Insight & Analysis

A public convenience

Published: Aug 2017

If you want to continue doing business with a European public body, you’d better get ready for e-invoicing now.

The way you do business with EU public bodies is changing. As of November 2018, e-invoicing will become a mandated requirement. Companies must either comply or lose the business.

The EU’s Directive 2014/55/EU is the document responsible. It lays out the rules on e-invoicing in public procurement processes by member states. The European Commission offers some guidance on preparation but what does it look like from the perspective of a technology vendor looking to build out a business case for implementation?

Gert Sylvest, Co-founder and CTO from procurement-to-pay provider, Tradeshift, sees European e-invoicing as arguably lagging just behind Latin America in its enthusiasm for adoption. Progress to date has largely been due to wide penetration across the Nordics (Tradeshift is a Danish firm). “Legislation has been at the heart of this result and much has been done by EU member states to remove legal barriers,” notes Sylvest.

For the EU to mandate the acceptance of electronic invoices in the public sector, it demonstrates its awareness of existing excessive complexity, legal uncertainty and operating costs for economic operators using electronic invoices across the member states, comments Sylvest.

“Complying with a new electronic invoicing standard each time a business accesses a new market creates barriers and obstacles to cross-border trade. The potential annual savings can be up to €40bn across Europe just for the business-to-business segment.”

Slow burner

The changes will offer a mixed bag of effects on the broader corporate community trading in Europe. “The good news is that this will help the public sector within the EU and it will also push the private sector towards e-invoicing,” says Sylvest.

But he feels the pace has been too slow to date, arguing that “billions could have been saved” with a more aggressive plan. “Unfortunately, the bureaucrats in the EU have decided that there will be several e-invoicing standards permitted at the same time. This will be at huge extra costs for everyone and can mean big delays in implementation.”

Corporates looking to use e-invoicing – and retain their public body contracts – should avoid the political debate and instead consider the positives. Sylvest suggests these include reduced inefficiencies, improved fraud detection, and late payment management. “And it delivers greater visibility into spend and working capital”.

The European Commission offers these bonus points:

  • Faster retrieval of money from customers by reducing the time an invoice or payment is in the post.
  • Reduced printing and postage costs.
  • Quicker and cheaper processing as the information in electronic invoices can be fed directly into a company’s payment and accounting systems.
  • Lower storage costs.
  • Reduced training and system development costs.

Following now

“E-invoicing is a component of a greater trend, which is digitising the entire procure-to-pay process, which yields even greater benefits,” declares Sylvest.

To get on board with this trend and begin issuing and accepting e-invoices in the EU’s public sector, the first thing a business needs to understand is that there is a common standard that supports the whole procure to pay process called Universal Business Language. “Firms should look to solutions that support this standard to ensure maximum interoperability,” he advises.

Companies will also need to familiarise themselves with Pan European Public Procurement On-Line or PEPPOL. “PEPPOL is operational and successful in several countries and has demonstrated that cross-border trade is possible based on a common standard,” Sylvest asserts.

Suppliers only need one service provider connected to PEPPOL in order to send invoices to any contracting authority also connected to PEPPOL. This, for Sylvest, is the pathway of most convenience for companies seeking to maintain their public service trade.

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