A Beginner’s Guide to e-Invoices and Electronic Invoicing

A Beginner’s Guide to e-Invoices and Electronic Invoicing

The vast majority of businesses today use invoices in one way or another. Even those who don’t send invoices to customers use them for things like paying bills to creditors, for instance.

In most cases, invoices are put together manually, either in physical form or digital, and sent out by often insecure means like email.

But what is e-invoicing, exactly? E-invoicing has the potential to change how a business’s entire supply chain looks. In this article, we’ll explain what an e-invoice is and outline the benefits of using them. Then, we’ll run through how you can get started using e-invoices.

To learn all about how to send out electronic personalised invoices, read on.

What is an e-invoice?

An e-invoice, or electronic invoice, is an electronically (or digitally) delivered invoice.

Electronic invoices are produced by e-invoicing software without the need for a human to input any data. This means they can be automatically read by e-invoicing solutions, rather than by a human, in order to get the bill paid faster.

Traditional invoices need to be seen by someone who will use a template, an invoice generator, or would create an invoice from scratch, to then turn the data into a bill to be paid. Going electronic with invoicing means that you don’t need to spend time turning invoices into bills - which also means there’s less risk of mistakes being made.

Electronic invoices are produced by software, without human intervention.

How is e-invoicing different from digital invoicing?

One way to help understand e-invoices is by comparing them to digital invoices. What is a digital invoice, though? In contrast to an electronic invoice, a digital invoice is any form of an invoice that can be viewed and processed digitally.

Digital invoices tend to come in two forms: 

  • PDF or Word files
  • Scanned paper invoices

Digitising invoices is a manual process, and digital invoices are usually designed to be easy for humans to read and understand. They require an extra level of human intervention.

While you will be taking extra care to make sure that no mistakes are made, errors can happen. By automating your invoice processing, you hugely minimise this risk.

Benefits of e-invoices

Ease of use

There’s a lot to keep in mind when writing an invoice manually. To be legally enforceable, an invoice must contain a wealth of information. 

Invoices must include things such as:

  • Contact information for both your business and your client
  • An invoice ID or invoice number
  • Payment terms and due dates
  • An itemised list of the products or services provided
  • The total amount due 

This can be a lot to keep in mind and creates multiple potential failure points.

In contrast, e-invoicing removes the need for manual data entry. Businesses can simply exchange invoices directly between their accounting systems and their accounts payable and accounts receivable departments. This means that all the relevant information is already there, minimising the risk of mistakes.

Increased efficiency

E-invoices exchange data directly from machine to machine. This means that data passes through fewer hands to get from one business to another.

In addition to reducing the chances of something going wrong, as detailed above, this can also mean that e-invoices are paid more quickly. When a physical or digital invoice arrives, someone on the client’s end must turn the invoice data into a bill to be paid.

But by using an electronic format, all the client does is approve a pre-populated bill. This makes paying as easy as clicking yes on a transaction that is already set up. As proof of these benefits, some businesses that are making the shift to e-invoicing are already showing quicker payment times.

Pay-enabled e-invoicing

Electronic invoicing makes payment even easier for your clients as you can include a ‘pay now’ button that integrates with any payment app. This means that your client only needs to click the button in order to pay the invoice, making the transaction seamless.

Clients will be able to pay this invoice with their debit or credit card, or even their PayPal account. This secures the transaction as there’s no need to share account details.

Greater security

Finally, electronic invoices are far more secure than sending invoices on paper or by PDF. The main reason for this is the means of transmission. E-invoices are sent directly from one accounting system to another, and as such, they are less liable to compromise than forms of communication like email.

In addition to this, electronic invoicing does not require manual intervention between the initial accounting and producing the invoice. This can significantly reduce the risk of human error or fraud.

Think of it as using email. For the invoice to work, both parties - sender and receiver - need to be signed up to a provider and connected to the internet.

As this invoicing system is still quite young, there is not yet a single global standard for e-invoices. Instead, there are a variety of providers that operate around the world. PEPPOL is the standard in several European countries, as well as in Australia and New Zealand, used by the PEPPOL network

Other e-invoicing standards include: 

  • FacturaE - used in Spain 
  • Factur-X - used in France
  • CFDI - used in Mexico
  • DTE - used in Chile
  • Finvoice - used in Finland

The problem with this is that it means businesses operating in different areas will need to adopt different systems to start using e-invoices. Unlike email, which is standardised to the extent that any of the main providers can send and receive messages to any other, e-invoicing is currently somewhat fragmented.

As with email, e-invoicing will not become the standard until most businesses sign up for it.

If you want to move towards a world where electronic invoices are used as standard, then it’s best to start using them as much as possible now, and encourage others to do the same.

E-invoicing is an exciting new approach to invoicing - one that offers many tangible benefits to businesses and clients.

As with everything about running a business, especially handling finances, it’s crucial that businesses get it right. Here at QuickBooks, we have resources available to help you learn what an invoice is and how to make one, and our helpful invoicing software can help make it easier than ever to keep track of your transactions and create your e-invoices.