What is e-invoicing? Here’s everything you need to know from basics to benefits

Faster than paper mail. More powerful than an email. Able to leap distances in a single click.

“Look! Up in the sky! It’s an email invoice!”
“It’s a paper invoice!”
“It’s an E-invoice!”

Although e-invoicing doesn’t have the same impactful first hand impression as Superman, it’s still a game changer that will impact many lives in the business world by streamlining invoicing processes and bringing security closer to businesses’ everyday work. This blog post will equip you with the basic knowledge of e-invoicing: what it is, who it is for and what’s the process behind it.

Let’s start with the very first question: what is the definition of electronic invoicing and why is it a game changer? The European Commission defines e-invoicing as: “the exchange of an electronic invoice document between a supplier and a buyer”. Simply put, e-invoicing is a secure and automated exchange of invoices between businesses. 

What is an e-invoice?

Unlike PDFs or scanned images, e-invoices use a structured format, like XML (eXtensible Markup Language), that is machine-readable. This means data like product descriptions, quantities, and prices are embedded within the document itself, making it readable for ERPs and invoicing softwares. Structured e-invoices are often accompanied by an invoice image, which is a visualisation of the structured invoice content you created in your software.

While the core structure is the same in e-invoices, specific formats can vary by region and countries, like SI-UBL in the Netherlands, Svefaktura in Sweden or Finvoice in Finland. The good news is, the EU standard EN16931 promotes interoperability between different e-invoice formats. This means even if businesses use different formats (like SI-UBL, Svefaktura, or PeppolBIS), the core data within the invoice can still be understood by different systems. This eliminates the need for complex conversions and opens up borders for smoother international trade.

E-invoicing brings clarity and savings to business processes

In short: e-invoicing benefits businesses of all sizes, from startups to corporations, and even government agencies and consumers.

The chaos of paper and email invoices can be overwhelming

Let’s start with a real life example. Imagine working in an accounting office, where you as an accountant receive a mountain of paper invoices and gigabytes of email invoices from various customers. These invoices could arrive by mail, email, courier, or even be hand-delivered, creating a logistical nightmare. Each invoice would then need to be manually entered into the accounting software by hand, a tedious process which might take days or weeks. Add in a badly slept night, or a headache, and you’ve got a recipe for disaster. A single misplaced decimal can trigger a chain reaction of calls to suppliers, credit invoices, and manual data fixes, all of which eat away at your valuable time and money.

E-invoicing saves you from the stress of manual mayhem

E-invoicing streamlines the entire process by minimising human errors and reducing tasks like manual data entry and chasing lost paper invoices. This frees up your valuable time to focus on what truly matters – running your core business. Suppliers submit invoices electronically through a secure network, reaching you in minutes. E-invoicing automates these time-consuming manual processes, saving you time, money, and frustration.

How does the e-invoicing process work?

Sending and receiving follow the same logic as sending a letter via postal service, where the letter sender puts the letter in a mailbox. A mailman picks it up and delivers it to a mail distribution centre, from where another mailman picks it up and delivers the letter to the recipient. 

In e-invoicing, senders and receivers act as end users (letter senders and receivers), and e-invoice operators act as mailmen between mailboxes. Most importantly, the exchange happens automatically, securely and in an instant compared to sending and receiving letters, or invoices, manually.

1. The sender creates the invoice in their invoicing software and transmits it securely through the e-invoicing network.
2. The sender’s e-invoicing operator converts the invoice to a format the receiver software understands and securely delivers it to the recipient’s software.

Don’t get fooled by e-invoice look-alikes

E-invoicing is a relatively new thing among businesses, and there can be various interpretations of what an electronic invoice is. An invoice might be in a digital form but that doesn’t make it an electronic invoice yet. For example, JPGs or PDFs sent via email are not e-invoices, nor are paper invoices scanned with OCR and then manually transferred to the e-invoicing software. 

E-invoices follow a specific structure mandated by regulations and industry standards. This standardised format makes the data machine-readable and allows the information to be delivered without manual handling all the way from the sender to the receiver’s software.

How to take e-invoicing into use?

E-invoicing capability is a valuable feature, which is usually integrated within invoicing or financial management softwares.  The first step is to check with your software provider to see if their software is compliant with e-invoicing. If so, they can assist you in setting up e-invoicing in your existing software. 

How much does e-invoicing cost?

E-invoicing is a much cheaper option to paper invoicing but the cost of e-invoicing depends on the ERP software and their pricing logic. Some providers offer transaction-based pricing, where each e-invoice sent and received has a clear, transparent cost. Sometimes the cost of an e-invoice is included within a monthly subscription fee for the ERP, or they might offer a free plan for a certain amount of e-invoices, after which they will be priced according to usage or package.

Are you ready to begin your e-invoicing journey?

E-invoicing is rapidly transforming how businesses manage their finances now and in the future. By streamlining processes, minimising errors, and saving time, e-invoicing promotes more efficient operations for businesses of all sizes.

In fact, e-invoicing is already mandatory in some regions, and its adoption is steadily increasing around the world. This growing importance makes understanding and implementing e-invoicing solutions a strategic decision for businesses like yours aiming to stay competitive in the global marketplace.

Not convinced yet? Gain deeper knowledge of the e-invoicing benefits with our blog post E-invoicing vs. traditional invoicing: why it’s time to make the switch.