What is an electronic invoice?

Electronic invoicing came to stay. The legal trend in most countries is towards electronic invoicing. There are many companies that already enjoy its advantages.

Before listing the benefits of electronic invoicing, let’s start with a basic question…

What is and what is NOT an electronic invoice?

The Tax Agency defines electronic invoicing as follows:

Tax document generated by computerized means in electronic format, which replaces the physical document on paper, but which retains the same legal value with security conditions not observed in the paper invoice. Functional equivalent of the paper invoice, which can be transmitted from the sender to the recipient by telematic means. In computer terms, it consists of a file with the content required by law for any invoice, which can be transmitted from sender to receiver by telematic means (from one computer to another) and which has characteristics that ensure authenticity and integrity.

An electronic invoice, or e-invoice, is often mistaken for a digital invoice.

Both can be processed electronically from creation to payment, however, there is a big difference between these two: the electronic invoice contains supplier data in a structured format that the buyer’s ERP can automatically recognize, without the need for the account department. to pay enter data manually. A digital invoice is an invoice that can be viewed and processed digitally.

As mentioned before, the electronic invoice is created in the seller’s billing system, online banking or in a web form. From there, the electronic invoice file can be downloaded or sent directly to the buyer’s software. This e-invoice is delivered through an electronic invoicing operator. The operator can be compared to the postal system when sending paper invoices. Each electronic invoice recipient also has their own electronic invoicing address.

Through electronic invoicing, unnecessary steps such as manual data entry and verification are eliminated. For that to be possible, the invoice must be in a format that the buyer’s system can process. Electronic invoice files come as structured data. Some commonly used formats are XML and EDI.

Electronic invoicing (e-invoice) is the transmission, reception and processing of digital transactional documents between suppliers and buyers. A true electronic invoicing method must be completely electronic in such a way that the supplier’s data can be integrated directly into the buyer’s system.

Long story short…

An e-invoice is:

  • Structured invoice data in formats such as XML or EDI, created in invoicing softwares.
  • Structured invoice data issued through web forms.

An -einvoice is NOT:

  • Unstructured invoice data in formats such as PDF, Excel or Word.
  • Scanned paper invoices.
  • Documents processed ​​with optical character recognition.

So, what are the advantages of electronic invoicing?

Electronic Invoicing brings benefits for both customers and suppliers. It helps us to:

Reduce costs

By reducing, or even completely eliminating, manual data entry, sorting, validation and recording of invoices, electronic invoicing can generate substantial savings of 60% to 80% in invoice processing.

Improve productivity and automation

For paper or PDF invoices, documents must be stored, classified and entered into the accounts payable system. These steps, especially data entry, are very time consuming and prone to errors.

With electronic invoicing, data is sent directly from the supplier to the buyer’s accounts payable system, eliminating the need to manually re-enter data. As a result of the decreased workload, the accounts payable staff can spend more time doing other activities of greater value to the business.

Electronic invoicing enables accounts payable departments to automate invoice validations before submitting them for approval. These validations ensure that all data and calculations are correct, such as VAT amounts, prices on the invoice match those of the order, supplier data, etc.

Shorten payment cycles

Providers are often willing to offer a discount in exchange for an advance payment. The e-invoice allows for faster processing and therefore shorter payment cycles. As a result, buyers using electronic invoices have more access to discount opportunities.

Improve account reconciliation

The reconciliation of invoices issued to customers with payments received is one of the challenges faced by each provider. Customers can combine multiple invoices into one payment. In addition to that, the payment amount may be different from the original invoices due to various reasons, such as customers claiming deductions due to damaged products.

Consequently, a provider can issue 5 invoices of € 2,000 each and receive a one-time payment of € 9,000, and must contact the client’s AP department to clarify the details about the payment.

With electronic invoicing, customers can submit details of paid invoices along with payments to help simplify account reconciliation.

Prevent errors, losses and fraud

Most of mistakes are often made on paper invoices, and solving them is a waste of time.

Invoice differences and rejections are costly, time-consuming to resolve, and can lead to late payments. With electronic invoicing, data from the provider’s AR (accounts receivable) system is transmitted directly to the customer’s AP system, reducing the risk of errors caused by data entry. Therefore, the potential for rejected invoices is reduced.

Much information is automated and standardized, making it more difficult for us to make mistakes.

Improve the customer / supplier relationship

A fast and efficient payment method will definitely help to strengthen the relationship with the providers. This will translate into a more streamlined supply chain and better customer satisfaction.

Reduce your carbon footprint

Last but not least, electronic invoicing virtually eliminates the need for paper. Plus, no energy is wasted in the production and transportation of all those documents. It is, therefore, a tool to help protect the environment.

Invoice-e, practical, fast and sustainable!

Do you want to know more about the options that technology offers us to issue and receive electronic invoices? Let’s talk!

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