An e-invoice is an invoice that is issued, received and processed electronically between a supplier and a buyer. It is most commonly used in business to business transactions between an organisation and its supplier. From creation to receiving, right down to being processed, it is electronic and digital in all aspects of its life-cycle.
The types of e-invoicing
Visual digital formats
In visual formats of e-invoices, the primary aspect is visualization of the content, which assumes human processing, such as:
- .pdf, digital document format (common in emails)
- .jpg, .png, .gif (common picture formats)
- .tif (common in scanning solutions)
In data formats, the primary aspect is computer processing of the data, but some formats may also provide for visualization.
Unstructured – the data cannot be automatically read from the document into accounting systems:
- Spreadsheets, word processors, etc.
- HTML – common in emails and websites
Structured – the data can be automatically read from the document into computer systems:
- Standardized – data files based on publicly shared specifications EN 16931, UBL, CII, EDIFACT, etc.
- Un-standardized – internal data files whose structure does not follow publicly shared specifications.
The benefits of e-invoicing
There are many benefits to using e-invoicing. For starters, replacing the physical paper form with a digital form allows the invoice to be handled and archived more efficiently. This allows for significant savings in printing, postage, intra-office routing, and archiving. These can be achieved with digital images of the invoice as well as with structured e-invoices mentioned above.
Additionally, making the data machine-readable removes the need to manually view and read a visual form of the invoice. It also removes the manual work of staff working in accounts payable departments entering the invoice information into a finance or ERP system. This provides significant savings in human resources and reduces errors in data entry.
It can also make various contributions to economic health. It supports public policy priorities such as public-sector deficit reduction, financial transparency, and promotion of sustainable development. They can also make a material contribution to public sector cost reduction and efficiency, as well as creating opportunities for the public sector to adopt these digital processes.
When is it suitable for businesses?
If you’re thinking of issuing e-invoices to other businesses, it might be worth considering the following:
- Take a look through your customer base – do you have enough customers that can receive e-invoices?
- Find a solution that can serve your entire customer base, regardless of the format they want to receive their invoices in.
- Would you be able to negotiate early payment discounts if you bill your customers with e-invoices?
- Starting small with one customer and rolling out e-invoicing gradually might be worth looking into.
If receiving and processing e-invoices is something that would suit your business, then consider the following:
- Does your accounts team spend a lot of time following up invoice errors and queries?
- Do you employ a dedicated resource to rekey invoice information you receive in either paper or unreadable electronic formats?
- Do you have social responsibility targets around faster payment of invoices to small businesses?
- Do you use a lot of paper and resource-heavy manual handling processes?
- Does your business make use of external financing?