A great poet once said, “To err is human.”
And while we don’t think the poet was talking about the many common errors tax teams make on invoices, the quote still applies. Digital companies routinely make mistakes on invoices – trust us, we’ve been there. From our experience, we’ve identified five common invoicing pain points your digital company is probably facing.
1. Numbering invoices properly
How your invoices are numbered is just as important as what’s on the invoice itself. Some countries require a specific numbering sequence of your invoices. Most countries globally only require invoice numbering to be unique and sequential. But they may also allow you to run multiple sequences (e.g. per line of business, or per customer). In contrast, other countries where e-invoicing (aka Digital Reporting, aka Continuous Transaction Controls, aka the industry really needs a standard name) is required have more restrictions and criteria in place, but the Tax authority often provides the number you should use. Some countries may impose a maximum invoice number length, while others are very prescriptive around the alphanumeric characters that can be used and at which point in the number sequence.
Suppliers and marketplaces also have issues with numbering invoices if the country requires sequential ordering. If there’s any sort of technical issue (if transactions need to be replayed due to an internal outage) or a high frequency of transactions, there can be errors in determining the next number in an invoicing sequence. For a deeper dive into sequential numbering, we’ve written about it here.
2. Language and localization issues
Here’s a fun fact: issuing the invoice in the local language is a legal requirement in many countries. Converting your invoices into the appropriate language is a major complication for digital companies selling in dozens of jurisdictions. And yes, you’re going to have to raise invoices in the local language as required by law – but you might also want to raise them in a second language to provide a better customer experience. The law may allow you to raise an invoice in English, but if your customers are primarily French speakers, it could benefit your company to translate the invoice into their preferred language as well.
In addition to language, formatting your invoices properly is also important. Take invoicing in Saudi Arabia, for instance. Even if you’ve translated your invoice to Arabic, it’s still necessary to redesign the template to accommodate the language. Otherwise, reading the invoice left-to-right may be an uncomfortable experience for Arabic speakers, who read from right-to-left.
3. Rounding and foreign exchange rates
Making sure to raise invoices (with tax charged) in a customer’s local currency seems like a simple task. But there are choices to make: what exchange rate should you use? And there’s another issue that may seem trivial, but can get complicated: does the country require you to round? Not only that, do you know how each country requires you to present and calculate invoice amounts?
Many accounting teams have internal rules set up via their invoicing system to round every transaction. Here’s the problem – every country has specific rules around how to round VAT. Japan has a rule that you must round to the nearest yen (no decimal places are allowed). Other countries require you to sum the Net amounts before calculating taxes, while others require a VAT calculation on a line item level. Many businesses do not consider the individual rules of each country and end up with invoices that are non-compliant - an issue that is exacerbated as digital reporting requirements are rolled out. This is because some governments will simply reject transactions where rounding breaches the stated tolerance thresholds and these can be as very low (for instance in some EU Member States this threshold is as low as €0.01).
4. Generating invoices in volume (and storing them)
Global digital enterprise companies may start out issuing only hundreds of invoices per year, but they can scale to generate millions of invoices per day, and that often requires their systems to work non-stop to churn them out. And if you’re asking an ERP to generate invoices at a volume that high? Expect delays. While an ERP is certainly able to generate an invoice, it often struggles to do so at a meaningful scale – it’s not designed for that.
On top of this, every single invoice may have a visual representation in a format like PDF, and storing millions of invoices (for anywhere between five to twenty years) requires a significant amount of digital storage. And if this is not burdensome enough, some countries now require you to store those digital invoices locally - i.e. on servers in that country.
5. Tracking custom legal requirements
Some countries require invoices to have citations and hyperlinks to specific documents in order to fulfil commercial requirements. And while legal requirements tend to be static, things do change. Even if you have an invoice template in place that meets current compliance guidelines, it doesn’t mean it’ll be compliant forever.
For example, a number of our team reside in Croatia, which has recently mandated that all invoices from September 2022 feature both the local Kuna currency and the Euro at a fixed exchange rate. But that’s only for 18 months to ease the transition. After that, all invoices must not have the Kuna on them at all, as they should be billed entirely in Euros.
It is often difficult to monitor and maintain accurate invoicing templates globally, especially with lean tax teams.
Fonoa keeps you from making mistakes on your invoices
Fonoa offers one solution to all of these common invoicing issues. Here’s how we can help:
- Reduce the time and effort spent on issuing invoices with automated invoicing capability via an API
- Issue locally customizable, localized and compliant tax invoices in any language
- Automatically generate invoices with unique and sequential numbers in line with local regulations
- Apply the correct tax and currency conversion to an invoice
- Transaction documents are stored and archived in accordance with local requirements
And sure, if you are only operating in a handful of countries, you may be on top of your invoicing needs. But, as you expand, think about the resources spent on monitoring, making and maintaining a single, relatively small change for a global business. For one, you have to make sure you’re tracking all commercial and legal requirements for the countries where your company has operations and customers. You must then research exactly how to change your invoice. And then you have to involve your engineering team to make sure they’re prioritizing any fixes and updating it in time.
There’s a better way.
Schedule a chat with a member of our sales team today to learn how we can easily take away your invoicing headaches.