Different Forms Of E-invoicing

November 14, 2020

Despite being a low-tech, cost-ineffective solution, a paper invoice is still the most common form of invoicing, but its supremacy is seriously challenged by the sweeping process of digitization, driven by the promises of an e-invoice era. Using the definition of an e-invoice in the broadest sense – as simply being opposite to paper (in a de-materialized form)-there are several forms of e-invoicing.

When it comes to paperless solutions, in the universe of digitized invoicing, the structured format (or lack thereof) forms the core dividing line. Among the non-structured solutions, *.pdf format is clearly the most preferred choice. It simply requires the supplier to create the invoice within their own accounting software and send it as a *.pdf file. Quick implementation and wide accessibility are the most attractive points – suppliers are not required to change their processes or incur any significant technological or infrastructural modifications or costs.

On the other hand, the benefits of a digital invoice are negligible without a smart system that automates invoice processing. That is when the real benefits of e-invoicing become apparent, but only a minority of businesses so far have highly automated accounts payable processes that are optimized to effectively manage invoice payments. In the case of structured invoices, it all comes down to the different types of transmission.

EDI as the most common form of e-invoicing

The most common form of e-invoicing is EDI (Electronic Data Interchange), a method of transferring highly standardized electronic data in a predefined (*.xml) format over a dedicated communications link, for the purpose of the optimization of data flow. Using EDI, errors due to manual data entry are eliminated as data becomes more accurate whilst internal business processes are optimized, saving time and money. Yet the deployment of an EDI requires specific infrastructure, which implies non-trivial, upfront investments (time, money and manual labor). As a result, on-boarding rates are often high, consisting mostly of large companies able to afford it.

A web portal is a viable cost-effective option for small and medium-size companies lacking the EDI infrastructure, but want to grow and establish relationships with larger companies. On the pros side, economies of scale can be leveraged across the entire customer base. On the negative side, the portal may require manual data entry (if not supported by an accounting application), which can create duplication and operational inefficiencies. For that reason, the portal method was regarded as an intermediate stage of development to the fully integrated solution.

That is until a hybrid model came along, capable of routing electronic documents through an API (Application Programming Interface), further improved by the power of cloud computing. Instead of a rigid and costly EDI system, fragmented due to different industry standards and, as such, out of reach for many, API & Cloud solutions nowadays offers interoperability, efficiency, and affordability. Its scalability across businesses is surely one of the most promising features, and according to a SelectHub study, more than half of the surveyed supply chain executives think Web Service APIs are the future of the data interchange.

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