All about e-invoicing
Introduction to e-invoicing
E-invoicing is a process that enables companies to send and receive invoices electronically. This process uses standard formats and technologies to improve efficiency, reduce costs, and increase accuracy. The capabilities extend so far that, without human intervention, invoices can be booked from one accounting system to another. In other words: an automatic administration.
Key Aspects of E-invoicing
Efficiency E-invoicing reduces the time required to prepare, send, and process invoices. It eliminates manual steps, leading to faster payments and fewer errors.
Cost Savings: By using electronic invoices, companies can save on paper, printing, shipping, and storage costs.
Accuracy and Compliance: E-invoicing results in fewer errors in invoices through automated validation and control mechanisms. This helps companies comply with legal requirements and standards such as Peppol.
Environmentally Friendly: Reducing paper consumption and transport needs contributes to sustainability and environmental protection.
What is an e-invoice?
An e-invoice is an electronic invoice that must meet the same requirements as a paper or PDF invoice, such as including a unique invoice number and the sender's VAT number and Chamber of Commerce number. An e-invoice is a technical file that can be read by a ‘robot’. The data in an e-invoice is always in a fixed place with a fixed encoding, allowing it to be processed automatically.
Why e-invoicing?
E-invoicing is fast, reliable, and secure. Invoices can be exchanged directly between ERP systems, reducing processing time and errors. Using a secure network makes the exchange safer than via email. Additionally, e-invoicing is increasingly being mandated by governments. These mandates stem from initiatives such as VAT in a Digital Age (ViDA), which aim to reduce VAT fraud and modernize tax collection. Governments encourage and sometimes even require companies to use e-invoicing because it provides a more efficient and transparent system for both the tax authorities and the companies themselves.
Steps in receiving e-invoices
1. Delivery
• Portal: Invoices can be received via an online portal where suppliers can upload their invoices.
• Peppol: Invoices can be received via the Peppol network.
• Other networks: Invoices can be received via various other e-invoicing networks, depending on where the supplier is registered.
• Direct connection: Invoices can be received via a direct electronic connection.
• Email: Invoices are received via email and then automatically processed by the e-invoicing service. The email box for invoices is often used for other – financial or non-financial – documents as well. eConnect has developed 'email classification' for this, so that the management of email boxes does not need to be done by employees, and filtering out which emails contain invoices is automated.
• Paper: Paper invoices are scanned and digitized to be integrated into the electronic processing process. eConnect offers 'Recognition as a Service', where 100% of the paper invoices are delivered as electronic invoices.
2. Automatic processing
• Scan: Paper invoices are scanned and converted to digital formats for further processing.
• Classification: Invoices are classified based on their content.
• PDF conversion: Digital invoices in PDF format are converted to a standard e-invoicing format, creating an e-invoice.
• Normalize: The data on the invoices is converted to a uniform format, allowing for consistent and accurate processing.
• Enrich & validate: Data is checked and supplemented with missing information to ensure the accuracy and completeness of the invoices.
• Booking proposal: A booking proposal is generated for the invoice, allowing the invoice to be booked quickly and accurately in the financial system.
• Financial processing: The invoice is processed in the accounting system.
3. Invoice response
• Processing: Status updates such as approved, rejected, or set for payment are automatically processed and fed back to the sender.
• Validation: Notifications such as receipt confirmation, duplicate invoice, incorrect reference, or incorrect XML are automatically generated and sent back to the sender for correction.
• Acception: The e-invoices are recognized and packing slips, reminders, or unreadable documents are rejected and filtered out.
Steps in sending e-invoices
1. Submission
• Invoicing software: Invoices are generated by specialized invoicing software or in the accounting package and (directly) submitted via the Peppol Access Point or the Peppol Service Provider ecosystem.
• Portal: Companies can upload their invoices via an online portal provided by the Peppol Access Point or the Peppol Service Provider. This portal offers a user-friendly interface for manually entering and uploading invoices. For beginners or companies with small numbers of invoices, a provider like eConnect offers the option to create them via the portal.
• Direct connection: Invoices can be submitted via a direct connection. Accounting packages or invoicing systems implement 'peppolfirst' (see explanation in this article).
• Secure mail: Invoices are sent via secure email channels to ensure the privacy and integrity of the data during transmission.
2. Processing
• PDF conversion: Invoices in PDF format are converted to a standard e-invoicing format.
• Normalize: The data on the invoices is converted to a uniform format, allowing for consistent and accurate processing.
• Enrich & validate: Data is checked and supplemented with missing information to ensure the accuracy and completeness of the invoices.
• Delivery detection: It is checked whether the invoice can be successfully delivered to the recipient and in what format this should happen.
• Financial processing: The invoice is processed in the accounting system.
3. Delivery
• Direct connection: Invoices are sent directly to the recipient via a secure and direct electronic connection. If there is no direct connection, it is checked whether the recipient is reachable on another e-invoicing network besides Peppol.
• Other networks: Invoices can be sent via various other e-invoicing networks, depending on the recipient's preferences. If the recipient is not reachable on another e-invoicing network besides Peppol, it is checked whether the recipient is connected to Peppol.
• Peppol: Invoices are sent via the Peppol network. If the recipient is not detected in one of the previous steps, the invoice is sent by email.
• Email with payment link: Invoices are sent with a payment link via email, allowing the recipient to pay easily and quickly.
Peppolfirst
PeppolFirst is an initiative that configures accounting software and ERP systems to use Peppol as the default e-invoicing network. This means that when PeppolFirst is implemented in an accounting package, the system automatically chooses Peppol for sending and receiving e-invoices, unless specifically indicated otherwise by the user. If Peppolfirst is implemented in the accounting package, an API call is first made to the Peppol Access Point upon sending, to verify whether the recipient is connected to Peppol. If this is the case, it is naturally assumed that Peppol is the preferred reception channel.
How does PeppolFirst work in an accounting package?
When PeppolFirst is implemented in an accounting package, the process works as follows: Configuration and Integration: Automatic Default Setting: Peppol is automatically set as the default e-invoicing network within the accounting software. The accounting software integrates with the Peppol network, allowing users to send and receive e-invoices via Peppol without additional configuration. Invoice Sending: When a user creates an invoice, it is automatically formatted according to Peppol standards. The accounting software then detects the recipient's e-invoicing address on the Peppol network and sends the invoice automatically via Peppol. The sender receives a confirmation of successful transmission and can track the status of the invoice within the Peppol network. Invoice Receiving: Received e-invoices are automatically downloaded from the Peppol network and imported into the accounting software. The software validates the invoice data and performs automated checks. Correct invoices are booked directly in the system, while errors generate a notification to the user for further action.
Benefits of invoice response messages
With e-return messages (e-return), also known as invoice response messages (IRM), you automatically receive status updates on sent e-invoices. These messages provide insight into the location and status of the invoice and enable you to take action more quickly in case of problems. E-return messages contribute to a better customer relationship through a structured feedback loop. Suppliers can take action earlier if the invoice is disputed, update cash flow more quickly upon approval or payment, and automatically adjust statuses in the ERP system, saving manual adjustments. This is a great advantage compared to sending invoices by email, as it is not only good to know that your invoice is delivered correctly, but also important to know when it goes wrong. For example, if the order number is incorrect, the recipient can automatically send a status update requesting a new invoice with the correct order number (PO number).
Peppol network versus other e-invoicing networks
Peppol is an open network with uniform invoice standards and various service providers, making it easier for companies to join and take advantage of the benefits. Peppol is designed to enable interoperability between different e-invoicing networks, ensuring standardized and easy exchange of electronic documents. Other networks such as Coupa, Tungsten, and Ariba are closed networks with their own invoice standards, which means users often need to log in to send invoices, adding extra work and higher costs. The transformation from one e-invoice format to another is usually outsourced to a Peppol Service Provider.
The difference between conversion and transformation
Conversion is from, for example, PDF to e-invoice, and transformation is from e-invoice to e-invoice.
Adoption of e-invoicing
The adoption of e-invoicing is much higher in surrounding countries than in the Netherlands. Here, the percentage of e-invoices has not significantly increased in recent years. One of the reasons for this is that the government provides subsidies for the development of alternative networks instead of making a clear choice for a standard network such as Peppol. This results in entrepreneurs in some sectors designing their own standards for the transport of e-invoices, increasing complexity and costs for service providers.
