­­­Why Your Business Needs to Develop a Comprehensive E-Invoicing Strategy

It’s critical that every business—especially those that rely on non-automated accounting processes—address this global phenomenon holistically.

In recent years, large multinational companies have moved to an e-invoicing model and started to digitize various forms of their invoicing processes. However, we are now on the brink of a transformation in which the governments in Europe and elsewhere will require that e-invoicing be central to most global businesses' accounts payable and accounts receivable processes. Preparing for this huge shift will be a key challenge for finance teams over the next 18 to 24 months.

E-invoicing is the process of electronically exchanging structured, digitized transactional documents. These documents can be purchase orders, payment terms, or credit notes transmitted between seller and buyer. Digitization can take different forms. Some large businesses already encourage their suppliers to send invoice data to them electronically via AP e-invoicing platforms; EU governments require that invoice data be sent via the secure Peppol network.

Sales tax authorities have also driven the growth of e-invoicing as a GST/VAT reporting tool in which tax authorities automatically obtain finance or invoice data from a company’s accounting and ERP systems. Governments are mandating e-invoicing to ensure compliance, reduce tax fraud, and tighten the gap between the expected GST/VAT and what is collected. Such mandates are common in Latin America and other countries, such as India and Italy.

It’s estimated that 19 countries will mandate some form of tax e-invoicing by 2026. This includes two G7 economies—Germany and France—and several APAC governments are expected to mandate Peppol be used for B2B e-invoicing.

In addition, the European Commission has proposed a series of measures to digitize the EU’s VAT system. The United States Office of Management and Budget (OMB) Memorandum 15-19 has directed agencies to electronically manage invoices for federal procurements to promote efficiency and transparency, reduce waste, and make it easier for vendors to do business with the government. In addition, the Federal Reserve and the Business Payments Coalition have launched an e-invoicing exchange pilot program. 

Taken together, these changes mean that e-invoicing is becoming central to the accounting processes of global businesses. Any company that does a sizable amount of business—regardless of where it’s located—should begin now to explore the benefits of e-invoicing (and the negative outcomes of waiting too long) and, immediately after completing that assessment, implement a strategy for migrating to a comprehensive e-invoicing model.

Companies that are slow to move to e-invoicing by sticking with legacy systems for some or all geographies should rethink their strategies. Failure to shift to e-invoicing could jeopardize their ability to scale and remain viable.

Some businesses fail to see the need to lean into e-invoicing or adopt it on a case-by-case basis. Their finance leaders believe that their systems are functioning well enough. They may have operations in countries where governments haven’t mandated e-invoicing or are not involved in business-to-government (B2G) markets.

They see it as a fringe occurrence that won’t impact their business. That view is shortsighted and detrimental to the enterprise’s ability to scale and achieve long-term success.

E-invoicing will impact a business from two angles: the invoicing side and the tax side. Even if a company isn’t doing business in a country that currently mandates e-invoicing, that will likely change soon. The business could expand into a country that mandates e-invoicing, or a country where they currently do business could adopt the requirement. 

Consider the negative outcomes of an organization or one of its subsidiaries if it cannot speak the “digital language” required by tax authorities or “spoken” by companies it does business with and that have implemented e-invoicing internally. That organization could not invoice for services or products or be compliant. As a result, it could have to shut down operations in certain regions or even worldwide.

What’s ahead for businesses ready to develop a comprehensive e-invoicing strategy? For many, it will be a very different world—one in which businesses must think differently about managing their global accounting, I2C, and IT processes.

Preparing for this journey will take time, but the payoffs will be significant. Businesses will be ready for the imminent likelihood of needing to comply with these B2G and e-invoicing mandates wherever they do business. In addition, they will gain the broad efficiencies that come with these technological improvements.

Because of the significant efficiencies that e-invoicing brings to finance operations, businesses reduce their billing-to-payment lag time and enjoy improved cash flow and security. For example, it’s unlikely that electronic invoices will be sent to the wrong recipient or that paper invoices will get lost in the mail or fall into the wrong hands.

With an optimized, automated, and efficient system, companies gain remarkable visibility and save significant time and cost across regions. According to the global business integration provider INPOSIA, automated e-invoicing will result in a cost savings of 60-80% in most cases compared to conventional paper invoice processing.

Here are some additional benefits that come with shifting accounting and other operations to an e-invoicing model:

• Reduced manual data and tax errors.

• Enhanced cash flow through a faster invoice delivery time and payment.

• Time savings of finance teams through increased efficiency of streamlined AP and AR processes.

• Real-time reporting capability and instance verification of valid documents.

• Improved security with encrypted file transfer and digital signature tools.

• Reduced waste of paper and cost associated with printing, posting, and archiving paper invoices.

Businesses ready to develop a comprehensive e-invoicing strategy have their work cut out. It will take time and some resources to complete this journey. But the good news is that BlackLine can help. Our solutions enable a smooth and efficient transition toward full-scale e-invoicing readiness. Our automated, AI-enabled solutions allow organizations to efficiently and globally optimize processes to be confident in the quality of their data and the integrity of their invoice-to-cash and intercompany transactions.

BlackLine’s solutions provide an enterprise with the tools necessary to ensure compliance with tax mandates. The benefits would be realized for both third-party and intercompany transactions while resulting in minimal disruption to existing buyer-seller relationships. By partnering with BlackLine, you can get ahead of the challenges posed by e-invoicing mandates, no matter how large your business is or where you sell goods or services.

Ready to redefine the way your organization processes invoices? Getting started is the first step.