Electronic Invoicing (e-Invoicing), like many things in today’s technology-led world, is a long-standing concept that has actually been used by businesses as far back as the 1960s. Until fairly recently (5-10 years) the process has usually proven prohibitively expensive and relatively inflexible for many non-enterprise businesses due to the amount of processing and configuration initially required on both sides.
However, again, like with many other things today, the increase of bandwidth, processing power and storage capacity available has continually lowered the complexity, and therefore the associated costs of managing e-Invoices. This has encouraged governments globally, facing ever-increasing pressure in relation to their policies on security and sustainability, to introduce new legislation which sets e-Invoicing as the new standard.
In this article we investigate:
- What is e-Invoicing?
- How can e-Invoicing Help my Business?
- The Technical Frameworks for Managing e-Invoices
- Different Legislative Approaches and Requirements
- Managing e-Invoices Natively in NetSuite
What is e-Invoicing?
Simply put, e-Invoicing is the process of sending and processing a bill, or credit electronically.
There are two commonly acknowledged types of e-Invoices. Only one is recognized as ‘proper’ e-invoicing.
Unstructured: Also recognized as ‘digital invoices’, most commonly PDFs sent via email. Technically these are invoices that are produced, sent, and processed electronically; however, they still require manual processes and external activity to process them from receipt.
Structured: This is the option recognized as ‘proper’ e-Invoicing. In a structured e-Invoice, all invoice data is communicated purely electronically, in a format that is not readable by humans, and thus processed automatically with no external input or processing required. These would commonly be processed via EDI (Electronic Data Interchange) or XML.
It would be fair to say that today when the topic of e-Invoicing is raised, it is more likely than not that people are discussing or enquiring about the functionality classed as structured e-invoicing.
In fact, most legislation relating to e-Invoicing (such as the German framework) does not recognize PDFs or Digital Invoices as e-invoicing. That is also the position this article assumes, although we don’t have anything as official as the German government does to back up our stance.
So, when we discuss the advances of e-Invoicing and the introduction of new legislation we are really talking about systems and processes which are being implemented to standardize, secure, and ensure completely paperless and touchless submissions of vendor bills between the ERP solutions of suppliers and customers.
How can e-Invoicing help my business?
There are a few different ways in which e-Invoicing can benefit your business. Largely, these are an extension of the advantages of AP Automation as a whole – improved accuracy, security, cash flow and efficiency.
Click here to see further information on the general advantages of AP Automation for NetSuite and Download our White Paper
In terms of e-Invoicing specifically, the three most impactful advantages are most likely:
- Efficiency – e-Invoicing literally eliminates the manual processes associated with AP (even down to receiving, opening, and reviewing the document). The input has been done by the integration, so your time (or team’s time) is spent using the data rather than entering it.
- Security – Businesses are most vulnerable to fraud, or even accidental activity when there are gaps in the process. Any gaps provide an opportunity for individuals to amend details such as transaction amount or supplier payment details. E-Invoicing removes the opportunity for users to amend the information at the point of transaction entry, and if you use NetSuite, that means that any changes thereafter are captured by the ‘System Information’ Audit Trail Functionality.
- Compliance & Customer Service – Several governments and major economies have already implemented frameworks and processes to support e-Invoicing as part of a longer-term strategy to make it the default output from suppliers. With current set-ups increasing their adoption and new countries following suit, it is predicted that e-Invoicing will be the most used AP/AR approach by 2025.
In addition to complying with local and international legislation, it is also important to ensure you match your customers’ expectations and make it as simple as possible for them to buy from you.
The Technical Frameworks for Managing e-Invoices
The technical element has always been one of the most challenging aspects of e-Invoicing. At the risk of oversimplifying, the reason for this is that for e-Invoices to be issued by a vendor and received by a customer electronically, and automatically, the systems of both parties (normally ERP) must be mapped and aligned, as well as securely integrated to each other in some fashion.
All you have to do is take a look at your own AP processes and invoice details versus one of your suppliers and we’d suspect it wouldn’t take you too long to find a difference in terminology, or details included.
So, if you multiply that out to include every ERP system, industry-specific billing processes, international tax processes, and even just internal system preferences you can see how it becomes difficult to standardize and automate this across the board.
There are two key elements that become central to the technical conversation: standardized data and secure formats. These are also the cornerstones of the legal frameworks which have been implemented to date and which we cover a little more in the next section.
In relation to standardized data, the EU for example recognizes two e-Invoice formats and allow member states to make their own decision in relation to localized differences:
- Sequential invoice number
- Invoice date/date of creation
- Your name & address
- Name & address of your customer
- You VAT number
- VAP number of your customer
- Date the supply of goods or services was made or completed
- Quantity and type of product/service delivered
- The unit price exclusive of VAT
- An discounts or rebates if they are not included in the unit price
- The VAT rate applied
- The VAP amount payable, unless exempt
- If exempt, reference to the applicable directive or any other reference indicating the supply is exempt or subject to reverse charge
- When payments are made (if in advance)
- IBAN/SEPA number (for international deliveries)
- BIC/SWIFT code (for international deliveries)
- Invoice date
- Your name & address
- Quantity and type of product
- Total amount to be paid
- The amount of the pauyable or deductible VAT
- Any discounts or rebates
There are various approaches and formats to securely transfer data between different systems locations. The most commonly used approaches for e-Invoicing are:
EDI: Electronic Data Interchange (EDI) is a direct computer-to-computer transaction. This is normally managed by an EDI provider or solution which takes the initial transaction record and converts it into a corresponding format which can then be shared and read by the receiving platform. There are various EDI file formats, but a few of the most common are ANSI, EDIFACT, and TRADACOMS.
XML: Extensible Markup Language (XML) is a markup language that defines a set of rules for encoding documents in a format that is both human-readable and machine-readable. Don’t worry, this is just ‘tech speak’ for a system language that allows you to define what is in a document so that a computer and/or person can read it and take away the required information.
Peppol: Legislative Approaches and Requirements
The most widely used framework for managing e-Invoices is Peppol. Initially launched in 2008 as the Pan-European Public Procurement OnLine (PEPPOL), the network re-branded in 2018 to Peppol as it began to be used more commonly out in the EU/EMEA region.
Peppol is a set of artifacts and specifications enabling cross-border eProcurement, and is now a global standard for e-Invoicing, operating across 30+ Countries throughout Europe, Asia, and the US.
Some of the latest member countries that have implemented, or are in the process of implementing, Peppol driven e-Invoicing (initially for Business to Government (B2G) transactions, but extending to B2B transactions) include: Croatia, Poland, Benelux, Australia, and New Zealand.
Peppol works really efficiently using a ‘four corner model’ which integrates the vendor and supplier ERP solutions via an inbound and outbound Peppol access point.
In short, this looks like this:
- Transaction Created and Sent from Vendor ERP to Peppol Access Point
- Peppol Access Point receives and validates the transaction and forwards to the corresponding outgoing Peppol Access Point.
- Second Peppol Access Point Receives and validates the transaction data and then forwards it to the customer ERP.
- Customer ERP receives the validated invoice data automatically and sends a receipt back via the chain to confirm the successful submission.
Managing e-Invoices Natively in NetSuite
Now for the fun part!
Sure, all of the above information will make you the most interesting attendee at your next dinner party – by a distance – but what does this mean for your day-to-day, and how can you introduce e-Invoicing into your business when you use NetSuite?
Well, from an Accounts Receivable (AR) perspective, step one is the same for you. You create your invoice in NetSuite as normal. It is from step two onwards that you need assistance to embrace e-Invoicing. How do you gain access to the Peppol network?
Fear not…this is exactly what our ZoneCapture solution offers for NetSuite! Operating natively within NetSuite, ZoneCapture is an AP automation solution that both validates your invoice data and provides bi-directional access to the Peppol network.
So, you simply create your bills as normal, and then a series of default settings and workflows automatically export bills as e-Invoices to relevant customers. No more manual entry is required by your team.
On the AP side, the solution works exactly the same in reverse.
It basically allows you to provide a Peppol access point for your vendors to submit e-Invoices to you. This means that their bills will land, fully populated in your NetSuite system and automatically fit in with your existing approval processes. All with absolutely zero manual entry from your side.
Ok, so to summarize, the key takeaway regarding e-Invoicing is that the question is ‘when’, not ‘if’. Despite the complex nature of the topic, the execution is actually ridiculously simple and the outcome is completely pain-free once you have everything configured and ready to go.
The most important things to know are: Are you going to be legally obliged to operate using e-Invoicing, and if so, when? And secondly, when you do implement e-Invoicing, which framework will you be operating under, what data will you need to send and receive for e-invoices, and how do you integrate your ERP solution into the process?
For NetSuite users, we think the answer is simple and even better, you are only a few clicks away from having all the information you need. Visit our ZoneCapture page, or view our dedicated AP Automation page to download our white paper. Alternatively, click to contact us below and arrange for one of our friendly team to discuss your requirements and walk you through the solution.