All you need to know about e-invoicing and real time reporting

What is electronic invoicing?

In today’s world, technologies have rapidly advanced – from old ERP systems to moving to newer, more advanced ones. A classic example is the migration from SAP ECC to SAP S/4HANA. The advent is not just limited to IT activities. As a matter of fact, there have been significant changes in invoicing, reporting, and tax landscape. The government has made it mandatory for businesses to have electronic invoicing mandates. That said, real-time reporting requirements are on the rise as well. Although e-invoicing and real-time reporting might sound like similar terms, in reality, they are quite different. If you want to clarify your doubts about the same, here is a detailed guide to explore. Read on! 

What is electronic invoicing?

Electronic invoicing, or e-invoicing, is the process of digital billing between the supplier and the buyer. Just like a paper invoice, an e-invoice contains all the same information, such as the purchase order, purchase amount, payment terms, credit notes, and so on. The only difference lies in the fact that it is issued, transmitted and received in an electronic format. However, keep in mind that e-invoicing and digital invoice are two different worlds. 

Digital invoices are just PDFs or electronically delivered scanned paper invoices, whereas e-invoices are digital files comprising structured data designed to be automatically exchanged and processed by accounting and ERP systems. It takes one of two formats that dictate how an invoice is sent, viewed, and accepted –

  • A machine-readable structured invoice format for electronic data exchange (EDI). 
  • A hybrid invoice format combining structured invoices with visual formats that are both readable by machines and humans.

Since the electronic invoices are created in a machine-readable format, they are transmitted to the customer’s ERP system instantly. In addition, the government in today’s era has started mandating the use of e-invoicing. All e-invoicing rules ask for specific businesses to send invoice data electronically to other businesses and, in some cases, to tax authorities simultaneously. However, technical implementation in updated SAP S/4HANA required formats and several other factors may differ from country to country and are subject to changes.

What is real-time reporting?

Real-time reporting, also known as live reporting, is when the vendor must electronically transfer Value-Added Tax (VAT) data directly in real time to the tax authorities. As with e-invoicing, there is no global standard to be followed, although the Standard Audit File for Tax (SAF-T) system has been introduced recently.

In contrast, receiving VAT details in real time allows the tax authorities to estimate VAT income, detect discrepancies, and track performance in a much better and simplified manner. Although many organisations choose to deploy e-invoicing systems voluntarily to expedite corporate procedures, real-time reporting is often implemented as a result of a government mandate.

Benefits of maintaining e-invoicing

Shifting from paper or digital invoices to electronic invoices can benefit your organisation in numerous ways. It helps to streamline the information that needs to be shared and allows you to automate the invoice processing task. Here are a few benefits of e-invoicing for both suppliers and buyers –

Benefits of e-invoicing to suppliers include

  • Security of information included in the invoice.
  • Increased savings as there are no extra costs of printing or postage.
  • Ensures faster collection of payments.

Benefits of e-invoicing to the buyer include

  • The processing of invoices becomes faster.
  • With early payment, buyers receive discounts and thus save extra.
  • Higher efficiency as there is no hassle of maintaining data manually.
  • The chances of errors are few.

Merging the benefits of e-invoicing and real-time reporting

Maintaining an invoice is undoubtedly crucial for business activities and VAT as it is a major source of information. Real-time reporting is an extension of e-invoicing. Due to the benefits both e-invoice and real-time reporting offer to organisations, many countries around the world have combined both into one mandate – where the invoice should first be submitted to the tax authority and after approval, it can be forwarded to the buyer. 

Combining the benefits of e-invoicing and real-time reporting helps streamline the process of exchanging invoice data between business partners. In addition, it helps tax authorities to gain relevant VAT details in real time.

The final takeaway

Real-time reporting and electronic invoicing requirements might not be something you have to deal with right now, but there’s a strong possibility you will tomorrow as the number of nations mandating electronic invoicing is expanding. 

Fortunately, several organisations help businesses with e-invoicing and real-time reporting services while complying with all the tax and legal requirements. One of the well-known organisations is the TJC Group. They are an SAP-backed company that offers a range of solutions starting from SAP data archiving to preparing for S/4HANA data migration. TJC Group offers automated SAP data extraction solutions to make it simple and quick for organisations to extract the potentially large quantities of data required for tax and audit functions. Check their website here!