December 20, 2010
European Commission promotes e-invoicing
The European Commission (EC), the governing body for the European Union (EU), has announced a set of initiatives to encourage the growth of e-invoicing across Europe. By 2020, the EC hopes that e-invoicing will be the main method by which European businesses issue invoices. It estimates that that moving from paper invoices to e-invoices will generate savings of around (EUR) €240 billion (C$318 billion) over a six-year period.
Unlike paper-based invoices, e-invoices provide all data in digital format. The benefits of e-invoicing include reductions in payment delays, fewer errors, lower printing and postage costs and, most importantly, fully integrated processing.
“One distinctive feature of the e-invoice is its potential for automation, especially if the invoice is sent in a structured format,” the EC says. “E-invoices can be generated and transferred automatically and directly from the biller’s financial supply chain system to the recipient’s system. Most of the economic benefits come not from savings in printing and postage costs but from the full process automation and integration from order to payment between trading parties.”
The EC states that, because existing rules on e-invoicing in Europe are fragmented along national or domestic lines, the potential value of e-invoicing has yet to be exploited. It is particularly interested in promoting adoption of e-invoicing among small and medium-sized enterprises (SMEs) across Europe.
“Currently, exchanging e-invoices is still too complex and costly, in particular for SMEs,” the EC says. “While 42 percent of large European enterprises say they receive or send e-invoices, the adoption rate among SMEs is just 22 percent. As a result, the average market penetration of e-invoicing remains rather low in Europe and is currently estimated at around 5 percent of all B2B invoices exchanged each year.”
The EC says that its initiatives are designed to ensure legal certainty for companies issuing cross-border e-invoices; to develop inter-operable e-invoicing platforms based on a common standard that replace today’s often incompatible e-invoicing systems; and to promote the adoption of e-invoicing through the creation of bodies such as national e-invoicing fora and a European multi-stakeholder forum called the European E-invoicing Forum.
As part of efforts to ensure legal certainty for e-invoices, from January 2013, the EC’s regulations on cross-border European value-added tax (VAT) will require EU member states to treat paper invoices and e-invoices on an equal basis. Member states will no longer be allowed to add specific requirements such as insisting that e-invoices be based on advanced electronic signatures or the EDI (electronic data interchange) format standard.
E-signatures are used to identify and authenticate the sender of an electronic document such as an e-invoice.
The EC describes EDI, which dates back to the 1980s, as cumbersome and costly to use, and states its preference for e-invoicing standards based on the UN/CEFACT Cross-Industry Invoice (CII) v.2 platform.
The diversity of e-signature laws among EU member states has impeded the adoption of cross-border e-invoicing, the EC says. It calls for a more co-ordinated and comprehensive approach by member states to facilitate the EU-wide cross-border interoperability of e-signatures. In order to encourage harmonisation of national e-signature laws across Europe, the EC will make revisions to its existing regulations on cross-border e-signatures. These revisions will provide a legal framework for cross-border recognition and interoperability of secure e-authentication systems.