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  • Writer's pictureBen Washburne

E-Invoicing, Expanding Globally, and The Approaching Compliance Wave

Updated: Apr 22

We have been fortunate to work with many clients who have established a presence or have acquired entities in Europe, Asia, and Oceania. A concept that is still foreign to many U.S. based companies is "e-invoicing". eInvoices are invoices that are issued, transmitted and received in a structured data format which allows for its automatic and electronic processing. This does not mean a pdf sent via email, but a structured, and controlled data exchange between systems. When planning expansion or acquisition into another country, it is incredibly important to understand the concept of e-invoicing to equip yourself with the knowledge to make better decisions around the centralization of accounting systems and processes.


In this article we will cover what an e-invoice is, discuss the compliance "wave" that is rolling across the rest of the world, and how this impacts accounting and ERP decision making when expanding globally.


What Is An eInvoice?


The European Union guidelines paint a good high-level picture of how to think about eInvoices:


  • eInvoices are not:

    • Unstructured invoice data issued in PDF or Word formats.

    • Images of invoices such as JPG or TIFF.

    • Unstructured HTML invoices on a web page or in an email.

    • OCR (Scanned paper invoices).

    • Paper invoices sent, like images, via fax machines.

  • The use of eInvoices requires two key functions:

    • The eInvoice needs to be created with the correct structure.

    • The eInvoice needs to be transferred from the seller’s system to the buyer’s system.


In short, you can think of e-invoicing as the car and the highway that all invoices must travel on if a company wants to do business in a certain geographic region. Standardized fields, file requirements, submission deadlines, and audit trails that are mandated and enforced by local governing bodies.


Understanding the E-Invoicing Compliance "Wave" Outside of the US


The concept of e-invoicing has been around since 1965, but has really started to take off in the last decade with the modernization of business systems and the migration to cloud-based ERP systems. Many companies and ERP's have been gradually adopting the technology overseas to improve efficiency and reduce errors. The technology has now reached a level of adoption and cost efficiency where governments outside of the U.S. are rapidly rolling out mandates to enforce the technology in order to reduce fraud and ensure the proper collection of indirect taxes (VAT, GST, etc).


Governments can't make this happen overnight, and many are taking a "phased in" approach with companies "phasing in" as they reach a certain annual revenue generation thresholds. Those annual revenue thresholds are lowered each year over a certain period of time until all companies within the region are mandated to comply.


As of the date this article was published (April 2024), over 80 countries have announced or already have mandates in place. That number is expected to double by 2030.


While there is a sprint underway to standardize on a country by country basis, it is important to realize that each country has their own standards, networks, and regulations. Luckily, there is some standardization in place with the rollout of the PEPPOL (Pan European Public Procurement Online) for instance. This standard is making it's way across the world to attempt to standardize the network and access points for transmitting on the network worldwide.



How Does This Drive Decision Making Around ERP Selection and Systems Consolidation?


While organizations like PEPPOL are making it easier for developers and technology companies to adapt and standardize, it is important to realize that on some level, each country will always have their "spin" on what is required. This is why it is important to do you research and invest in an ERP that has the agility to adapt to these ever-changing requirements.


Luckily, NetSuite has been on the front lines of this innovation. NetSuite has all of the tools necessary for your team to develop and meet the eInvoicing standards of the country you are looking to support. The Electronic Invoicing SuiteApp provides the ability to generate and send eInvoices as well as receive and convert them into transactions records.


In addition to this functionality, NetSuite has also announced a partnership with the global-tax leader Avalara to develop a living, breathing solution native to NetSuite that will:


  • Quickly support e-invoicing models by country or region. NetSuite will connect to Avalara's global API to fulfill e-invoicing mandates, including digital signatures, QR codes, and tax authority clearance and approvals.

  • Easily access e-invoice exchange networks and government platforms. Organizations can connect to national and international networks, like PEPPOL, as well as government e-invoicing platforms directly from within NetSuite.


This means that in a future state, your NetSuite environment will adapt and change to meet the requirements in all of the countries in which you operate. Taking the burden off of your development team to maintain e-invoicing compliance.



The U.S. Isn't Far Away From Enforcement...


While there is no set timeline to mandate e-invoicing in the U.S., we may not be far away. In July 2021 the Business Payments Coalition and the Federal Reserve launched a pilot project called the "e-Invoice Exchange Market Pilot". This project aims to "establish a secure, open e-invoice delivery framework." They have already completed the market pilot in 2023, have launched a market ready exchange framework, and have established a legal entity to oversee it (DBNAlliance).


It doesn't take an eInvoicing or tax expert to come to the conclusion that once the U.S. government sees the tax revenue benefits from the rollouts abroad, we will not be far behind in adopting this new way of operating.


We're Here To Help

If you are thinking about a new ERP or expanding globally, our team at Equify Advisors has deep experience leading these selection efforts. Equify Advisors is a NetSuite Alliance Partner and has certified experts within the technology. Set some time with us to learn more here: https://www.equifyadvisors.com/contacttheteam


Author:

Taylor Kopnitsky

Ben Washburne - Partner

NetSuite Certified SuiteFoundation

NetSuite Certified ERP Consultant




Disclaimer:

Equify Advisors, LLC does not guarantee the up-to-date accuracy of the compliance information and data included in this article. This article was published in April 2024. These mandates and requirements for each country are forever changing. Please review locally published e-invoicing guidelines and regulations to ensure your compliance. Neither Equify Advisors, LLC nor any person acting on its behalf may be held responsible for the use which might be made of the information contained in this eInvoicing article.

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