Justin Main is the Vice President of Integrated Payments at Car confidencea leader in B2B integrated payments and receivables automation.
Cashing in is increasingly difficult. This is despite more businesses using electronic invoicing instead of traditional paper than ever before. In fact, leading analysts such as Billentis expect the global e-invoicing market to grow to around €18 million by 2025.
For many companies, their B2B e-invoicing solutions have been built around email and PDF delivery. Now, however, there are more than 90 different countries around the world that require e-invoicing in one form or another, with different standards, and we are in the midst of some of the most dramatic upheaval and increasing demand that the industry has seen.
Here are the three mandates every business should understand about today’s e-invoicing landscape:
Mandates of the buyer
Driven by customer demands, suppliers often must comply with sending invoices in a preferred format and through a preferred channel, such as an accounts payable (PA) platform such as Coupa or SAP Ariba. While great for buyers, suppliers are often hampered by manual processes for entering invoice data into buyer accounts payable portals, and as a result, many choose to automate the process.
When using a PA provider, large companies require them to deliver invoices in a specific digital format, and each AP provider has its own preferences and requirements. Typically, suppliers are forced to manually enter data into an AP portal because their IT environment cannot meet the processing and delivery requirements necessary to generate an invoice in the electronic format of choice.
The increased demand from buyers to deliver invoices through their AP portals has caused particular difficulties for accounts receivable (AR) teams and has dramatically increased their manual work. In a study commissioned by Billtrust, 38% of senior accounting/finance leaders surveyed cite “dealing with an increasing number of client portals” as a top concern, while the majority of respondents shared that their teams interact with an average of 11-20 AP portals. .
Originally, large multinational companies were pushing electronic invoicing and using AP partners to streamline their inbound invoicing processes. Governments are now leading the way, especially in Europe. With more than 90 mandates already in place globally and more to come (the United States is also investigating establishing a national standard for business-to-government (B2G) e-invoicing), it is imperative that companies quickly understand the compliance challenges they face.
Created in 2014 and designed to reduce costs, increase revenue, increase efficiency and prevent tax evasion, the EU’s PEPPOL project required all EU member states to have technology e-invoicing in 2018. Although it was born with great intentions, unfortunately the problem was that each country had to decide how to build its own solution, and with everything decided on a country-by-country basis, we are left with a fragmentation of standards in the whole industry.
Mandates of the Fiscal Authority
In Europe, this was first seen in Italy, but countries like Poland and others are following suit. We are also seeing some countries start to push for mandatory B2C e-invoicing as well. There are different approaches to this mandate, but what is currently gaining traction is a real-time “authorization” model. With the settlement model, suppliers and buyers must send the invoice data in electronic format to the Tax Administration for validation and real-time auditing, designed to combat tax evasion and close the loophole VAT.
Just because a buyer or government requires an e-invoice doesn’t mean a company can easily deliver one. To do this, you need to understand the channels and billing formats that will require support today, while at the same time researching and understanding which ones you’ll need to add in the future. Building and testing a data connection to an AP portal or B2G billing network can also be a daunting IT endeavor that requires a large budget and time. In fact, it can often take up to six months to successfully make a connection. And once you’ve made a connection, maintaining it can be a full-time project. Because of the complexity involved, it may be time to start looking into automated solutions that help ensure compliance across multiple platforms, as well as multiple countries and standards.
Remember to consider how invoice flow fits into your entire order-to-cash cycle. It’s the most important document in the whole cycle, so making sure it’s generated, presented and delivered in a fully compliant way can really help improve your cash flow and maximize satisfaction with all your interest groups.
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