European E-Invoicing Guide for SMEs

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The intent of the Guide is to provide SMEs with unbiased information and insight regarding the different aspects of e-Invoicing and practical guidance on how to begin. The Guide combines business, technical, practical, legal and compliance information in a way that interested SMEs can be armed with knowledge when making their own independent decisions to chart the best way forward for their business. “We developed the Guide based on multiple national surveys around the region and in collaboration with European SME associations to provide the basic understanding every decision-maker needs in evaluating an e-Invoicing strategy (project?).” Carmen Ciciriello The Guide is not meant as a step by step, “How to Guide”, nor does it provide specific information on the universe of solutions and services on offer. Instead, it offers management insight into the impact of e-Invoicing (pros and cons), possible evolution paths and, most importantly, the questions they must (should) ask any potential vendor on compliance, e-Signatures and standards. The guide was copyedited and designed by MAPg.
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  • 1. European E-Invoicing Guide for SMEs SUPPORTING EUROPEAN SMALL AND MEDIUM ENTERPRISES IN THE ADOPTION OF ELECTRONIC INVOICING
  • 2. November 2009 "This Guide is a very helpful instrument that will certainly encourage SMEs' uptake of electronic invoicing. At the same time and perhaps more importantly, it also demonstrates that only if the current EU rules on e- Invoicing are amended and simplified as proposed by the European Commission we will be able to reap the benefits of a single, EU-wide legal framework." Gerhard Huemer, Economic and Fiscal Policy Director at UEAPME.
  • 3. THE EUROPEAN E-BUSINESS LAB BIBLIOGRAPHICAL INFORMATION The European e-Business Lab is a cross-industry initiative Authors Carmen Ciciriello launched by successful organisations committed to sharing and improving e-Business best practices, adoption, Mairi Hayworth standardisation and innovation. It is a division of the Publisher European Business Lab European Business Lab Association. The Laboratory provides a platform for a user-driven open innovation Book Design MAP Gallery ecosystem focused on e-Business developments. Graphics Giulia Tonelli ACKNOWLEDGEMENTS We would like to thank the sponsors and contributors of this © 1st edition 2009 Guide, as partners of the European e-Business Lab: All rights reserved. European Business Lab. Austrian Federal Economic Chamber (WKO), Email: info@euebl.org AustriaPRO, Website: www.euebl.org CBI (Customer to Business Interaction) Consortium, Via Carlo Troya, 38 SEPA International, 70031 Andria (BA) UEAPME (European Association of Craft, Small and Italy Medium-sized Enterprises). We would also like to thank the Enterprise Europe Network of the European Commission for its valuable collaboration. DISCLAIMER The authors wish to express appreciation to those who This booklet is for general guidance on matters of encouraged and supported the preparation of this Guide: interest only. It does not constitute professional advice. You should not act upon the information Costas Andropoulos, contained in this booklet without obtaining Antonio Conte, specific professional advice. No representation or David Ellard, warranty (expressed or implied) is given as to the Risto Suominen, accuracy or completeness of the information contained in this booklet, and, to the extent Aigars Jaundalders, permitted by law. The European Business Lab, its Danny Gaethofs, members, employees and agents accepts no Pieter Breyne, liability, and disclaim all responsibility, for the Kai Haberzettl, consequences of you or anyone else acting, or refraining to act, in reliance on the information Thomas Wilson, contained in this booklet or for any decision Mike Beral, based on it. Dulce Lopes, and Julian Inza.
  • 4. Preface It is with great pleasure that we introduce to you the first of the European e-Business Lab’s Guides, the ‘European e-Invoicing Guide for SMEs’. The European e-Business Lab (EBL) is an initiative launched by successful organisations who are committed to sharing and improving e-Business best practices, adoption, standardisation and innovation. We monitor and gather business needs to improve the current electronic business ecosystem and work closely with European institutions, the public sector, solution and service providers to make sure that SME requirements are taken into consideration. For the first e-Business Guide, we chose to address an accelerating trend that will impact every company in Europe over the next few years. The trend is the automation of the invoicing process and is known as “e- Invoicing”. The intent of this Guide is to provide SMEs (and all organisations) with unbiased information and insight regarding the different aspects of e-Invoicing and practical guidance on how to begin. The Guide combines business, technical, practical, legal and compliance information in a way that interested SMEs can be armed with knowledge when making their own independent decisions to chart the best way forward for their business. AUTHORS: CARMEN CICIRIELLO Carmen Ciciriello is a Member of the European Commission (EC) Expert Group on e-Invoicing and of the EC Payment Systems Market Expert Group. She gathers and validates business requirements, providing an expert view of corporate needs in legislation and technology relating to e-Business. As Chief Executive Officer of SEPA International Ltd., Carmen promotes the vision of an integrated and competitive European e- Business ecosystem, advocating corporate needs and requirements with decision makers and regulators. Carmen is the Chairman of the European e-Business Lab. MAIRI HAYWORTH Mairi Hayworth is a Founding Member of the European e-Business Lab; previously a ten year member of the European e-Commerce Standards Board. Her career has spanned twenty-five years primarily managing transaction centres in a multi-national, cross-industry environment. She has been a driving force of e- Business solutions, global standards, and harmonisation of e-Invoicing legislation. Mairi has held senior management roles in operations, finance and information technology.
  • 5. European E-Invoicing Guide for SMEs Contents ABOUT THIS GUIDE SECTION ONE: INTRODUCTION TO E-INVOICING Chapter 1 - E-Invoicing Introduction to electronic invoicing and its benefits ........................................................................1 E-Invoicing behaviours and needs of SMEs in Europe ...................................................................2 Key e-Invoicing initiatives in Europe ...............................................................................................2 Chapter 2 - Impact of e-Invoicing Impact on business .........................................................................................................................4 Impact on processes ......................................................................................................................4 Impact on technology .....................................................................................................................5 Chapter 3 - E-Invoicing adoption models E-Invoicing evolution .......................................................................................................................6 E-Invoicing models .........................................................................................................................6 SECTION TWO: HOW TO GET STARTED Chapter 1 - E-Invoicing Checklist Define the scope ...........................................................................................................................18 Assess Capability .........................................................................................................................18 Identify your e-Invoicing platform .................................................................................................19 Implement your solution ...............................................................................................................21 Chapter 2 - Electronic Signatures Introduction ...................................................................................................................................25 Electronic Signature Technologies ...............................................................................................25 Electronic, Advanced and Qualified signatures ............................................................................26 i
  • 6. European E-Invoicing Guide for SMEs Chapter 3 - Emerging Technologies Intelligent PDF ..............................................................................................................................28 Customised Spreadsheet Templates ............................................................................................28 Other Technologies .......................................................................................................................28 SECTION THREE: BEST PRACTICES Chapter 1- Best Practices for e-Invoicing Controls over invoice data ............................................................................................................31 Recommended Best Practices .....................................................................................................32 Chapter 2 - Best Practices for e-Archiving Supplier and receiver responsibilities ...........................................................................................33 Chapter 3 - Technology changes SECTION FOUR: LEGAL COMPLIANCE Introduction ...................................................................................................................................35 E-Invoicing compliance in Europe ................................................................................................35 EU countries where e-Invoicing is mandatory for the Public Sector .............................................40 E-Archiving compliance in Europe ................................................................................................40 Cross-border e-Invoicing and e-Archiving ....................................................................................42 E-Invoicing and e-Archiving requirements in the EU ....................................................................42 Proposal for a simplified and harmonised legal framework ..........................................................48 SECTION FIVE: STANDARDS Technical standards ......................................................................................................................51 E-Invoicing standards ...................................................................................................................51 Benefits of using standards ..........................................................................................................51 Common global and regional standards .......................................................................................52 Industry Specific Standards ..........................................................................................................53 Emerging standards .....................................................................................................................53 Standards convergence ................................................................................................................54 Types of messages .......................................................................................................................54 Data Transport methods ...............................................................................................................54 ii
  • 7. European E-Invoicing Guide for SMEs ANNEX 1 Content of an invoice for VAT purposes ANNEX 2 E-Invoicing SMEs Survey LIST OF REFERENCES GLOSSARY iii
  • 8. European E-Invoicing Guide for SMEs About this Guide SECTION ONE: INTRODUCTION TO E-INVOICING Section 1 provides an introduction to e-Invoicing and its impact on business, processes and technology. An overview of different levels of process automation and integration, from a manual, semi-automated to a fully automated, end-to-end solution is provided. Impact on the buyer (receiver of the e-Invoice) and the supplier (sender of the e-Invoice) is analysed under each type of scenario. SECTION TWO: HOW TO GET STARTED Section 2 offers practical guidance on “How to get started”. A detailed checklist defines the typical phases and decisions of an e-Invoicing implementation project for full end-to-end automation, including critical aspects. An introduction to electronic signatures and emerging technologies is included at the end. SECTION THREE: BEST PRACTICES Section 3 details Best Practices gathered at European and international level by e-Invoicing experts and practitioners to provide the highest level of guidance to SMEs. SECTION FOUR: LEGAL COMPLIANCE Section 4 explores the legal requirements for VAT e-Invoicing compliance in the EU and different Member States. It provides a practical explanation of what are the requirements and how SMEs can achieve compliance using the different options at their disposal. The final part describes the current proposal of the European Commission to harmonise and simplify the current legal framework for e-Invoicing and how it could benefit enterprises. SECTION FIVE: STANDARDS Section 5 focuses on invoice data standards, messages and transport technologies. ANNEX 1 Content of an invoice for VAT purposes. ANNEX 2 Results of the SMEs Survey on e-Invoicing conducted by members of the European Commission Expert Group on e-Invoicing, in 2008. REFERENCES GLOSSARY iv
  • 9. Section One Introduction to e-Invoicing
  • 10. INTRODUCTION European E-Invoicing Guide for SMEs TO E-INVOICING Section One: Introduction to e-Invoicing CHAPTER 1 - E-INVOICING 1. INTRODUCTION TO ELECTRONIC INVOICING AND ITS BENEFITS For the past twenty years, large corporations have been automating their invoicing processes, in order to take advantage of the savings and efficiencies that e-Invoicing can provide. Since 2005, European governments (i.e. in Denmark, Spain, Italy, Sweden, etc.) have started to make e-Invoicing mandatory for the public sector. In these countries, all companies and citizens who supply goods and services to the public sector will be required to send only electronic invoices. The benefits that Europe could derive from e-Invoicing adoption are estimated at € 238 billion (cumulated over a period of six years)1 . While a paper invoice costs between €1,13 and €1,65 euro, electronic invoicing would reduce the cost per invoice to between €0.28 and €0.47, a reduction of 70% to 75%2 . The European Associations of Corporate Treasurers has reached similar results, estimating that companies could save up to 80% of their current costs by processing invoice data automatically, removing paper and manual efforts. Nevertheless, today the majority of small and medium enterprises3 in Europe are still creating paper invoices, putting them into envelopes with stamps, and either sending them through the postal system or by courier to their clients. When clients receive the paper invoices, they must check that the information in the invoice is correct and manually enter the details into their systems before the payment can be approved. This whole process can be fully automated without manual intervention: the information included in the invoice can be automatically created by the supplier’s computer and sent to the client, whose computer can automatically check that the information is correct and approve the payment. The result is a dramatic reduction in the time and cost to create, send, receive, check, approve, and pay an invoice. A key benefit of electronic invoicing for SMEs, beyond the efficiency and cost reduction, is the opportunity (or competitive advantage) to have access to a wider market of potential customers and suppliers, especially large corporations, who prefer working with e-capable trading partners. Any opportunity to improve and expand business relationships in the current economic conditions is extremely valuable and worth pursuing. Electronic invoicing allows SMEs to grow their business, in terms of orders, customers or suppliers, without having to invest in a proportionate number of employees to carry out repetitive administrative tasks, for which the process automation is best suited. Employees currently entering invoice data manually into the company’s internal system, opening and closing envelopes and archiving paper documents, will be able to allocate their time to more value added tasks, such as customer relationships. Electronic invoicing is rapidly becoming the preferred means to exchange invoice data. SMEs must be prepared for this natural market evolution. 1 CapGemini, “SEPA: potential benefits at stake,” January 2008. 2 Aberdeen Group, “Electronic Invoicing Solution Selection Report: Leading an Accounts Payable Extreme Make Over,” December 2005. 3 According to article 2 of the Annex of Recommendation 2003/361/EC, the category of micro, small and medium-sized enterprises (SMEs) is made up of “enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro”. 1
  • 11. INTRODUCTION European E-Invoicing Guide for SMEs TO E-INVOICING 2. E-INVOICING BEHAVIOURS AND NEEDS OF SMES IN EUROPE Surveys aimed at identifying the behaviours, perceived benefits, obstacles and potential accelerators of e- Invoicing adoption were conducted in 2008 (see ANNEX 2). The results can be summarised as follows: The largest majority of SMEs are currently sending or planning to send e-Invoices either: as PDF from their accounting application directly to their customers 58,9% 35,5% SMEs perceive as the main potential benefits of e-Invoicing: cost reductions increased efficiencies faster payments 75% 79,3% 37,8% The key problems of e-Invoicing for SMEs are: readiness / compatibility with internal information systems customer readiness / compatibility legal uncertainty complexity 30,25% 33,1% 22,4% 22,8% The most important accelerators for e-Invoicing are: 1. free of charge IT-tools to create, transmit and send invoices 2. supporting material (solution documentation, user manuals, legal documentation, sample files, frequently asked questions) 3. assurance that the solution is VAT compliant The realisation of the savings and efficiencies that e-Invoicing can provide to Europe will depend on its adoption by SMEs. Their current practices and needs should be considered as the foundation for any successful economic policy and related initiative. 3. KEY E-INVOICING INITIATIVES IN EUROPE A growing number of European governments are committed to fostering e-Invoicing adoption. In order to reduce the administrative burden to companies, EU governments (such as The Netherlands) are simplifying and harmonising the national legal framework removing current legal barriers. A harmonised legal framework and the adoption of a common global standard are two fundamental conditions for reaping the potential benefits of e-Invoicing. 2
  • 12. INTRODUCTION European E-Invoicing Guide for SMEs TO E-INVOICING An important action that EU governments could take is the promotion of a global non-proprietary standard, that satisfies the needs of communities currently using national and industry specific standards. As the single largest buyer in the European economy, the public sector would give an enormous impetus to convergence towards a common standard, reducing the costs and complexities of data translation across the entire e- Invoicing ecosystem. (See Section 5 for more information on standards) Certain EU Member States, especially in countries where e-Invoicing is mandatory for the public sector, offer simple tools for users in the Business-to-Government domain. The Danish National IT & Telecom Agency launched an open e-Business framework – NemHandel – for the exchange of e-Business documents4 in a secure and reliable environment. EU governments are also engaged in a major initiative, PEPPOL (pan-European public procurement online), whose objective is to allow any company and, in particular SMEs, in the EU to communicate electronically with any European governmental institution for the entire procurement process. The PEPPOL initiative has an e-Invoicing component which will allow the exchange of e-Invoicing documents between all relevant stakeholders. 5 At the same time, the European Commission is running an e-Invoicing and e-Ordering pilot project (e- PRIOR) with a number of suppliers. The main goal of this project is to gain real-life experience with e- Invoicing and to share the lessons-learned with Member States and any other interested stakeholders. 6 The other side of the order-to-payment cycle is paymen
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