How eInvoice Mandates Can Trip Up Your Business Abroad

In the U.S., businesses are attracted to digital invoicing for a slew of financial benefits: faster, more efficient accounts payable and reconciliation processes, a reduction in the threat of errors due to manual data entry and ability to capture early payment discounts thanks to an accelerated invoice management process.

Still, U.S. companies aren’t necessarily forced to ditch paper invoices and go digital. Not so for other parts of the world: Government mandates are looking to reduce corruption and fraud and enhance reporting capabilities through eInvoicing requirements.

That means new pressure to keep track of these requirements, which vary from jurisdiction to jurisdiction. And if you’re a U.S. company looking to do work abroad, it means you can’t ignore these various regulations, either.

Richard Waugh, Vice President of Corporate Development at eProcurement firm Zycus and its eInvoicing division Invocus, made that warning quite clear in a recent interview with PYMNTS.

“If you want to roll out eInvoicing across your global enterprise, you need to be mindful of these different regulations in different parts of the globe that you need to be in compliance with,” he said.

These mandates mean eInvoicing is no longer a two-party process between buyer and supplier. Regulators, like tax authorities and auditors, are now involved, and corporations must comply with their rules, whether they are about digital signatures, timestamps, archiving processes or otherwise.

“It gets pretty complex — real fast,” Waugh said.

He noted that Zycus is looking to “mask” that complexity for corporate clients by integrating compliance solutions from TrustWeaver, enabling users of Zycus’ eInvoicing solutions to make sure their invoices comply with local regulations. Otherwise, Waugh noted, businesses could be hit hard.

“There is certainly a legal and economic ramification to noncompliance in certain countries,” he said, adding that, again, these penalties range from country to country.

In Europe, analysts at the Organization for Economic Cooperation and Development found that eInvoice mandates are helping Europe to promote tax compliance and detect fraud.

Latin America has proven to be a driver of eInvoice adoption. Research from the Accounts Payable Network found significant cost savings achieved not only by the governments across the region that require eInvoices for procurement purposes but among local companies that have complied with those rules.

Coca-Cola’s compliance with Brazil eInvoicing mandates, for instance, led to 70 percent savings on processing costs, researchers found.

In the U.S., however, eInvoicing is hardly a requirement — and hardly commonplace. Earlier this year, Billentis released its 2016 eInvoicing: Digitization & Automation report and found that paper invoices continue to reign in the U.S.

“Ironically, the U.S. is essentially unregulated,” Waugh noted. “It’s sort of led to an anomaly here. Typically, if we’re talking about technology applications, the U.S. is usually on the forefront in terms of adoption. EInvoicing is one case where other parts of the world are far ahead of the U.S.”

But cases like Coca-Cola reveal yet another incentive for even U.S. companies to go digital.

“Companies that don’t get on board with eInvoicing run the risk of not just running afoul of certain government regulations, but they’re missing an opportunity for cost savings, because they’re maintaining this nonproductive, often paper-based way of dealing with accounts payable and invoices in general.”

According to Waugh, it takes more than two weeks for the average business to simply approve of an invoice when they’re operating on manual and paper-based processes. That means these businesses don’t even have a chance to capture an early payment discount offered by a supplier for paying as quickly as, say, 10 days.

“In the U.S., [eInvoice adoption] is really based on the financial benefit,” he said. “And in other parts of the world, it’s largely driven by government mandates.”

If international mandates aren’t enough of a reason to adopt eInvoices, companies have another: The U.S. is slated to introduce its own eInvoice mandate in 2018, at least for the government’s own procurement purposes.

Waugh did note that digital invoicing is gaining steam in the U.S. for reasons like the ability to capture these early payment discounts and reduce data entry errors. But today, for multinational corporations, a lack of understanding of digital invoice regulations across jurisdictions can lead to some big missteps outside the U.S. and, soon, inside the U.S., too.