Third-party billing‍: What is it and what are its benefits?

March 1, 2022

Third-party billing is an arrangement that companies take in order to take over the responsibility of issuing invoices in the name and on behalf of the underlying supplier towards their customers. More specifically this can happen where an intermediary is taking over the compliance burden of issuing locally compliant invoices for transactions, which are normally a duty of the VAT/GST-registered suppliers selling the goods and/or services.

The structure of this arrangement is such that issuer / intermediary usually needs to have an agreement with each of the suppliers for whom it issues invoices, such that it is clear from a legal point of view that the responsibility is not going to be handled by the underlying supplier for certain transactions where the relevant intermediary is involved.

Third-party billing is often done in the context of platforms and marketplaces, where the platform offloads compliance burden from its underlying supplier ecosystem, and issues invoices / credit notes on their behalf to end customers.

Benefits of third-party billing

The benefits of third-party billing are twofold - they both help platforms from a customer experience and customer support perspective, and provide a value add to the underlying supplier as they don’t need to think about invoicing and whether they are handling their transactions in a tax-compliant manner.

When it comes to customer support and experience, third-party billing helps reduce inbound customer support tickets related to tax invoices from the platform’s end-customers where they haven’t received an invoice, they received an incorrect invoice or would like to get a refund due to various reasons. 

As the platform controls the invoicing process, it can make sure that for each sale a correct invoice is issued, and can handle credit note issuance in case of refunds and cancellations. Alternatively, the platform would need to reach out to underlying sellers for each support ticket, and then navigate the process together with that supplier to resolve the issue the customer is facing.

Moreover, third-party billing helps from a customer experience perspective, as customers always receive an invoice that has a uniform look and feel, and can be branded to reflect both the platform and the underlying supplier in the transaction.

Finally, even if invoicing rules do not apply to a specific supplier (because they are for eg. under the registration threshold locally), the platform can still issue receipts / payment confirmations in the supplier's name, to make sure that each transaction is accounted for and shown to the end-customer.

Fonoa Invoicing

Through Fonoa’s Invoicing module, platforms and marketplaces can seamlessly issue third-party invoices, credit notes, and receipts, and make sure customers are having the optimal experience from the billing perspective, as well as reduce customer support issues.