May 6, 2024
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.
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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.
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.
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
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.
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 Mix of standards for international operations Freedom of interpretation of the standard |
| 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 Change management and the adoption of new internal processes |
| 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 Error handling |
| 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. |
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.
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.
Slavena Hristova
Director of Product Marketing, Vantage group at ABBYY
Slavena Hristova is Director of Product Marketing, Vantage at ABBYY. Hristova leads the global product marketing of the ABBYY Vantage product line. She manages the complete product lifecycle from market requirement and go-to-market strategy development, to sales enablement and training offerings for channel partners. She has several years of experience in product management and marketing in the areas of text recognition, information and document management.
Connect with Slavena on LinkedIn.
