E-invoicing Trends: Go Further, Faster and Freer

Monika Bocianowska, AP Global Process Owner Director, Coty

Monika Bocianowska, AP Global Process Owner Director, Coty

Brian Tracy wrote: “Time is money; continually look for ways to do things faster & better”.

Companies are looking for solutions to speed up the AP process and reduce manual effort spent on repetitive administrative tasks like managing invoices. Every touch to an invoice increases costs associated with processing the invoice and accuracy in handling and payments. The mission of process simplicity and cost reduction will be accomplished when invoice processing will be touchless. Go further, faster and freereliminating manual effort.

Challenge for global enterprises

Many suppliers still present their invoices via paper or as a PDF attachment in an email. These delivery methods require a great deal of manual processing, storage, and retrieval of paper invoices and related documents, including scanning, invoice data verification, and exception management. We do invest money in technology and introduce supplier networks, portals, and EDI solutions, based on supplier relationships and transaction volume, but still we cannot eliminate the paper invoices without specific government regulations. This switch to electronic invoicing enables costs to be cut by up to 80% compared to paper invoices. In addition, fixed costs can be saved, and errors minimized. The faster and cost-effective way will be the standardization of e-invoicing rules and clear guidelines on how to implement them globally.

Until January 1, 2019, we only saw the post-audit model in the EU. European companies are free to decide how to send and receive invoices, and the original invoices need to be archived for several years for audit purposes. On January 1, 2019, Italy became the first country in the EU to introduce a clearance model. This model, well known in Latin America (Brazil, Chile, Mexico) obliges the originator to send each invoice in electronic format to the tax authority. The tax authority then validates the invoice and either delivers it back to the sender so that the company can send it to their clients orthe tax authority delivers it to their clients directly. This allows tax administrations to receive real-time data on business operations and to detect fraudulent transactions in a timely manner. Now we can observe a new trend, the clearance model is becoming popular in other EU and APAC countries not only from a business-to-business perspective, but also among government and tax authorities. In 2021 Hungary, Greece, Chile, India, Italy, and Portugal continue their journey towards digitization. United States, China, and Saudi Arabia have also announced their initial roadmaps for e-Invoicing mandates.

“Organizations that are not using advanced technologies need to define the best approach in this technological journey which take a place in the next 5 years”

In the next 5 years business-to-business (B2B) e-invoicing will be obligatory in Poland (2023), Slovakia (go-live is not yet known), France (2023), Germany (e-invoicing discussions have also recently begun in the German Parliament), and in most countries in Europe, Latin America, Middle East, and Asia Pacific authorities are stepping up to have finalized their e-Invoicing mandates.

Unfortunately, some countries in the EU have different strategies when it comes to implementing e-invoices. We seethe same problem in APAC and America.To address this problem in the EU, the European Commission could take a leading role by drafting a directive that gives clear guidelines to the Member States on how they should implement this model, so that standards are applied in the same manner. The European Commission is currently working on legislative proposals to modernize VAT compliance obligations across the EU. A system where one government-operated platform must validate all e-invoices according to local specifications can hardly form part of a harmonized EU-wide consistent compliance framework. The Commission proposals should become available in 2022; however, even if approved, they are not likely to take effect before 2025. The relevance of this EU regulation for B2B interactions will grow as a result of massive investment in digitization processes with the EU Next Generation Fund resources (budget 750.000 million euros), as approved by Brussels in the context of the current COVID 19 pandemia.The National Next Generation programs should have a minimum of 20 percent invested in digital transition. So at least 150.000 million euros to be invested in digitization of businesses and administration in the next 3 years.

However, given the implications of this process for global trade, it would also be convenient to address this issue in consultations with United Kingdom, the USAand Asia-Pacific countries, as well as other relevant non-EU trade partners. For instance, this topic could be included in the agenda of the next EU-ASEAN Summit.

The next steps for global enterprises will be to revisit existing solution EDI, supplier’s platform, RPA and assess the risk of the change, including cybersecurity challenges to current digitization processes. Organizations that are not using advanced technologies need to define the best approach in this technological journey which take a place in the next 5 years.