JSON is a lightweight data interchange format that's easy for both humans and machines to read and write. While it's more commonly associated with web applications, JSON is also gaining traction in e-invoicing due to its simplicity and compatibility with modern programming languages.

XML (eXtensible Markup Language): XML is a versatile markup language used to define the structure and content of data in a human-readable format. It's widely used in e-invoicing due to its flexibility and extensibility. In an XML-based e-invoice, data elements are tagged with descriptive labels, making it easy to interpret and process the information.

Peppol BIS: A standardized set of formats specifically crafted for electronic documents pertaining to procurement processes within the Peppol network. It facilitates the seamless exchange of various procurement-related documents including invoices. This standard is integral in modern e-invoicing processes, promoting interoperability and streamlined communication between different business systems across borders.

EDIFACT (Electronic Data Interchange for Administration, Commerce, and Transport): EDIFACT is a global standard for electronic data interchange (EDI) used across various industries. While it has been used traditionally for paperless exchange of business documents, including invoices, it's also being adapted for modern e-invoicing processes.

What is B2B, B2C, and B2G e-invoicing?

B2B (Business-to-Business) e-invoicing involves the digital exchange of invoices between businesses. Sellers send electronic invoices to other businesses for products or services provided. This streamlines complex invoicing processes, enhances accuracy, and accelerates payment cycles.

B2C (Business-to-Consumer) e-invoicing refers to the electronic invoicing process between a business and individual consumers. Businesses send electronic invoices to customers for purchases, promoting convenience, reducing paper usage, and offering customers a digital record of their transactions.

B2G (Business-to-Government) e-invoicing pertains to electronic invoicing between businesses and government entities. Businesses send electronic invoices to government agencies for goods and services, adhering to specific government standards and compliance requirements. This approach enhances efficiency, transparency, and accuracy in financial transactions with the public sector.

Is e-invoicing mandatory?

Many governments worldwide are either planning or have already implemented mandatory e-invoicing requirements for businesses operating within their jurisdictions. These initiatives vary in scope and complexity but often share the common goal of modernising invoicing practices and reducing tax fraud. The mandates require businesses to adapt their invoicing processes to comply with the new regulations. This involves implementing digital solutions, ensuring data accuracy, and adhering to the respective governments' specific formatting and data standards. While these changes may initially require businesses to adapt, the long-term benefits include improved efficiency, reduced errors, and enhanced compliance with tax laws. It is a question of when rather than if. 


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What to consider when implementing e-invoicing?

Embarking on the e-invoicing journey represents an exciting step forward. Whether you're responding to customer demands or aiming to extensively automate your entire invoicing processes, the pivotal step is clearly outlining your organisational goals. Starting with a small yet flexible solution can often be a smart way to begin, allowing for gradual expansion in line with your objectives. This approach fosters a productive and rewarding progression tailored to meet your business's unique needs and aspirations. Here are some key considerations to keep in mind:

Commitment from your company: The successful implementation of e-invoicing requires commitment from several levels of your organisation. It's essential to have support from top management to ensure adequate resources, time, and effort are allocated to the project. Communicate the benefits of e-invoicing to all stakeholders to gain their buy-in.

Choosing the right e-invoicing solution: There are many e-invoicing solutions available, ranging from simple invoicing software to more advanced solutions that integrate with your enterprise resource planning (ERP) system. Choose a solution that fits your business and needs.

Integration with existing systems: When done right, your new solutions should integrate seamlessly with your existing solutions, such as accounting software, enterprise resource planning (ERP) systems, and other financial tools. Integration is crucial for smooth data flow between different systems and minimising disruption during implementation.

Network reach: Considering the extent of your supplier's network reach is crucial. Selecting a supplier with a network that has a large number of businesses connected to it helps ensure that your business can seamlessly exchange e-invoices with a diverse and expansive array of clients and vendors.

Ensure compliance with legal requirements: Ensure that your provider and solution are equipped to help you comply with the ever-changing e-invoicing requirements to avoid penalties and legal issues further down the road.

Outgoing or incoming flows, or both? Another important consideration is to define the scope of your project. Do you want to digitalise your supplier invoice flow (AP Automation), customer invoice flow (AR Automation), or both? Make sure that you choose a supplier that covers all your invoicing needs.

On-boarding business partners: To reap the benefits of e-invoicing, it is important to get your business partners, such as suppliers and customers, on board. Make sure to look for a vendor capable of helping you with supplier onboarding, communicating the value to your business partners, and setting your e-invoicing project up for success. 

A future-proof solution

Electronic invoicing is a game-changer for businesses seeking to streamline their invoicing processes, reduce costs, and improve efficiency. By implementing e-invoicing, you can save time, reduce errors, and improve your cash flow management. Additionally, e-invoicing has environmental benefits, reducing the impact of paper-based invoicing on the environment. As the world becomes increasingly digital and new legal requirements enter into force, e-invoicing is a crucial step towards a more sustainable and efficient future for businesses of all sizes. We hope that the information above should help set you off to a good start to implement e-invoicing in your business and reap the benefits. 

This text was originally published 18 February 2021 and last updated 28 September 2023.


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