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E-Invoicing in the Age of Digitalization – a Paradox?

Estimated reading time: 4 minutes

Just about everyone uses the term “e-invoicing” these days, but it’s actually not the right term. In fact, it’s even somewhat misleading – yet we’ve followed this global phenomenon ourselves in calling one of our solutions “E-Invoice World Cloud.” But why?
It’s mainly because we’re sticking with a term that originally did simply refer to invoices in electronic form. Today, however, it has come to be associated with almost any transfer of information that takes place in relationships with customers, suppliers, and public authorities. Meanwhile, government influence on such matters continues to grow thanks in part to E-Invoicing Directive 2014/55/EU.

This year, Santa will be putting not just the usual gifts under the tree, but a number of legal changes, as well. In addition to those that have been made in Mexico, Spain, and Italy, the authorities in Greece, Portugal, and India are now also expecting companies to give them deeper insights into their business processes. And it’s supposedly all about e-invoicing! In these cases, though, it’s not simply about clicking a mouse and sending someone a digital bill. That means it’s not just a matter of middleware, mapping, or interfaces, either. I’d like to tell you it’s all easy to implement in no time, but it’s definitely not. Anyone who still believes that e-invoicing is purely about issuing bills digitally probably thinks Santa really does exist!

 

Complex tax and fiscal systems

Even though one might assume otherwise due to the focus on digitalization, it hasn’t been about e-invoicing alone for a while now. Companies also have to report movements of goods, payment flows, and various balances (some of them cumulative) to the authorities. The term “e-invoicing” was actually just a convenient catch-all, but people have come to accept everything it represents. These days, we’re no longer only talking about business partners exchanging digital invoices. It’s much more about the information public authorities require with regard to business processes, and these requirements vary a great deal.

 

How can you make everyone happy?

In some countries they involve reporting, while others concentrate on shipments – in other words, issues one typically encounters in customs and foreign trade. Sometimes, it’s even about local movements of goods within a specific company location. In other nations, you basically have to send each invoice to the tax authorities right away. Take the system Brazil has put in place, for example, which defies belief: Anyone who does business in this maze of tax laws has to come to terms with the fact that for every logistical process, there are fiscal requirements that are part of the daily routine. Anyone who works in this field is sure to have heard of the intricacies of the country’s Nota fiscal approval process, as well.

If you take a closer look at all these topics, the conventional tools, traditional partners, and established technologies many have worked with in global e-invoicing thus far don’t seem like a very good fit. That’s because today, e-invoicing has an effect on a customer’s processes, regardless of whether it’s a pharmaceutical producer, an automotive supplier, or a timber company. This is where another paradox arises: How are “standard” customer processes supposed to match up with the legal standard in question? In reality, we’re talking about business processes that are still far from standardized. Most of these procedures have developed their own particular character over time and incorporated best practices that are specific to individual national subsidiaries (“We’ve always done it that way!”).

 

The topic is underestimated!

It’s this type of process landscape that needs to be adapted to both future business specifications and the requirements of a standardized, harmonized template that itself has to fit into a global governance model. Then there are the strict demands of various public authorities. One question in particular starts coming to mind: How can you satisfy all these different entities? There are indeed a great many stakeholder groups to accommodate, and since they all deserve your attention, you can’t allow for any conflicting objectives.
Complicated, isn’t it? That’s why it’s important to have a comprehensive understanding of the situation, along with an intelligent solution that integrates seamlessly into your SAP system. This is especially true in a time marked by digitalization, S/4HANA, ONE Global Corporation, ONE Finance , corporate templates, transparency, standardization, and harmonization. Meanwhile, it’s clear that many IT departments tend to neglect this subject and underestimate it as a result. This is a dangerous way to go. In our experience, it sometimes leads to customers calling us out of the blue around three weeks before an important legal requirement is scheduled to take effect.

 

The goal: a single point of truth

Many corporations now only accept invoices in a specific format. In global competition, vendors can even lose customers if they don’t choose the right one for certain information. Supply chains in the automotive sector, for instance, feature a high degree of automation and rapid exchanges of data. Rather than pure mapping or a particular structure, we’re talking about the adaptation of entire business processes. This is exactly what a modern e-invoicing solution has to reflect. It needs to provide process support appropriate to the context at hand. We’ve long since moved past formats and communication channels; it’s now about the end-to-end integration of legal requirements into digital processes.

We’ve long since moved past formats and communication channels; it’s now about the end-to-end integration of legal requirements into digital processes.
Oliver Villwock
Consulting Director

So, what’s the challenge today? When new requirements arise, you have to come up with answers to the following questions: How do they impact the end-to-end process in question? How can you ensure a single point of truth? And how can you avoid media discontinuity? This brings us back to the subjects of digitalization and standardization. After all, if you suddenly add that kind of discontinuity back into your landscape just to get your B2G processes running smoothly, you’re going in the wrong direction.

As you can see, implementing state-of-the-art e-invoicing processes that work without a hitch is not something you pull off in the space of one afternoon. It has the scope of a full-fledged project.

At the risk of getting repetitive, this topic is much broader than the term “e-invoicing” suggests. What if we called it “electronic governmental communication” or “process integration for legal requirements”? For now, there’s no other established expression that describes what we’re talking about in a concise, yet thorough way. Maybe coming up with one will be one of my resolutions for the new year. If you’d like to help out, feel free to send me your suggestions!

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Oliver Villwock
Consulting Director
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