Are you ready for e-invoicing?

For companies with global aspirations, the movement towards e-invoicing is evident and gaining momentum. This shift is propelled by a blend of factors, including the proliferation of government mandates worldwide, the rising embrace of digitalization in businesses, and the growing recognition of the advantages of e-invoicing.

But the perceived complexity of the process and the increasing frequency of government mandates globally may deter some businesses from adopting e-invoicing. However, waiting for mandates to dictate adoption remains a reactive, non-strategic approach. Instead, businesses should proactively embrace e-invoicing to seize the logistical benefits, enhance their competitive edge, and stay ahead of the curve in this rapidly evolving digital landscape.

E-invoicing deserves a prominent place in your 2024 strategic goals, and getting a head start can significantly benefit your business.

The number of countries around the world with mandatory e-invoicing for business operations increases steadily. E-invoicing adoption is particularly strong in both Europe and South America.

Several South American countries, including Brazil and Argentina, have already implemented legislation and rules for e-invoicing. In Europe, Italy led the charge by implementing a fully functional electronic invoicing system in 2019. Romania followed suit in 2022, mandating B2B e-invoicing in high-risk sectors and plans to extend the requirement to all domestic transactions by 2024 in a two-stage launch. Additionally, Poland and Greece are introducing e-invoicing mandates and new tax legislation this year.

Reading tip: E-invoicing compliance update, January 2024

Businesses operating cross-border in the EU, for example, are facing an increasingly complex landscape of e-invoicing and tax compliance. In the years to come, the EU proposal "VAT in the Digital Age" (ViDA) seeks to transform the tax reporting system by introducing real-time digital reporting through e-invoicing across EU member countries.

As part of the proposal, the process of clearing upcoming invoices involves sending e-invoices in a machine-readable format to tax authorities or service providers for validation and approval. The specific requirements for this vary by country. In some cases, pre-approval is necessary before suppliers' invoices reach buyers, while other countries accept reporting after the fact.

One of the reasons Europe (and also other countries worldwide) are so keen on e-invoicing and reporting mandates is the VAT gap - the difference between expected and collected VAT revenue. EU Member States lost an estimated €93 billion in Value-Added Tax (VAT) revenues in 2020, according to the 2022 Report on the VAT Gap released by the European Commission. The proposed ViDA initiative aims to bridge this gap by providing a more robust approach to tax enforcement and ensuring tax authorities effectively collect VAT, surpassing the limitations of traditional methods like periodic reporting and subsequent tax audits.

Whether the ViDA proposal is adopted or not in the EU, it sure has a cascading effect on European countries who further adopt mandatory e-invoicing legislative work. Many countries have established legislation that makes e-invoicing mandatory or are in the process of doing it.

The United States has also made strides in this area, thanks to the efforts of the Business Payments Coalition (BPC) and collaboration with the Federal Reserve, resulting in the development of an electronic e-invoice exchange framework. Participation in the e-invoice exchange framework is voluntary and is expected to remain that way in the U.S. for a while.

The global shift towards mandatory e-invoicing is gaining traction. Therefore, the question lies not in the 'how’, but rather in the 'if.’ If mandatory e-invoicing is becoming a global trend, global businesses should strive to stay ahead of the curve and embrace it sooner rather than later.

Taking a proactive approach by adopting e-invoicing is advisable. Delaying this transition may result in missing out on significant advantages. As part of a digital transformation journey, e-invoicing will drive fundamental change inside organizations and businesses, and create opportunities as well.

The benefits of e-invoicing are vast and far-reaching, which you can fully discover in another blog post. Getting started with e-invoicing now can provide at least these top advantages:

1. For one, businesses that adopt e-invoicing early can get ahead of the curve and gain a competitive advantage. By streamlining their invoicing processes, businesses can save time, resources and ultimately costs, allowing them to focus on their core activities.
2. Additionally, e-invoicing can help businesses reduce errors and improve accuracy, which can lead to better customer relationships and improved cash flow.
3. The benefits of having access to more data, specifically more granular data, and using analytics, leads to better insights that help the business move forward.

Taking incremental and less disruptive steps, enables companies to proactively review and establish processes before impending deadlines, fostering a proactive and efficient approach.

Finance leaders play a vital role in spearheading digital transformation and translating strategic visions into tangible results. They are pivotal in developing transition blueprints and conducting thorough audits of financial and accounts receivable processes. Moreover, finance leaders serve as custodians of data, ensuring smooth information flow across the organization.

Finance leaders should clearly articulate the strategic benefits of e-invoicing, demonstrating how it aligns with the organization's overall objectives. This could include improving cash flow, reducing operational costs, enhancing compliance, and strengthening supplier relationships.

Effective communication and collaboration are essential for securing stakeholder buy-in. Finance leaders should regularly engage with key stakeholders, such as procurement teams, accounting personnel, and supplier representatives, to address concerns and ensure their participation in the implementation process. This open dialogue fosters a sense of ownership and minimizes resistance to change.

Change management is a critical aspect of e-invoicing implementation. Finance leaders should develop a comprehensive change management plan that addresses user training, process documentation, and ongoing support. Clear communication, regular progress updates, and recognition for successful adoption are key to ensuring a smooth transition.

However, the journey towards transformation is not without its challenges:

• Compatibility issues. One of the main challenges is the compatibility of existing ERP and AR tools with e-invoicing. There should be minimal disruptions to the data flow, that’s why compatibility tests need to be run before any integration talks can start.
• The role of technology partners. As businesses embark on the e-invoicing journey, the support and expertise of technology partners become invaluable. These partners, like Billtrust, play a crucial role in navigating the complexities and challenges associated with adopting and implementing compliant e-invoicing solutions.
• Little standardization. While standardization would make life much easier for international companies, we‘ve not seen enough evidence that this will be the case. Proposals in the EU, for instance, leave much space for countries to implement their own ideal e-invoicing and reporting template. We can only pray that some countries do use the same approach.
• Potential resistance from customers. Customers may have concerns about the security of their financial information or the technical requirements of using e-invoices. They may be accustomed to traditional paper-based invoicing and may not see the need to change their processes. They may fear that switching to e-invoicing will add complexity and increase their workload. Customers may have existing accounting software or systems that are not compatible with e-invoicing or they may be concerned about the cost and effort of integrating new systems or training their employees on new procedures.

Picture this: your invoices are trapped in a bureaucratic maze of approval processes, delaying payments and straining your cash flow. And if you don't comply with e-invoicing mandates, you could face steep penalties from the government and the hassle of time-consuming audits.

This is the new reality for businesses in certain countries. Failure to comply with e-invoicing mandates and follow standard procedures can have far-reaching consequences for your business, extending beyond mere fines that impact your bottom line. It could also have a detrimental impact on your key trading partners and customers, potentially leading them to switch to competitors who are more adept at handling e-invoicing.

While waiting for government mandates to kick in may seem like a prudent approach, it can open the door to missed opportunities and potential penalties. To avoid such a scenario, it is crucial to stay ahead of e-invoicing mandates and adopt a comprehensive compliance strategy. This will not only ensure regulatory compliance but also demonstrate your commitment to efficiency and innovation, fostering stronger relationships with your trading partners.

In today's digital age, e-invoicing isn't just an option; it's a strategic imperative. As global shifts and government mandates reshape the business terrain, finance leaders find themselves at the forefront of this transformative journey.

By proactively adopting e-invoicing, businesses not only navigate regulatory complexities but also gain a competitive edge. The advantages, from streamlined processes to improved accuracy, pave the way for enhanced efficiency and innovation.

Don't wait for mandates to dictate your path; instead, lead the way in optimizing financial operations. Your journey into e-invoicing starts now, and the benefits are too significant to ignore. Take charge, stay ahead, and position your business for success in the evolving digital economy.

Ready to embark on your e-invoicing journey? Connect with industry experts like Billtrust to navigate the complexities seamlessly. The time for e-invoicing is now.