Electronic invoicing (e-invoicing) is the transmission, reception, and processing of digital transactional documents between suppliers and buyers. A true e-invoicing method should be entirely electronic in such a way that data from the supplier can be integrated directly into the buyer’s system. E-invoicing benefits both suppliers and buyers.
These are the crucial steps to implement e-invoicing for your business.
Preparation and requirements for adopting electronic invoices
Technically, in order to implement e-invoicing properly, businesses need to make sure that they complete the following steps:
- Set up an e-invoicing system. This can be done either in-house or by an outside vendor.
- Make sure that the new invoicing process complies with the formats, requirements, and detailed XML structures.
- Integrate the reception and process of electronic invoices and other associated electronic documents into the existing accounting workflows.
- Register with the tax authority.
Steps to implement e-invoicing across the organisation
1. Determine the scope of the project
Your organisation will face some major challenges when implementing an e-invoicing solution. The transition requires buy-in from multiple departments like project management, procurement, and finance. Therefore, an e-invoicing implementation project should have a project sponsor, who will ensure the highest level of commitment across the organisation.
The management should carry out a thorough requirement analysis of the whole transition process. The scope and objectives of the new e-invoice system must be predefined as they are crucial to the final outcomes.
There are vendors that provide additional services and tools that take into account the invoice types (e.g., domestic or global), types of suppliers and buyers (e.g. B2C or B2B), the profile of customers (e.g., a large, medium, and small), and predict the new cost per invoice.Read more: Factors to Consider when Choosing Accounting Software (Part 1)
In detail, the following fundamental tasks should be completed in the early phase of an e-invoice implementation:
- Identify the involved stakeholders (suppliers, customers, group companies, shared service centres).
- Identify the involved departments.
- Examine the current state of the e-invoicing landscape.
- Review the market and make a list of the available solutions.
Reviewing and evaluating the available e-invoicing solutions is vital to meeting both the commercial goals and the requirements imposed by the tax administrations.
2. E-invoicing solution requirement analysis
E-invoicing implementation doesn't have a one-size-fits-all approach. It is therefore important to come up with a complete list of requirements and expectations of the software performance. It is best to start with a detailed list, identify your key needs and cross them out one-by-one.
We suggest you to:
- Define the objectives of the entire project.
- Figure out how the new invoicing process will integrate with your existing AR and AP systems.
- Analyze how your suppliers and customers will get along with the new invoicing policy. There are some industries that are more familiar with e-invoicing practices than others, simplifying the mass adoption of e-invoices.
- Have an implementation timeline and budget to determine the expected cost, duration, and ROI.
3. Validate the solution provider
The e‐invoicing service vendor should provide a variety of e‐invoice formats, and support converting from paper invoices to e-invoices and vice versa. It is also critical for the service provider to have the experience and ability to handle legal and commercial challenges of e‐invoicing.
As for the solution itself, look for its ability to exchange the document between the suppliers and customers as their current standards can vary depending on their accounting systems. The software should be able to handle different types of documents, from POS, debit notes, credit notes to payment instructions throughout the invoicing process.Read more: Benefits of accounts payable automation in financial management
Some e-invoicing software can work seamlessly with the existing accounting system. For example, if your organisation has implemented an ERP system, there should be fewer problems when integrating it with the new electronic invoicing software, leveraging the current data management and workflow without having to do much adjustment. A thorough due diligent will minimise the risk of malfunction of the solution in your future use.
4. Roll out
This is when you and your provider start to implement the agreed e-invoicing technical solution. Additionally, you need to obtain the permissions needed as well as ensure the compliance of the solution. In this step, you will also need to notify all the affected parties and provide proper training for your staff.
During the rolling out process, you can run into some difficulties in integrating the new software with the existing AR and AP systems and reveal the skill gaps in the employees’ capability. Hand out guidance and manuals also help to keep everyone on the right track in the future.Read more: The Changing Role of CFOs in Digital Transformation
5. Review the project's effectiveness
After the rollout step, it’s not yet the end of the implementing e-invoicing process. Having the software in place, you need to decide whether or not the new software meets the expected performance and benefits you’ve set at the beginning of the process. Identify the points where it can be improved and compare the performance with other systems would be essential in making sure that you’re going with the right choice.