Invoices are a part of every business for many years. It is used as proof of sales, tracking payments, maintaining records, helping in tax filling, and many more for daily business operations.
Do you have a process like this for invoicing? Printed, signed by authorized personnel, and folded paper is sealed in an envelope, a stamp is added, addresses are added, and the envelope is mailed. Isn’t it too time-consuming?
Consider e-invoicing if you dread having to go through the long and tedious process of manual invoicing.
So, without much further ado,
Let us dive into what is this e-invoicing and how it’s winning corporate lives.
Electronic invoicing or e-invoicing is a form of electronic billing. The purpose of using e-invoices is to ensure that trading partners, such as customers and suppliers, comply with the terms of their trading agreements.
In simple words, e-invoicing refers to documents that are issued, received, and processed electronically to reduce manual efforts and increases business productivity.
The e-invoicing system has been introduced to standardize and uniformize the invoicing process.
– Documents issued in Word or pdf format with unstructured data.
– An image of an invoice, such as a jpg or tiff.
– HTML invoices on a website or in an unstructured email.
– OCR (Scanned paper invoices).
– Scanned paper invoices.
The adoption of electronic invoicing was widespread several years ago in countries like the Nordics and Latin America. Some other countries have introduced e-invoicing more recently or will do so in the near future.
Several countries under the European Union have made e-invoicing mandatory for business-to-government transactions.
E-invoicing will be implemented in several Asian countries including Japan, Vietnam, South Korea, and the Philippines as early as 2021.
Recently, India has made e-invoicing mandatory. Under the Indian Goods and Services Tax (GST) law E-invoices apply to businesses that exceeded the Rs.50 Crore annual turnover limit. The Central Board of Direct taxes and Customs (CBIC) reduced the annual turnover amount from Rs.100 Crore to Rs. 50 Crore. This regulation has come into effect from 1st April 2021.
The E- Invoices are a standard format of the invoice recommended by GSTN for the GST registered persons under GST Law, 2017.
Below are a few important components that an e-invoice must-have. To refer to the full list click here.
IRN stands for Invoice Reference Number. It is a unique number created by the Invoice Registration Portal (IRP) with the help of a hash generation algorithm, under the e-invoicing system. This number consists of 64 characters (alphabets + numbers + certain special characters).
A Digital Signature is simply encrypted JSON data returning from the IRP. The digital signature is mandatory for each invoice to be valid.
The digital signature also should not be confused with the signature of the taxpayer.
Also Read: Digital Signature v/s Electronic Signature
– QR Code
The data in the QR Code is also generated by the IRP. The QR code can be scanned at any time to view the invoices.
Let us walk you through the paramount benefits of an e-invoicing system.
1) Easy & Accurate documentation
With E-invoicing, you reduce the chances of making mistakes. How? You improve your visibility and ensure accuracy due to end-to-end tracking. Having a digitally precise and detailed audit trail significantly helps to reduce human errors thus increasing productivity. You can also track invoice validation, approvals, and payments in real-time.
Here is another major benefit, higher accuracy gained with E-invoicing systems reduces the risk of invoice frauds that occur due to duplication or human errors.
2) E-invoicing curbs Tax evasion:
When buyers generate E-invoices, they can be tracked in real-time. This leads to a speedy issuance of ITC (Input Tax Credit). The faster the ITC generation, the lesser the tax frauds.
An e-invoice system reduces the scope of invoice data manipulation as they are generated before a transaction is processed. Furthermore, this reduces the possibility of a fake GST invoice.
Similarly, one can only claim an authentic ITC. Tax officials can easily track fake input credits if both input and output tax details are available.
3) Maintain transparency with customers:
Once the E-invoice is uploaded on the GST portal, the buyer receives the authentication details via email. This transparency actively demonstrates trust. The best part? Customers can reconcile their purchase orders. The real-time tracking feature helps customers to accept or reject invoices, on the go.
4) Access e-invoices from anywhere:
As e-invoices are uploaded on a common portal, they can be accessed from anywhere. Meaning, an e-invoice generated in software ‘A’ can be accessed by users on software ‘B’. This adds up to e-invoice efficiency, especially during the pandemic.
Paper-based invoices are to be retrieved by accountants within the office itself. However, e-invoices enable accountants to enter data from their home offices as well.
5) Save Time and money
Is your organization penny-wise or dollar smart?
Apart from saving costs on paper, ink, posting, and printing you save numerous employee-level costs. How? By actively tracking each penny earned, you are in better control of managing your finances. Meaning, with all data available at your fingertips, you can make better strategic decisions for your company.
Firms land up identifying opportunities, to provide better facilities to their teams and increase their overall efficiency. In a nutshell, tracking your organization’s finances saves both time and money.
6) Going green
E-invoicing is your way to hit two targets with one stone.
You are increasing your company’s productivity, but you also end up doing a favor to the environment. Switching to a paperless solution reduces paper wastage, time, and energy required to maintain those papers.
7) Easy to keep a track record
E-invoices can be easily sent, viewed, and processed. They make it easier for users to view them and keep a track of the e-invoice’s status. In certain cases, users can check if the generated e-invoices are viewed by their customers.
8) Flexibility in customization.
You can generate professional-looking e-invoices without having any need to edit spreadsheets for hours.
9) Smooth transmission of e-invoices
As e-invoices are digital, they can be easily sent across organizations or to customers within a few clicks. As they can be sent across online, they can be edited much faster than traditional e-invoices.
10) Increases productivity of a business.
Processing invoices involved printing, signing, scanning, and mailing or couriering them. All this significantly slowed down an office’s productivity. With the e-invoicing system, processing financial records and invoicing data has become must faster and efficient thus leading to a business’s boosted productivity.
E-invoicing solutions are helping organizations streamline their invoice processing cycles. With offices working remotely, going digital with the changing times is mandatory. A company that automates its activities digitally wins in the longer run.
With the innumerable benefits of e-invoices, companies are indeed revolutionizing their corporate lives. Recent years have seen rapid growth in business document digitization.
The world is going digital, where are you?