Connecting Europe - eInvoicing and eIDAS

by Gaurav Sharma (guest) on 05. April 2019

The EU has launched a number of initiatives to realize the aim of creating a unified Digital Single Market. The Connecting Europe Facility (CEF) is a funding instrument that provides the primary thrust for this initiative. The CEF uses certain underlying building blocks (known as Digital Service Infrastructures) to achieve this objective of providing an interconnected and unified marketplace.

These building blocks consist of specifications, standards, and software that address electronic identification and authentication, communication, payment, and other related topics. Here, we are looking specifically at one particular building block - eInvoices.

 

What's wrong with the current system?

Although consumers are used to a standardized invoicing and payment system when they shop online, the experience is a bit different for B2B (Business-to-Business) and offline transactions. Each month, the accounting departments of companies large and small process thousands of invoices that need to be paid out to vendors and suppliers. The issue with these invoices is that they are not standardized; therefore, it is not always possible to upload them into an AP (Accounts Payable) management software. Sometimes, machine reading software is used to scan and capture some information, but it still requires a lot of manual intervention.

Furthermore, this process is time-consuming and expensive. In addition to the manual labor required, the system is prone to errors. Even if it is reversed eventually, a wrong payment can mess up the company's working capital and cause delays in further shipments and other problems. This is especially true for a diverse marketplace like the EU where various companies use a multitude of different legacy systems in different languages.

The solution to all of this is the eInvoicing system.

 

eInvoicing - Bringing Business to the 21st Century

The technical standards for electronic invoices are defined in CEN/TC 434. The guidelines provide a conceptual framework as well as technical specifications for implementing electronic invoicing that can be standardized across the EU. This means that any invoice generated by a company in the EU is immediately accessible by Accounts Payable and other accounting software worldwide.

In addition to drastically reducing the manual effort to process invoices, this would reduce errors as well as the risk of fraud and electronic theft. Some surveys estimate a cost saving of as much as 60% in account payable processing. This translates to billions of Euros saved across the EU every year.

The benefits do not end there. A robust and automated eInvoicing system can significantly reduce business working capital costs and thus boost the health of the entire economy. Often, funds sit idle in bank accounts as invoices are transmitted or couriered, inputted into a system, checked, verified, and then the payment is made. This increases the working capital cycle for a business and can cause financial strain. A standardized eInvoicing system can potentially eliminate this waste.

 

Fighting Fraud through Qualified Electronic Signatures

Electronically delivered invoices are more susceptible to fraud. There are many examples of such fraud like sending wrong invoices with tampered identities, or as increasingly seen a simple change of the bank account indicated on the invoice through a man-in-the-middle attack.

The combination of an eInvoice with a qualified electronic signature allows to guarantee the invoice’s authenticity of origin and the integrity of the data. Compliance with the European eIDAS-Regulation provides the legal frame-set and backing (non-repudiation of origin and of emission).

The eInvoicing system is another example of how a seemingly small improvement can significantly benefit stakeholders.

 

 

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References and Further Reading

Image: Crane & Co Ltd, Firework Manufacturers, Warmley BS30, courtesy of Paul Townsend, Flickr (CC BY-SA 2.0)

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