Digitizing Invoices 101: How and Why to Digitize Invoices

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Manual invoice processing is expensive, complicated, environmentally unfriendly. And moreover, just not necessary.

Can you believe the ever first electrical invoice was sent back in 1965? Since then, the technology has evolved exponentially and around 90% of fortune 500 companies have adopted digital invoices in their daily practices.

There is no point in printing, enveloping, stamping, or sending an invoice on paper – all you have to do is digitize the invoice data as e-invoicing so that it can be booked and paid for easily.

Want to know how to leverage the benefits of digital invoice processing?

Let’s discuss how to do just that.

Wait, before jumping right in, we should discuss what exactly an electronic invoice is.

So, let’s define an electronic invoice and get on the same page.

What is an Electronic Invoice?

After the European Directive 2014/55/EU, e-invoices were defined ( in the Act to promote electronic government E-Government Act) as follows:

An invoice is electronic if:

  • It is forwarded, transmitted, and received in an electronic format (not paper-based) via the email address
  • The format allows the accounts payable process to be processed electronically and automatically

Sending invoices as PDF Files doesn’t meet the requirement since they cannot be processed automatically in PDF format. Instead, recipients require e-invoicing with a format that is structured and can be easily understood and not a PDF.

Structured invoicing formats in their pure form, sometimes called the EDI data (Electronic Data Interchange) cannot be read by humans. The recipients need to visualize the electronic invoices for verification, release, and subsequent archiving.

Hybrid invoice formats eliminate this disadvantage by combining the human-readable visual representation with the machine-readable structured format. This is usually achieved by embedding an XML file in a PDF format. For example, a ZUGFeRD invoicing contains a readable PDF combined with structured data in an XML format.

What is Electronic Invoice Used For?

Is your company active? Do you supply to the public sector? If your answer is ‘yes’ to these questions, you’ll likely need to send invoices electronically now or in the future.

Apart from the enormous potential and cost savings capabilities of the E-invoicing system, the government still stands as the driver of E-invoicing.

However, electronic invoices differ from unstructured electronic invoicing within this directive. 45 to 65 percent of all businesses in a country supply to the public sector, the EU standard is envisioned to be the driving force on E-invoice. This is why electronic invoices with structured data are required for trading partners to a public-sector customer.

The demand for E-invoicing is becoming more rampant:

the reason behind the growing number of E-invoicing regulations is trifling: Governments are exploring creative ways to enforce their tax laws to increase VAT. The VAT GAP Report of 2018 indicated that EU member states evaded up to 147.1 billion euros in 2016, which is a whopping 12.3% of the expected VAT.

Meanwhile, the predicted VAT and the collected VAT dropped by around 4.4 billion since 2015.

The slowing economic growth and the backdrop of a tight national budget will motivate most EU member states to find ways to collect more of the expected tax.

One of the easiest ways to do that is by enforcing neighborhood companies or trading partners operating within their national border to make all their structured invoices electronically. This is already the case in a lot of countries – they are required to report the entire invoice or the VAT information it contains electronically to the proper tax authority.

How to Digitalize Invoices?

Basically, invoice processing has two branches outgoing and incoming. So let’s learn how to digitize invoices in both processes.

  • Digitalize Outgoing Invoices

    Manual delivery of paper invoices is highly inefficient and error-prone for suppliers. These paper invoices sometimes lead to some human error, cause high costs, and subsequently result in late payments.

    Digitalize outgoing invoices

    The use of electronic invoices or structured invoices helps to optimize various internal processes, increase transparency, and also save administration costs. It also helps the environmental footprint of the company with the cooperation of accounting software with various versions. This helps to secure market opportunities, competitive advantages, specifications, and even customer loyalty.

    Digital invoice or structured invoice delivery processes can be divided into four simple steps: Preparation, Input, Portal, and Export/Transfer.

    • Preparation: The received structured invoice data is transformed into the desired format.
    • Start: After creating an invoice with an ERP system and collecting invoice data, the outgoing invoice will be transferred automatically through an interface directly to the E-invoicing solution for an outgoing invoice.
    • Portal: The portal application allows the audit-proof archive to be connected and the outgoing invoice book to be viewed centrally
    • Transfer/Export: The last step involves the E-invoice to be sent to the recipients. For example, it could be submitted as a secure download link or an attachment. Another common approach is via a connection of e-invoice recipients through EDI (EDIFACT).

    Using an e-invoice solution for outgoing e-invoices helps to eliminate manual outgoing invoice processes of the customer and also reduces the time for an invoice to become due since they are delivered immediately.

  • Digitize Incoming Invoice

    E-invoice allows an incoming invoice to be processed by the customer in an automated and continuous process: right from collecting incoming invoice data to booking them.

    Digitize incoming invoice

    The step involved in processing digital invoice receipts can be divided into three: Receipt, Preparation, and Processing.

    • Receipt: Acquire invoice templates automatically through various input channels like invoicing software.
    • Preparation: This is the part where the invoice content is converted into an internal standard. Electronic invoices with structured invoice data are converted too. PDFs and scanned paper invoices are extracted using the OCR/text recognition invoice software. This will also help in collecting structured invoice data and electronic data interchange.
    • Processing: The structured invoice data is embedded with order and Master data from the ERP system to perform electronic data interchange. It automatically checks for quantity, order reference, and county-specific rules, web forms, or price deviations. The invoice can also be automatically transferred for posting through web forms or invoicing software. The others are routed to an approval process or an integrated classification process.

    The system logs every confirmation process that the invoice status goes through. The content of the invoice needed for booking is automatically transferred to the customer’s enterprise resource planning system. The invoice data, conversation, editing protocol, and attachment in the editing process must be archived according to the specific national requirements.

    Other than that, when the transaction is global, it includes various rules and regulations. So, you need to pay extra attention when it comes to international e-invoicing.

  • Global E-Invoicing

    The government regulations forced most internationally active companies to send all their invoice electronically. Although, every country has specific legal regulations and conditions. E-Invoicing regulation now exists in more than 65 counties, and it won’t stop there.

    Global e-invoicing

    The different laws of various countries with their multiple regulations made international E-invoicing a very complicated transformation of invoice status processing.

    Although there is a global regulation in almost 65 countries, they are still different in various aspects, like how electronic data must be collected, what kind of electronic data must be collected, and the requirements for the digital signature. Although there are two basic types of rules for E-invoicing, they are; post-audit and clearance.

    • Post-audit: These rules specify a minimum amount of time for which e-invoice to be kept for possible automated verification. This procedure is used in most parts of the European Union with few exceptions.
    • Clearance regulations: This regulation implies that the invoice to companies in a respective country should be settled through a regulatory authority therefore real-time controls should be possible. An example of real-time controls includes digital signatures. The clearance rule is applied in countries like Brazil, Hungary, Spain, Portugal, Turkey, and Mexico.

If you practice entirely electronic invoice processing, it has multiple benefits.

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Whether your business is in construction, landscaping, consulting, photography, auto repair, or the medical field, invoicing takes way too long. That’s why we’re here. InvoiceOwl makes your invoicing faster and simpler so you can get paid promptly and without the hassle.

Why Digitize Invoices?

Digitizing invoices is not just for the vendor’s comfort. It offers multiple benefits to the seller and the buyer as well.

It creates a win-win situation for both the parties involved and results in your business growth.

Did we just catch your attention?

Then let’s discuss the benefits of digitizing the invoices.

  1. Sales Convenience

    Every sale needs documents like estimates and invoices. The sooner you are done with creating and sending these documents, the better sales you will close. Similar is for the other side. The customer does not wait too long for your estimates and invoices to reach them if they are not your loyal customer.

    The digital invoices can reach them in a second you click send. And the client can receive it from anywhere and anytime. Whereas, conventional invoices do not offer this convenience. Which ultimately affects your sales.

  2. Eco-friendly

    As the conventional invoicing needs paper, it is not that environment friendly. E-invoicing on the other hand does not need paper at all. Moreover, as the trend of using digital signatures is growing, most of the company are going paperless. So, why should you lag behind?

  3. Accept Online Payments

    While late payments will always attract charges and may cause some setbacks, some clients may find it difficult to leave their workplace to deposit in the bank. An online e-payment option for digital invoices will help create a database for keeping the purchaser’s payment info after making the first payment. With this, they don’t have to go through inputting card information again when they need to make a payment for a bill, especially if it is a weekly payment.

    A few clicks will get the job done, and the payment is made. If you have a new buyer trying out different outlets for a handyman service, with this e-payment information stored safely in a database through the cloud, he or she will likely patronize you again because of less stress in making a payment.

  4. Outshine the Competition

    The types of service you render to your customers should not be stressful, hence the need for quick options. You can separate your brand from other competitors when you extend your stress-free service to the aspect of getting invoices instantly.

    A new client will do business with you again if there’s an option for customers to make payments easily without stress.

  5. Provides Options

    This will help your customers make payments on the go. uIt you have an internet connection, a smartphone, or tablet, they can typewrite in their card details to make a payment as soon as they acquire your service. You won’t have to bother about bounced checks too if your customer while you have made it easy for the consumer to make payment.

  6. Get Paid Instantly

    Processing an invoice is meticulous and thus takes time. But e-Payment facilitates instant payments for any business organization. It also breaks the stereotype of geographical restrictions and allows customers to buy or adopt services without getting involved physically and you can get paid faster.

    Clients can easily make a payment from their home or office choosing payment methods of their choice from given options. The invoices integrated with the payment gateway can allow businesses to accept invoice payments online and also send instant notification of the transaction to the business owners and clients to be assured of the purchased items.

  7. Quick and Easy Setup

    Setting up an option to get online invoice payments is very quick and easy for businesses to accept the payments just after delivering the services or the product. Moreover, many service providers are not aware of setting up the payment method; the online setup with low setup fees and very low transaction rates will also help them in getting paid without any hassle.

  8. Quick and Easy Setup

    Setting up an option to get online invoice payments is very quick and easy for businesses to accept the payments just after delivering the services or the product. Moreover, many service providers are not aware of setting up the payment method; the online setup with low setup fees and very low transaction rates will also help them in getting paid without any hassle.

  9. Reliable Mode of Payments

    Online invoice software offers reliable features for global merchants to receive e-payment most securely. Global merchants can receive the money without any risk of bounced checks and the penalties associated with it.

  10. Build More Trust in Customers

    As per the current situation, customers often prefer those service providers who accept payments online. It encourages them to do business more frequently because of the ease they offer. It also saves them from any kind of fraud and secures their money if they don’t receive the product or purchase products online. They will always have the proof digitally as a secure transaction. Such a situation will build more trust between customers and business owners.

  11. Add Convenience to Frequent Payments

    If you are a service provider and offering some subscription-based services where customers need to make payments after a certain period of time, they will definitely look for the option to pay online. This option will be more convenient for both customers and business owners to make frequent payments. Instead of sending the payment reminders every time and requesting to send checks for the payments, business owners can automatically collect payments through e-payment after the end of the subscription or during the subscription.

  12. Stay Ahead in the Competitive Edge

    For a business, an option to receive online payments can help them improve its reputation and allow them to gain the trust of the customers. Moreover, when their competitors are implementing online payment systems and becoming advanced businesses need to go beyond their competitors to stay ahead in this competitive edge.

  13. Influences Impulse Buyers

    An online e-payment for online invoices may influence buyers to purchase products listed on the website or opt for the services and make payments online. Since the e-payments are quick and easy for the customers they can help businesses to serve the clients more effectively without thinking about the money trouble.

So, what are you waiting for?

Go digitize your invoices now!

Frequently Asked Questions
  1. Why are e-invoices so important?

    E-invoices are so important because it helps you get paid faster. Moreover, digitized invoice processes have helped save cost up to 60 to 80 percent compared to manual invoicing methods.


  2. What Are The Advantages of E-Invoicing?

    An e-invoicing process has multiple direct and indirect advantages. And a few of which are:

    • Cheaper costs & quicker ROI
    • More efficient processes & higher compliance
    • More security
    • Better cash flow
    • Complete transparency & fast booking

  3. How do I Send an Electronic Invoice?

    You can use any platform that allows you to transfer pdf files over the internet. However, email is the most common and professional channel to send an electronic invoice.


  4. How to Accept E-Payments Online?
    • You can accept e-payments via multiple e-payment gateways, such as
      credit cards and debit cards
    • eChecks using ACH processing
    • mobile payments

Conclusion

Invoice processing automation is not the future anymore. It has become the thing of today. Most businesses are digitizing paper documents, manual data entry, and payment processing. Thus, if you want to keep up with the time, you must switch to digital invoices.

And this is much easier than you think.

Invoicing software like InvoiceOwl lets you create invoices that help your customers with digital invoice processing. So, !

Author Bio
Jeel Patel
Jeel Patel
Founder

Jeel Patel is the Founder of InvoiceOwl and is the main curator & writer of the content found on this site. With ideals of quality, commitment, and perseverance, he believes in creating lasting business relationships with the clients.

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