Published On: March 28th, 2024 / Categories: Data Processing / Tags: , , , /

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The invoice digitization process is becoming a common practice. Whereas statutory compliance must always be adhered to when using XML transformations. Besides, XML is a file type used by several software platforms. However, XML is short for Extensible Markup Language. It always contains essential cross-platform syntax. Since it allows the information to be passed between applications, operating systems, software, etc. Besides, XML conversion enables data conversion and invoice or bill digitization for financial records.

The Importance of Statutory Compliance

Compliance is ALWAYS vital for data entry, conversion, and digitization of invoices. However, the law requires honesty and accountability in financial reporting, including digitizing invoices. Surprisingly, to prevent errors in calculations and financial reporting and increase efficiency, the rider needs to define and document the level of access within the company. Definitely, financial digital records start with XML invoices. However, European countries like Spain and Germany have recently begun handling XML invoicing rules. In fact, they aim to provide users with proper security measures and standards.

E-invoice Regulation: A Must-Know for Everyone

Starting November 27, 2020, the e-invoice regulation (E-Rech-VO) will apply to electronic invoicing or invoice digitization in federal public claiming. Therefore, all sellers of the German federal government are obliged to transfer invoices only in electronic form and in an arranged output format.

From April 17, 2020, in addition to national ministries, constitutional bodies, and federal authorities, states and communities must also be able to receive and process electronic invoices in a structured manner. Furthermore, the B2B and B2C enterprise sectors are still flexible regarding electronic invoices and XML conversion.

However, we suggested that companies discuss e-invoices as part of their digitalization strategy. Companies are already reaping medium- and long-term benefits because of E-Rech-VO; they have already changed their invoicing process as much as possible.

What Data Format Does an Electronic Invoice Need to Contain?

You can accept electronic invoices where anyone can confirm the authenticity of the source and the integrity of the invoice data by means other than electronic signatures. At this time, using invoice digitization, you need to send shipments securely. They must maintain their integrity, including the authenticity of the contents. Indeed, they also need to store the shipment data safely.

The German IT Planning Council passed the standard format for an electronic invoice, the so-called XRechnung. XRechnung is an XML file compared to the CEN-compliant national invoice data standard according to standard EN-16931. However, standard EN-16931 also defines structured data formats. Meanwhile, in addition to XRechnung, ZUGFeRD 2 acts as a possible alternative. Simultaneously, apart from a fully structured XML file, it also offers a PDF to display invoices. Therefore, ZUGFeRD 2.0 is a hybrid data model of digital records. At this time, for suppliers, this means they need software that allows them to format and create structured data for financial records.

How Can Electronic Invoices Be Constructed in a Structured Data Format?

In invoice digitization, ZUGFeRD 2.0 and XRechnung can be created instantly from the ERP system. It requires an add-on that you need to set up and install. It should be in a position to develop formats and structured data formats. In addition to service providers that provide the appropriate software, SAP already offers a standard solution in e-document compliance.

The SAP Application Interface Framework allows converting electronic documents into country-specific formats such as ZUGFeRD 2.0 and XRechnung. In addition to traditional e-document creation, SAP offers an overview accounting of all documents with the e-document Cockpit (EDOC_COCKPIT). In the future, it will be possible to extend the capabilities of SAP Finance with these modules.

Varieties of E-Invoicing

E-invoicing with XML conversion is expanding in many countries. Although some countries do not have e-invoicing compliance regulations, they carry out this because it promotes better efficiency in the invoice payment process. In that sense, we have classified e-invoicing into two types – e-invoicing without compliance and e-invoicing with compliance.

E-invoicing Without Compliance

As such, e-invoices only adhere to the data format the buyer and seller agreed upon. It does not conform to the country’s electronic invoicing regulations. The following processes are:

  • The parties involved, such as the buyer and the supplier, decide and agree on the invoice data and format. As a part of invoice digitization, the invoice will contain structured data using EDI technology or simple web forms.
  • Anyone generates an e-invoice, which the supplier sends from their accounts receivable system or through a web-based form.
  • You can receive the e-invoice in a format that can be processed immediately by the buyer’s trade payables system—the purpose of maintaining financial records.

E-invoicing With Compliance

Countries vary in their rules and regulations for e-invoicing and digital records. Compliant e-invoices follow a similar process with exceptions:

  • The laws and regulations of the countries of the trading parties bind the invoice format.
  • Government guidelines regarding content verification, security, etc., are followed during electronic shipment.
  • You can use invoices for audit and value-added tax (VAT) purposes.
  • There is no involvement of papers.

E-invoicing with compliance is a good approach as it facilitates audit trails. Depending on the regions where trading transactions occur, it is wise to pursue this type of e-invoicing for more incredible business benefits.

Benefits of Invoice Digitization

Digitization using e-invoicing solutions can simplify the accounts payable function and considerably benefit trading partners and their businesses. Some of the significant benefits of using a digitized electronic invoicing solution are:

Perfect Replacement for Paper Invoices with Invoice Digitization

Creating and processing paper invoices is complex, error-prone, and requires sellers’ and buyers’ time and effort. The process becomes tricky when there is an increase in the involvement of many transactions or multiple buyers. E-invoicing and XML conversion solutions can eliminate such problems as the invoice being in a data form and needing no paper.

Streamlined Procedures and Less Turnaround Time with Invoice Digitization

E-invoicing solutions help optimize the invoice processing cycle and reduce the time and labor spent on various stages, including payment tracking, approval, and processing. Eliminating the need for paper invoices, verifying and matching related documents, and automating repetitive tasks can reduce processing times and result in faster turnaround times.

Enhanced Relationships

Invoice digitization solutions act as a bridge to maintain good relations between business partners. Due to the digitization of everything, suppliers can track the status of their shipments without having to call or mail repeatedly for confirmation. They can do it with the help of digital records. You can even correct the errors quickly, and you can set approvals to enable faster processing of invoices. Overall, it contributes to better relationships and smoother functioning.

Enables Visibility and Clarity with Invoice Digitization

Electronic invoicing can increase the visibility of the entire invoicing process. Run digitized e-invoicing solutions, track validation and approval processes, and enable detailed audit trails. Real-time transactional data provides increased visibility into commitments, thus improving the forecasting accuracy of financial records.

Reduced Costs with XML Conversion

Electronic invoicing can bring significant savings to businesses. Electronic invoicing guarantees increased cash flow as it processes and disburses invoices immediately. Converting to invoice digitization can reduce paper processing costs by around 70%. Using e-invoicing solutions, stakeholders can track payments, analyze cost trends, and find more opportunities to save costs. While prompt payment benefits the supplier, early-payment discounts benefit the buyer, resulting in cost savings for both parties.

Higher Compliance

One of the most significant benefits of using an e-invoicing solution is compliance. These solutions aim to manage compliance. E-invoicing eliminates paper trails and centrally stores invoice data and related documents to facilitate compliance with VAT laws. It maintains the authenticity of invoice data and prevents it from being easily altered.

Lowered Risks with XML Conversion

With e-invoicing solutions, it reduces or eliminates various risks. Duplicate and additional invoices, similar to manual invoices, are not a question in e-invoicing as the validation rules take care of them. Secured encryption protocols scan every e-invoice, flag fraudulent invoices, and control data misuse or data loss of business details.

Go Green Advantage

Switching to invoice digitization eliminates the need to maintain paper invoices. Besides helping green initiatives for a better global environment, e-invoicing solutions make businesses cost-effective and energy-efficient.

How Does It Work?

Backups of digital records are encryption methods individually determined by law in many countries. However, the influence of the European Union is visible in EU countries. They made additional rules for record-keeping, usually six years, for digital signatures. However, some companies use a software development company to create their customized invoicing systems based on XML applications.

You must save and print high-quality invoices and send them to customers in a secure PDF format. Many companies offer digital invoicing as part of their package. Faxing is another function that simplifies invoicing and keeping records of deadlines, sent dates and amounts electronically.

Importance of XML

Many companies are turning to XML files for invoice digitization to make data highly accessible and versatile. XML is simpler and more flexible than many other file types and has several advantages over older formats. Generally, everyone builds the most recent invoicing systems on XML. That can handle statistical and financial reporting capabilities by working with the accounting department. XML conversion is an easy way to send invoices and an excellent way to integrate financial records with other business systems like ERP.

The number of companies looking to digitize their invoices and other documents constantly increases. Converting your invoices to XML for digitization can take time, and the rules can be confusing. Since compliance is a significant issue, hiring an experienced development company specializing in XML conversion and digitization is best.

Palash RoyData Advisor
Data Advisor at AskDataEntry – India’s leading data entry and processing services provider for businesses and individuals. He is a seasoned data professional who is an expert in big data processing and enrichment.

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