E-Invoicing: Boosting Compliance, Efficiency, and Security

In a recent interview with Fintech Magazine, Alex Baulf, VP of Global Tax at Avalara, shared his insights on the power of e-invoicing.

Baulf comments: “E-invoicing is a way of creating and exchanging structured and machine-readable data between two trading partners - a supplier and its buyer. An e-invoice allows companies to share the exact same information as a traditional paper invoice with their supplier’s ERP systems, without needing to create, print or post physical paper documents or scan them as PDFs. This gets rid of the need for manual data entry, leading to efficiency cost savings.”

E-invoicing is gaining momentum as governments worldwide seek to improve tax law enforcement and VAT collection.

Baulf notes: “In the last three years, governments have looked for better ways to enforce tax laws and collect VAT. Keen to ensure transparency and modernise indirect tax reporting and controls, more and more jurisdictions have begun to mandate the use of e-invoicing for day-to-day business activities.” 

Even in regions where e-invoicing is not yet mandatory, businesses are increasingly adopting this technology. “However, even in unmandated countries, businesses are increasingly turning to e-invoicing, as it is proven to reduce processing costs. Replacing the need for paper form invoicing with a structured, digital document speeds up the entire process. It also means that invoices can be handled and archived more efficiently.

"In fact, businesses can save up to 70% in material and printing, postage and archiving costs, compared to PDF and paper processing,” Baulf elaborates. The cost-saving benefits are clear, making e-invoicing an attractive option for companies looking to streamline operations.

The advantages of e-invoicing goes beyond cost savings to impacting business operations: “E-invoicing’s immediate information transfer cut processing times; businesses can expect to receive payments faster, leading to quicker and more effective operations.

"With e-invoicing, there is no need to manually enter data into systems for processing, saving businesses from painstaking, and often expensive, human errors. E-invoices will not sit indefinitely in someone’s email or get lost in the mail. When the information is in a digital format, legible by systems, businesses benefit from significant savings in human resources and accounting accuracy. This reduction in discrepancies is a game changer for business relations.”

The European Union and E-invoicing

The European Union is focusing on e-invoicing as part of its "VAT in the Digital Age" (ViDA) initiative, aiming for harmonisation across member states by 2028. E-invoicing is gaining more and more momentum as governments worldwide seek to improve tax law enforcement and VAT collection. Baulf says: “In the last three years, governments have looked for better ways to enforce tax laws and collect VAT. Keen to ensure transparency and modernise indirect tax reporting and controls, more and more jurisdictions have begun to mandate the use of e-invoicing for day-to-day business activities.”

Cybersecurity

Cybersecurity is a major concern for businesses today, and e-invoicing provides a solution to this challenge.

As Baulf explains, “A real fear for businesses today is the cybersecurity risks they face. Encrypted file transfer, digital signatures and secure networks - staples of e-invoicing - enhance security and ensure authenticity and integrity of data, making e-invoicing the safest way to send and receive commercial and financial information.” This added layer of security is crucial in safeguarding sensitive financial data.

E-invoicing is transforming domestic operations and facilitating international trade. Baulf remarks, “E-invoicing is transforming the way businesses are conducting their operations domestically and abroad. For VAT reporting, this means replacing the ‘periodical summary VAT information push’ (periodically submitting VAT information to authorities) with live-reporting of transactional VAT data.

"Tax authorities are able to be involved in the invoicing process and retrieve the information themselves (‘real-time VAT information pull’). On a larger scale, this enables more frictionless cross-border trade, as businesses can comply with the legal and tax regulations of different countries, preventing fraud and maintaining the integrity of the VAT process.”

“Ensuring faster payments and time efficiencies, e-invoicing allows business leaders to focus on the things that matter, such as strategic decisions that drive the business forwards. At Avalara, we believe that next generation e-invoicing will unlock global trade with 'anyone, anywhere, anytime', facilitate cross-border trade, and bring interoperability across processes and data to companies in different jurisdictions. As businesses seek to connect with a wider range of trading partners, the role and strategic importance of e-invoices will only grow.”

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