Electronic Invoicing (E-Invoicing)
Guide to Easy Savings Using Compliant Electronic Invoices (E-Invoicing) to Connect with Global E-Invoice Users.

Electronic Invoicing
E-Invoicing
Pro forma invoice
Electronic invoices
Types of Invoices
Euro Banking Association
Factoring (finance)
eCommerce
eCommerce Payment Systems
Electronic Data Interchange
eCommerce Development
Purchase This Domain

Electronic Invoicing (e-Invoicing)

Guide to Easy Savings Using Compliant Electronic Invoices (E-Invoicing) to Connect with Global E-Invoice Users. The key to saving is to first learn all about what compliant e-invoices are, how to use them and then where to connect with global e-invoice users. We will begin with a review of what Invoices essentually are.

Invoices

An invoice or bill is a commercial document issued by a seller to the buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates the buyer must pay the seller, according to the payment terms.

From the point of view of a seller, an invoice is a sales invoice. From the point of view of a buyer, an invoice is a purchase invoice. The document indicates the buyer and seller, but the term invoice indicates money is owed or owing. In English, the context of the term invoice is usually used to clarify its meaning, such as "We sent them an invoice" (they owe us money) or "We received an invoice from them" (we owe them money).

A typical invoice contains:

  • The word "invoice"
  • A unique reference number (in case of correspondence about the invoice)
  • Date of the invoice
  • Name and contact details of the seller
  • Tax or company registration details of seller (if relevant)
  • Name and contact details of the buyer
  • Date that the product was sent or delivered
  • Purchase order number (or similar tracking numbers requested by the buyer to be mentioned on the invoice)
  • Description of the product(s)
  • Unit price(s) of the product(s) (if relevant)
  • Total amount charged (optionally with breakdown of taxes, if relevant)
  • Payment terms (including method of payment, date of payment, and details about charges late payment)
The US Defense Logistics Agency requires an employer identification number on invoice.

The European Union requires a VAT (value added tax) identification number on invoices between entities registered for VAT. If seller and buyer belong to two different EU countries, both VAT identification numbers must be on the invoice in order to claim VAT exemption (VAT exemption according to directive 77/388/CEE of 17 may 1977).

Electronic Invoices:

Some of the Benefits of E-Invoicing are:

  • There are no printing and envelope costs of paper invoices and putting them in the envelope
  • There are no mailing costs associated with e-invoicing
  • There are no costs associated with opening invoice letters
  • Time and money is also saved with easy fast filing and retrieval in computer systems
  • There are no manual data input costs as with with paper invoices to the payables/accounting system at the payer.
  • Receivables files can be updated automatically based on the reconciling/reference codes
  • E-Invoicing saves approx. 10-20 Euro per invoice
  • Automation and ease of operation saves addional money in work time
Sending all outgoing and receiving all incoming e-invoices to and from one's own bank is the simplest e-invoice routing mechanism for customers. This provides both benefits via automatic STP-linkage between invoices and payments as well as a good shield against fraudelent invoices. Ultimately the competition will determine if other alternatives such as emailing e-invoices or e-invoice hotels will survive the transition to the use of E-Invoicing from traditional paper invoiving.

Standards for electronic invoicing varies widely from country to country. Electronic Data Interchange (EDI) standards such as the United Nation's EDIFACT standard include message encoding guidelines for electronic invoices. Some invoices are no longer paper-based, but rather transmitted electronically over the Internet. It is still common for electronic remittance or electronic invoicing to be printed in order to maintain paper records, but the most common continues to be PDF over email.

EDIFACT: The United Nations standard for electronic invoices ("INVOIC") includes standard codes for transmitting header information (common to the entire invoice) and codes for transmitting details for each of the line items (products or services). The "INVOIC" standard can also be used to transmit credit and debit memos. The "IFTMCS" standard is used to transmit freight invoices.

UBL: Use of the XML message format for electronic invoices has begun in recent years. There are two standards currently being used. One is the cross industry invoice issued by the United Nations standards body UNCEFACT and the other is part of the UBL (Universal Business Language) which is issued by [Oasis]http://www.oasis-open.org. Implementations of invoices based on UBL are more common, most importantly in the public sector in Denmark. Further implementations are under way in the Scandinavian countries as result of the NES (North European Subset) project http://www.nesubl.eu. The NES work is being transferred to http://www.cen.eu (the standards body of the European Union) for public procurement in Europe. Agreement has been made between UBL and UN/CEFACT for convergence of the two XML messages standards with the objective of merging the two standards into one before 2010 including the provision of an upgrade path for implementations started in either standard. Payment for invoices Organizations purchasing goods and services usually have a process in place for approving payment on the invoice based on an employee's confirmation that the goods or services have been received. Typically, when paying an invoice, a remittance advice will be sent to the supplier to inform them their invoice has been paid.

Types of Invoices:

There are different types of invoices:

  • Pro forma invoice - In foreign trade, a pro forma invoice is a document that states a commitment from the seller to provide specified goods to the buyer at specific prices. It is often used to declare value for customs. It is not a true invoice, because the seller does not record a pro forma invoice as an accounts receivable and the buyer does not record a pro forma invoice as an accounts payable. A pro forma invoice is not issued by the seller until the seller and buyer have agreed to the terms of the order. In few cases, pro forma invoice is issued for obtaining advance payments from buyer, either for start of production or for security of the goods produced.
  • Credit memo - If the buyer returns the product, the seller usually issues a credit memo for the same or lower amount than the invoice, and then refunds the money to the buyer, or the buyer can apply that credit memo to another invoice.
  • Commercial invoice - a customs declaration form used in international trade that describes the parties involved in the shipping transaction, the goods being transported, and the value of the goods. It is the primary document used by customs, and must meet specific customs requirements, such as the Harmonized System number and the country of manufacture. It is used to calculate tariffs.
  • Debit memo - When a company fails to pay or short-pays an invoice, it is common practice to issue a debit memo for the balance and any late fees owed. In function debit memos are identical to invoices.
  • Self-billing invoice - A self billing invoice is when the buyer issues the invoice to himself (e.g. according to the consumption levels he is taking out of a vendor managed inventory stock).
  • Evaluated receipt settlement (ERS) - ERS is a process of paying for goods and services from a packing slip rather than from a separate invoice document. The payee uses data in the packing slip to apply the payments. "In an ERS transaction, the supplier ships goods based upon an Advance Shipping Notice (ASN), and the purchaser, upon receipt, confirms the existence of a corresponding purchase order or contract, verifies the identity and quantity of the goods, and then pays the supplier."
  • Timesheet - Invoices for hourly services such as by lawyers and consultants often pull data from a timesheet.
  • Invoicing - The term invoicing is also used to refer to the act of delivering baggage to a flight company in an airport before taking a flight.
  • Statement - A periodic customer statement includes opening balance, invoices, payments, credit memos, debit memos, and ending balance for the customer's account during a specified period. A monthly statement can be used as a summary invoice to request a single payment for accrued monthly charges.
  • Progress billing used to obtain partial payment on extended contracts, particularly in the construction industry (see Schedule of values)
  • Collective Invoicing is also known as monthly invoicing in Japan. Japanese businesses tend to have many orders with small amounts because of the outsourcing system (Keiretsu), or of demands for less inventory control (Kanban). To save the administration work, invoicing is normally processed on monthly basis.
  • Continuation or Recurring Invoicing is standard within the equipment rental industry, including tool rental. A recurring invoice is one generated on a cyclical basis during the lifetime of a rental contract. For example if you rent an excavator from 1st January to 15th April, on a calendar monthly arrears billing cycle, you would expect to receive an invoice at the end of January, another at the end of February, another at the end of March and a final Off-rent invoice would be generated at the point when the asset is returned. The same principle would be adopted if you were invoiced in advance, or if you were invoiced on a specific day of the month.

Utility bills: Bills from utility companies are based on measured (metered) use of electricity, natural gas or other utilities at a residence or business. When an individual or business applies for service from the utility (opens an account), he signs an agreement (contract) to pay for his metered use of the utility.

References

  1. Invoice illustration adapted from Meigs and Meigs Financial Accounting 4th Ed. (McGraw-Hill, 1970), p.190 ISBN 0-07-041534-X
  2. US Defense Logistics Agency - Required information in invoices
  3. The Value Added Tax Regulations 1995
  4. DHL | Global | Customs Paperwork
  5. SCM | What is Evaluated Receipt Settlement?
  6. Utility bill description for Duke Energy (Ohio, USA)
  7. Utility bill description for Bayfield Electric Cooperative (Wisconsin, USA)
  8. EDIFACTORY - The EDIFACT resource
  9. EDIFACTORY - The EDIFACT resource
  10. Michigan state Bureau of Transportation Invoice processing
  11. US Department of the Navy Commercial Invoice Payments History System
  12. Commercial Contracting Guidelines - US Defense Contract Management Agency
  13. US Office of Federal Procurement Policy - Best Practices for Contract Administration
  14. Wikipedia.org - the free encyclopedia



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