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The Advantages of Electronic Invoicing
Studies show that corporations using electronic invoicing gain significant savings. This applies to outgoing as well as incoming invoicing.
Experts state (for instance, Prof. Breitner, www.iwi.uni-hannover.de) consistently that it can produce up to 70% of savings, mainly due to means and opportunities of process optimization. Even though the actual saving potential always requires individual consideration, it is obvious that considerable administrative costs decline by using e-invoicing.
Distinction to EDI
Electronic invoicing is defined as exchange of invoices in the form of files (e.g. PDF) via e-mails and Internet. The exchange of invoice data according to EDI procedure is not part of it. Electronic Data Interchange (EDI) is a well-established method of high-volume data exchange between known business partners. It requires, however, significant organizational and technical prepatory work, which is not efficient or even impossible to realize if the business partners do not know each other well. In addition with EDI, there arises the question what the valid tax document should be. B&L’s focus is, therefore, on the above-mentioned electronic invoices.
Laws on Invoicing
While it is relatively easy to exchange electronic invoices with consumers, special guidelines have been definded by law for invoices including VAT, namely B2B invoices. These guidelines at least result from the added value tax directives by the European Community, which were basically implemented as Value Added Tax Act in Germany. However up to now, a number of additional regulations apply, such as electronic signature laws and regulations, relevant for B2B invoicing in order to ensure integrity and authenticity.
The German federal cabinet passed the tax simplification law on February 2, 2011 which is based on the amendment to the EU VAT Directive which has to be implemented by member states until January 2013. By means of this law, the government implements the guidelines of the EC Council of Ministers and defines corresponding changes for the German Sales Tax Law planned to be effective as from July 1, 2011. Beside the current processes (signature and EDI), invoices can now be exchanged without these technical specifications subject to certain conditions.
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Processes for Outgoing and Incoming Invoices
Although many regulations were issued by the European Community, there is no standard framework for electronic invoicing throughout Europe. Due to these different legal standards and the different technical alternatives, different processes and options may apply.
We outline the organizational and technical distinctions in detail as follows:
Issuing electronic invoices in your IT to your clients
Receiving electronic invoices from your suppliers
Conclusion
In order to achieve significant cost savings, dealing with the organizational, legal and technical aspects is necessary. However, it will pay off very quickly. In order to be recognized under tax law, a detailed concept should be submitted in any case.
For more detailed information, please visit our Compliance page.
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