Let's get digital: preparing for mandatory e-invoicing

E-invoicing offers many benefits for corporate buyers and their suppliers. For example, an e-invoice contains data from the supplier in a machine-readable format, which can be automatically imported into the buyer’s TMS or ERP. Removing manual data entry from the process saves both time and money for treasurers and teams that chase payments or manage reconciliations.

The growth of e-invoicing and its sibling, e-reporting, is changing how companies do business across Europe. Regulation has been a vital driver in adoption. Since Italy began implementing mandatory e-invoicing in 2014 for business-to-government (B2G) invoices involving the central government, countries around Europe have followed suit. 

Aurélien Viry, Head of Societe Generale Factoring, comments: “Most countries have implemented some B2G e-invoicing processes and are now moving to address B2B invoicing.”

A harmonious Europe?

At the EU level, the European Parliament and Council published a directive on electronic invoicing in public procurement back in May 2014, the extended deadline for implementation of which closed in April 2020. The point of the directive was to bring a level of standardisation to 
e-invoicing within the EU for B2G invoices.

This year, the European Commission opened a month of feedback on the directive between March and April to help fine-tune the initiative and, perhaps, identify issues and possibilities for when it comes time to look at a similar standardisation for B2B and B2C e-invoicing. 

“At some stage, there will also be EU regulation for cross-border intra-European flows that will cover B2B e-invoicing, although this is still a few years away from any implementation,” says Viry.

The key message is that harmonisation of all e-invoicing within Europe will take time, mainly as implementation is happening at varied speeds across the member states.

“Countries have a range of views on scoping and the ‘flavour’ between reporting and invoicing, and that’s before we even start talking about technical standards,” adds Viry.

France in focus

With countries developing their e-invoicing frameworks and requirements slightly differently, the challenge for corporates is to understand and comply with the specific rules within every country they operate. Some countries, for example, prefer to centralise the control of the process through a government exchange platform. Others will put the emphasis on third-party platforms. Some countries only plan for the exchange of invoices on these platforms, while others, such as France, will include 
certain status updates for each invoice to show when it is 
accepted, rejected, or paid, for example.

“While Italy has a unique platform operated by the state, for example, in France there is going to be a dual mode,” explains Viry. “There will be one state-controlled platform, but there will also be several private platform operators that will obtain the invoices from the issuer and channel them to the client’s platform, where the client will see the invoice.”

It is vital for companies operating in France to understand their e-invoicing options, as the largest firms will find their B2B transactions poised for mandatory e-invoicing issuance from the middle of next year.

“France is starting with the largest companies – defined as those with €1.5bn sales or more – in July 2024,” explains Viry. “It will trickle down from there, so January 2025 for mid-size companies and then 2026 for small companies. When it’s your time, it’s your time!”

The French deadlines are particularly vital to understand as they cover both sides of the digital coin - e-invoicing and e-reporting. Large corporates must have both facets ready and operational by the summer of 2024. If mid-sized and small companies have a bit more time for e-invoicing issuance, they must nevertheless be ready for the reception of e-invoicing in July 2024, mandatory for all companies.

“On this date, it will become mandatory to receive invoices from large companies through approved platforms,” reveals Viry. “Some licensed operators will be public, others will be private, and each company will have to open an account with one of them to issue or receive invoices that it might get from its suppliers. The different platforms will be connected and pass on the information because, of course, the one who issues the invoice may not be on the same platform as the one who receives it.”

This also means that the private platforms require a connected infrastructure to operate properly, ensuring they can talk to each other.

“Each of these platforms will also have some minimum reporting duties towards the state through the public platform, because one of the objectives of the regulation is to have continuous control in order to limit the risk of VAT fraud,” explains Viry. “In addition to this focus on fraud, another objective is to make the whole invoicing landscape more transparent and competitive and to reduce the cost of collection.

Incoming changes unlock opportunities

Mandatory e-invoicing will impact corporate treasurers and other connected departments within an organisation. An obvious initial impact is that it will oblige companies to look at their invoicing and procure-to-pay processes for outgoing and incoming cash flows. For corporates preparing to adapt to the new invoicing environment, it is also an ideal time for a more thorough process overview, including an assessment on the data quality of counterparty databases.

“It’s probably an incentive to have some sort of overhaul or adjustment to the processes dealing with outgoing invoices and incoming bills,” affirms Viry. “It could also affect how the procure-to-pay process is structured within the company and how you communicate with your clients.

While the most sophisticated multinationals may be able to evolve their processes in-house to accommodate the new requirements, others may find it challenging to do everything themselves.

“Companies will need to rethink their process because there will be some integration between the different services,” notes Viry. “Firms can either look at this as an opportunity to outsource many of their tasks, or decide to keep this in-house.”

This is potentially where the new private e-invoicing platforms could provide some added-value services.

“There will probably be some integration between the services that some platforms provide to support small- and medium-sized companies to manage their invoicing and collection,” adds Viry. “One would imagine they could try to bundle additional services such as debtor chasing, bank reconciliations, reporting, and analytics. It is likely that accounting firms would also want to be connected, to gain easy access to data for reporting services, for example.”

And accounting firms are not the only ones that will be part of the e-invoicing ecosystem. Banks will also have a role to play in offering value-added services for corporates using private e-invoicing platforms.

“Most banks will be looking to find ways to make the client journey as integrated as possible between the web banking and e-invoicing functionalities,” comments Viry. “Speaking to the sponsors of private platforms, their idea is definitely to go far beyond the simple process of receiving some files electronically and sending them onwards. They want to integrate that with their existing business, be it banking or third party invoicing services.”

Time to act

For treasurers, now is the perfect time to prepare for mandatory e-invoicing. The deadline for large corporates in France in 2024 highlights how soon these changes will be with us all.

“It’s time for corporates to start looking at their processes – what can they clean up, what can they change – and to get some connectivity, especially if they’re on the issuing side,” advises Viry. “They need to carry out a detailed assessment of their data quality, review their processes and their partners, and re-engineer the client payment journey. For those in large companies, where it normally takes time to change processes due to the large volumes they manage, now’s definitely the time to act.”

For treasurers and their colleagues that manage client invoicing, procure-to-pay or general procurement, there are several decisions to make.

“Corporates need to look at their data, their systems, change whatever is manual, and of course decide as to whether they want to go with platform ‘A’, ‘B’, or ‘C’ or with the state-controlled platform,” says Viry. “Just getting to a 90% automation level of processes, based on a common ERP, will not be enough. The other 10%, which are highly specific and could be manual or based on other tools, are just as vital.”

Ensuring an efficient ecosystem

Of course, it is not only corporates that have to prepare for the rolling out of mandatory e-invoicing. Banks themselves are working to ensure that they are ready to switch on new functionalities to support the e-invoicing ecosystem while at the same time maintaining their existing services and support for clients.

“As a factoring entity, our job is to finance receivables,” says Viry. “Factors in France are the first source of short-term finance for companies, and we do this through purchasing receivables. This means we must have an efficient set-up to avoid any process duplication for our clients. The factoring industry is working with the state, and the bodies grouping the sponsors of platforms, to ensure the ecosystem is as efficient as possible.”

Another consideration is that banks also regularly send invoices for services to their own clients. The processes for that task are also going to change.

“Today, the way it’s done in banks is that we would debit some charges from the client account and then send them an account statement,” reveals Viry. “But tomorrow, banks may have to do that through the new electronic platforms, and that’s a sea change.”

On the other side of the equation, banks also buy goods and services from different parties, so they also must organise themselves to receive e-invoices and deal with them in their procure-to-pay system.

“The most critical aspect for us is how we deal with our clients and what sort of services we can offer them,” concludes Viry. “We intend to be active in that – while working on supporting and improving the current SG Factoring clients’ experience, we are exploring new opportunities for factoring as this reform will setup a landscape for innovative services.”

“In a nutshell, the change is big, the maturity low and the deadline is in sight: the clock is ticking”