A Guide to E-invoicing in Accounts Payable

In recent years, the adoption of electronic invoicing (e-invoicing) has significantly altered the landscape of Accounts Payable (AP) automation, transforming the way companies handle their invoice operations.

Jump to:

What is e-invoicing?
How does e-invoicing work?
What are the benefits of e-invoicing?
Expectations vs. Reality: e-invoicing in AP processes
How to automate e-invoicing with AP automation
Choosing the right AP automation solution for your e-invoicing

E-invoicing isn't exactly a new idea, but its recent rise in use has been spurred by advances in technology and various regulatory measures, especially within the European Union (EU). These changes aim to reduce the VAT gap and increase financial transparency.

As the business environment adapts, it's crucial for companies to grasp both the hurdles and advantages that come with e-invoicing. Challenges include dealing with varied international standards, maintaining compliance with regulations, and integrating smoothly with current systems. Nevertheless, if implemented with a thoughtful strategy and the right technology, e-invoicing can greatly enhance the efficiency, accuracy, and eco-friendliness of AP automation processes across different sectors.

What is e-invoicing?

Electronic Invoicing (e-invoicing) is the digital exchange of invoices that follow a structured, machine-readable data format (such as JSON or XML) and can be automatically imported into the buyer’s ERP system without manual data keying.

Per definition, the main goal of an e-invoice is the automated import into the AP system. A visual representation of the data in a human-readable format (such as PDF) is, while possible, secondary, not obligatory, and not considered part of the invoice.

How does e-invoicing work?

E-invoicing automates the entire invoicing process, from invoice creation and data transfer to validation and integration with the customer's systems, resulting in a more efficient, accurate, and streamlined accounts payable workflow.

Technically e-invoices are not a new concept. Alongside technology standards such as EDIFACT, UBL 2.0 or eFF (Electronic Flexible Format) used for the electronic exchange of data across different scenarios over the last 20+ years various formats specific to e-invoicing, such as

• ZUGFeRD/Factur-X in Germany and France,
• FatturaPA in Italy,
• Svefaktura in Sweden,
• and many more have evolved*, driven mainly by the need for efficient AP processes of private business in high-volume industries.

What are the benefits of e-invoicing?

E-invoicing offers enterprises benefits such as efficiency, data accuracy, visibility, security, and cost reduction.

However, its primary driver is closing the “VAT Gap” and ensuring public sector funding, rather than solely improving AP automation and enterprise efficiency. The EU Commission's 2023 “VAT Gap report 2023” revealed a €61 billion gap due to fraud, evasion, and miscalculations. Countries like Italy and Poland, mandating e-invoicing, have reduced their VAT gaps significantly.

The 2022 VAT in the Digital Age (ViDA) proposal aims to implement cross-border digital reporting using e-invoicing for B2B transactions, while PEPPOL invoices are becoming mandatory for B2G transactions. Many EU states plan to enforce e-invoicing in B2B transactions within four years, reflecting a growing trend towards regulatory adoption of e-invoicing standards.

What impact does e-invoicing have on accounts payable processes?

The benefits of e-invoicing for the state treasury are undeniable, and the initial results are already impressive. From the business perspective, there are also significant efficiency benefits in moving from scanning and manually processing paper and PDF invoices to standardized electronic formats.

At least in theory, the concept promises to solve many efficiency hurdles. But practically, businesses still face challenges, albeit different than with paper, but still challenges that require a solution. Let’s explore four challenges in e-invoicing through the lens of expectations versus the reality.

E-invoicing Expectation	E-invoicing Reality
Standardized format Structured invoice data is being exchanged digitally and fully automated between seller and buyer. No manual intervention needed.	Hybrid invoicing for international operations Business operating across borders and globally have to deal with a variety of different national e-invoice standards on one hand, on the other - with different regulations for suppliers of different sizes and different e-invoicing maturity levels across countries, which leaves them with a mix of invoices incoming as paper, PDF AND e-invoices in various formats that need to be normalized and flow into one and the same ERP system. Mix of standards for international operations Over the course of the last 20 years many countries globally have developed their national e-invoicing standards. The maturity and adoption level of such standards varies significantly with some pioneers such as Italy, the Scandinavian countries, and Latin America where almost 100% of all invoices are e-invoices, while Asia and Africa are still in the early stages. That leaves companies with international business dealing with a variety of standards, approaches and rules. The PEPPOL (Pan-European Public Procurement OnLine) network is promising to be a step in the right direction and over time fully replace such national standards. The network is used also partially by countries outside of Europe, such as USA, Mexico, Japan, Australia and Singapore. Freedom of interpretation of the standard A technical format standard definition does not necessarily translate into the same use of the standard across all invoices. Different interpretations of the standard from different suppliers results in the need to normalize for sufficient AP automation on buyer’s side.
Regulatory compliance Adhering to an e-invoicing standard ensures regulatory compliance and peace of mind both for suppliers and buyers.	Constantly evolving regulations While the intention to have all stakeholders (at least across the EU) adhere to the same standard and maintain compliance across borders is clear, the reality remains that legislation and regulations of member states are still evolving at their own pace and oftentimes it is unclear in which direction.
Seamless data transfer between systems An international standard for exchanging invoice data electronically eliminates all inefficiencies and roadblocks on the way to digitization. Data is transferred between organizations automatically, without human intervention.	Integration of e-invoicing platforms Integrating different e-invoicing systems, supporting different protocols with existing, sometimes decentralized, ERP and accounting systems can be challenging, time consuming, lead to data loss or compliance issues. Change management and the adoption of new internal processes According to e-invoicing consultancy Billentis, 40% of larger organizations cite this as an obstacle to adopting e-invoicing.
100% accurate data and touchless invoice processing With a process that eliminates the need for manual data entry or even scanning and OCR because all required data is submitted in a structured machine-readable format there is no need for manual review and validation. The data can flow directly into the ERP system and be processed automatically.	Data validation While e-invoicing systems provide mechanisms to validate tax calculations and compliance with regulatory requirements accounting departments still need to validate incoming invoices against POs, agreements, or internal business rules. E-invoices sent in machine-readable format only, such as XML or JSON, without visual representation, impose a usability obstacle for manual operators. Error handling Oftentimes it is unclear how errors in the received e-invoice are to be efficiently handled between the buyer and the seller.
Sustainability Transition from paper to electronic invoicing contributes significantly to reducing businesses’ ecological footprint, not only by reducing deforestation, but also by significantly reducing the resources required to manually process invoices.	New solutions rise to the challenge Although the theory behind e-invoicing sounds like every automation team’s dream, the reality is that the complexity of regulations, maturity, adoption, standards and formats leaves global companies still dealing with a messy reality, that requires new solutions.

Is e-invoicing the answer to all AP automation dreams?

While e-invoicing adoption is accelerating, it is important to keep in mind that it will be implemented in a phased roll-out depending on the jurisdiction.

Germany has implemented e-invoicing for public procurement; however, it has not yet implemented it as mandatory for B2B, however, has plans to introduce legislation in 2025.

France will have mandatory e-invoicing for large companies by September 2026. All other companies must comply from September 2027.

Spain, Law 18/22 Businesses with total revenues of 8 million Euros or more a year will be required to comply with the mandate one year from the date the electronic invoicing technical regulations are enacted.

In the UK, e-invoicing is not mandatory for B2B payments but is for payments to and from public entities.

With governments across the globe acting as catalysts for the adoption of e-invoicing solutions, the landscape is rapidly changing. Invoice scanning and OCR is expected to be significantly reduced, while the amount of e-invoices is expected to grow by 10-20% per year in the midterm.

Although the theory behind e-invoicing sounds like every automation team’s dream, the reality is that the complexity of regulations, maturity, adoption, standards and formats leaves global companies still dealing with a messy reality, that requires new solutions.

Choosing the right AP automation solution for your e-invoicing

The bottom line is that hybrid invoice automation is here to stay for the foreseeable future. Being able to deal with this complexity requires purpose-built AI solutions, such as Intelligent Document Processing, capable of intelligently analyzing, classifying, capturing and normalizing data from invoices of any type, format and language into a single structured stream into their ERP system.

Learn more about how ABBYY addresses hybrid accounts payable automation here.

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* Some of the file formats and standards used for the electronic exchange of data and e-invoicing include:

• EDIFACT - Used internationally, particularly in Europe, for electronic data interchange.
• UBL (Universal Business Language) 2.0 - Developed by OASIS, UBL is widely used and includes standards for various business documents in addition to invoices.
• ZUGFeRD - A format popular in Germany that combines PDF and XML data for invoices.
• Facturae - The mandatory standard in Spain for invoicing within the public sector.
• PEPPOL BIS Billing 3.0 - Used by the PEPPOL network for cross-border transactions within Europe.
• eFFF (Electronic Flexible File Format) - Used in Belgium, accommodating various business document types.
• Svefaktura - Used in Sweden, particularly for transactions involving the public sector.
• FatturaPA - The standard format for electronic invoices in Italy, specifically for public administration transactions.
• ANSI X12 - A standard widely used in North America for EDI transactions, including invoicing.

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