The E-invoicing Revolution: How Technology and Mandates are Shaping the Future
E-invoicing has become an increasingly interesting and popular topic among business people worldwide. To shed light on the essential elements of this inevitable shift, let's delve into the crucial details regarding the key aspects of e-invoicing, the associated challenges, and what to focus on when adopting e-invoicing efficiently.
Comarch recently hosted a webinar featuring Meng Liu, Senior Analyst at Forrester. In this article, we share our takeaways from the webinar entitled "Seamless Transition to E-invoicing: A Comprehensive Guide". Our guest speaker joined Piotr Jagiełło, Consulting Director at Comarch, and Katya Kancheva, Business Solution Manager at Comarch. You can still watch the webinar on-demand.
Key trends in e-invoicing
In 2023, we've observed a notable acceleration of e-invoicing adoption in different countries, and this comes as no surprise considering the uncertain macroeconomic environment we've witnessed throughout the year. A few notable challenges of 2023 include:
- The banking crisis
- High inflation rates
- Geopolitical conflicts and tensions
- Operational difficulties faced by businesses
- Difficulties in collecting taxes efficiently
This also resulted in the government finding it difficult to collect tax efficiently,” said Meng Liu. “I think that has incentivized many governments across the globe to initiate the invoicing mandates, which can help them collect tax more efficiently and effectively.”
Forrester's data validates the consistent growth in the adoption of e-invoicing-related technology solutions. Accounts payable and accounts receivable invoicing software solutions have experienced significant annual revenue growth, reaching double digits since 2015. The COVID-19 pandemic has acted as a catalyst, further fueling growth and advancements in invoicing technologies. This trend is expected to continue, indicating a sustained increase in technology spending for invoicing.
The European Commission has underlined that the disruptive impact of COVID-19 has accelerated the digital transformation journey for numerous organizations. Invoicing, being a crucial part of business operations, has seen a substantial acceleration in the global adoption of electronic invoicing processes, covering receipt, transmission, and processing of electronic invoices. This shift has now become a mainstream practice, highlighting the evolving landscape of invoicing propelled by the pandemic and ongoing digital transformation.
According to our data, we have found that, since 2020, following the outbreak of the pandemic, there have been approximately 15 new e-invoicing mandates released in different countries across the globe every year,” explained Meng Liu.
E-invoicing benefits for businesses
Adopting an e-invoicing solution brings substantial benefits to businesses, especially in the realm of payments. It has the potential to optimize and digitize B2B payments, leading to enhanced efficiency. A survey conducted in Australia revealed that many B2B payment professionals seek a more secure and expedited payment experience while ensuring compliance.
E-invoicing adoption facilitates the availability of comprehensive invoice data, enabling businesses to align it with their payment data. This alignment streamlines various aspects of the payment process, such as matching and reconciling invoice data with payment records. Consequently, this automation minimizes manual operations, expedites payment processing, and improves overall operational efficiency significantly.
The invoicing data can make the payments more secure and compliant,” notes Meng Liu. “This can significantly accelerate the digital transformation of payments for many companies.”
Singapore is a great example of this. The country, as a central Asian hub connecting the global community with the Asia Pacific and Southeast Asia, experiences a significant volume of cross-border transactions daily. The implementation of e-invoicing in Singapore has the potential to enhance compliance in these cross-border payments and transactions. An e-invoicing system provides extensive data insights that businesses can utilize to streamline various compliance-related tasks, including anti-money laundering and fraud management. By leveraging these insights, B2B transactions and payments across borders can be made more secure and compliant, fostering the growth of numerous multinational companies, particularly in countries such as Singapore.
Four primary challenges in e-invoicing adoption
Embracing e-invoicing adoption is far from an effortless journey; it's a process that entails overcoming numerous challenges. Here are the four primary challenges that client engagements and conversations have uncovered.
1. Fragmentation of e-invoicing processes
First and foremost, a significant hurdle lies in the disconnect between various invoicing processes and legacy systems, contributing to a fragmented landscape. The prevalence of siloed systems further complicates the adoption of modern e-invoicing solutions, serving as an initial barrier.
2. Reliance on manual processes and resistance to change
Despite companies embarking on their digital transformation journeys, a considerable part of their finance, accounting, and payment operations remains heavily reliant on manual processes, impeding the swift uptake of invoicing solutions. This resistance is largely due to entrenched manual habits and practices.
3. Fragmented landscape of e-invoicing mandates and compliance
The landscape of e-invoicing mandates and compliance is highly fragmented, varying from one country to another. These disparate requirements pose a complex challenge, making it arduous for companies to navigate and meet diverse regulatory stipulations concerning invoicing and taxation — a critical hurdle in the adoption process.
4. Absence of standardized e-invoicing formats
The absence of standardized invoicing formats and varying standards compounds the challenges. This fragmentation creates a slew of additional tasks and complexities, further hindering companies attempting to adopt e-invoicing seamlessly.
Regarding the fragmentation of e-invoicing compliance, the ASEAN countries in Southeast Asia are a good example. Notably, all ASEAN countries exhibit a strong commitment to e-invoicing mandates, though their approaches and levels of maturity vary significantly.
Singapore stands out as relatively mature in terms of e-invoicing adoption, showcasing a solid foundation. On the other hand, countries such as Malaysia and Indonesia have initiated their e-invoicing mandates journey, but their approaches differ considerably, reflecting varying stages of implementation and development.
Adding to the complexity, specific requirements such as invoicing format and platform further diverge among these nations, underlining the intricate and varied landscape of e-invoicing within the ASEAN region.
Approaches and timelines for e-invoicing mandates in Asian countries
In Singapore, the government has actively advocated for a unified e-invoicing platform, where Invoice Now is equivalent to the PEPPOL platform. This initiative has streamlined invoice processing significantly, and has the potential to replace legacy systems, such as the vendor invoicing portal utilized by the government.
In the Philippines, the government is intensifying its invoicing mandates with plans to make it mandatory for all taxpayers in the country to send and receive e-invoices by 2024. Malaysia is taking a phased approach, aiming to mandate larger businesses to adopt e-invoicing by 2024, gradually extending the mandates to smaller and mid-size companies in 2025 and 2026.
In other Asia-Pacific countries, such as Japan, China, and Australia, variations in maturity and platform usage are apparent. Japan, in particular, exhibits less mature e-invoicing adoption compared to Australia and China, with distinctive variations in platforms and requirements, such as e-invoicing formats and e-signature mandates.
E-invoicing mandates globally: Latin America and Europe
In Latin America, governments have embraced e-invoicing mandates to combat black economy activities and tax evasion. Large countries such as Brazil and Mexico have mandated all taxpayers to issue and receive e-invoices. However, the adoption of different localized platforms and varying requirements for e-invoicing formats underscore the unique approach within the region.
In European countries, there is a higher degree of fragmentation, with each country having its own e-invoicing mandate timeline and localized requirements concerning platforms, formats, archiving periods and e-signatures. This diversity necessitates specific capabilities or features that companies should expect from their e-invoicing solutions. Notably, e-invoicing compliance capability is crucial, given the intricate and complex e-invoicing mandate requirements across different regions, requiring tailored solutions to address these challenges effectively.
Integration and cloud-based innovations in e-invoicing solutions
Integration stands out as another pivotal feature that companies should prioritize in their e-invoicing solutions. Given the diverse operational landscape of businesses spanning different regions and countries, managing various digital and physical channels, as well as integrating with a multitude of partners, software, and systems, is fundamental. The effectiveness of an e-invoicing solution lies in its ability to integrate seamlessly with the internal systems and channels of these companies, making integration a crucial factor to consider.
Looking ahead, a significant trend in future e-invoicing solutions centers around software as a service (SaaS) and cloud-based offers. These emerging trends are essential due to the superior features, enhanced performance, scalability, and potential for higher cost efficiency that they bring.
Forrester has observed significant adoption of cloud-based e-invoicing solutions in the recent years. For instance, by 2020, we found that 50% of solution were already deployed in the cloud environment. We believe these cloud-based e-invoicing solutions will gain even more traction going forward,” as expressed by Meng Liu.
It is anticipated that the momentum behind these cloud-based solutions will only continue to grow in the foreseeable future, further solidifying their position as a preferred choice for businesses.
How do you adopt e-invoicing successfully?
If you're on the verge of adopting an e-invoicing solution, or are currently navigating through the e-invoicing journey, you could be encountering several challenges. How do you minimize them?
1. Understand e-invoicing trends
It's imperative to understand the evolving trends, benefits, and complexities associated with electronic invoicing. Most of the challenges listed above stem from the intricate nature of invoicing regulatory requirements and compliance complexities.
2. Consider SaaS and cloud-based solutions
Significant consideration should be given to software as a service (SaaS) and cloud-based solutions. These technologies present superior performance, enhanced features, and exceptional scalability, making them valuable options to explore.
3. Prioritize software integration and compliance features
Finding the right external partner is of utmost importance. While evaluating potential solutions and vendors, key features to focus on include advanced integration capabilities and robust compliance features.
4. Focus on data exchange and management
Equally critical is prioritizing data exchange features, as much of the complexity in e-invoicing adoption arises from data-related issues. Seamless management and exchange of data, especially in the face of disconnected systems or processes that can lead to incomplete or unstructured data, are essential for a smooth e-invoicing adoption journey.
