Electronic invoicing, usually referred to simply as e-invoicing, is becoming increasingly popular internationally in both the B2B and B2G sectors, gradually replacing the old-fashioned paper invoice and more recent PDF invoice. In recent years this has been accelerated by European legislation mandating the use of e-invoicing in B2G transactions (as explored in detail in as a result of the benefits of e-invoicing becoming more well known.
On the one hand, this shift naturally means a change in ZATCA Invoicing invoicing processes – something that some may view with trepidation. On the other hand, however, e-invoicing brings many advantages to supply chain businesses. In this article we’ll explore these briefly in the context of the other commonly-used alternatives.
Paper invoicing
Surprisingly, paper invoices still make up a large percentage of the invoices exchanged today. Yet as the diagram below shows, this method is not only consumption heavy, it also requires significant effort compared to the alternative (e-invoicing).
The sender prints out the invoice, puts it in an envelope, stamps it and then posts it. However, the costs incurred are not limited to those relating to postage. Rather, it is the manual processes of invoice creation, which are reflected in personnel and infrastructure costs, that make the paper-based process expensive. Anyone who has ever written several invoices will be able to understand how complex and non-scalable paper-based invoicing is!
Interestingly enough, many also trust the post office “blindly” when sending invoices, simply assuming that the invoice will reach the recipient (which in most cases it does of course). However, a confirmation of receipt by the recipient is only available with the classic paper invoice for an additional charge.
PDF invoicing
Over the past decade more and more companies have moved from paper invoicing to PDF invoicing. This is due in part to the legal equivalence of the e-invoice with the paper invoice and the omission of the obligatory electronic signature. Instead of sending paper invoices, PDF documents are sent by email or offered for download. The latter option is mainly used in the B2C sector – e.g. when downloading the telecom bill.
For the sender of a PDF invoice, effort is reduced to the generation of the PDF (which is usually done automatically from the IT system) and the dispatch (which is also mostly done automatically). Admittedly this represents a significant improvement compared to paper invoicing.
However, the process is still problematic on the recipient’s side as they are still confronted with a media break, as with a paper invoice. In other words, the data cannot be transferred automatically from the PDF into the ERP/accounting system. Instead, the recipient is required to type it in manually or transfer it using copy & paste.
The reason for this is the PDF format itself. Unfortunately many people mistakenly believe PDF invoicing comes under the banner of e-invoicing. However this is not the case as a PDF is not a structured, machine-processable document format, but is instead designed to be human-readable. Formats such as XML, CSV or EDIFACT are far more suitable for automated document exchange.
E-invoicing
When an e-invoice is sent, the invoice is generated on the sender’s side in a machine-processable format and then sent directly to the recipient’s IT system. There the e-invoice is absorbed by the IT system without human intervention and is immediately available for further processing (e.g. invoice verification and approval).
In contrast to paper or PDF invoices, no manual steps need to be taken and the process can be fully automated.
Furthermore, the sender (depending on the technical protocol used for invoice transmission) receives a corresponding confirmation as soon as the recipient has received the invoice.
