The future of procurement: e-invoicing, EDI and Peppol

What is an e-invoice?

An e-invoice is simply a digital version of an invoice. It should be noted that it must be originally created and transmitted electronically. It must also contain the same mandatory information as a printed paper invoice.

What an e-invoice looks like

Electronic invoicing has become indispensable in modern procurement. It allows companies to automate their invoicing processes, reduce costs and increase efficiency.

Discover interesting facts about e-invoicing: Betriebswirtschaft-Praxis.de

Electronic invoices can be presented in different ways:

• As unstructured data: as a PDF document, for example, or as an e-mail text.
  
• In a structured data format: this representation also corresponds to the EU standard EN 16931, which is currently essential for public sector (B2G) contracts in particular. Often, XMLformats are used as a standard, such as XRechnung or ZUGFeRD.
  
  This article focuses on e-invoicing in a structured data format.

The history of e-invoicing is directly linked to the development of EDI – these three letters stand for Electronic Data Interchange. Incidentally, this can be used not only to send and receive invoices automatically, but also any other information relevant to the ordering process: orders, order confirmations, delivery notes and much more. So without EDI there would be no e-invoicing!

In the following, we will take a closer look at the electronic invoice. But first:

A brief history of electronic data transmission

The beginnings of modern data exchange date back to the 1970s. However, before personal computers came into use, data had to be recorded on so-called punched paper tapes and magnetic tapes in order to be transmitted. Eventually, the first electronic data capture machines followed, allowing data to be sent to data centers via telephone lines.
All in all, the whole affair was still very complex and expensive, which is why its use was limited to large companies.

The first “real” personal computers came onto the market in 1980, and to this day they shape almost everything that exists in the way of computers.

The advent of the internet in the 1990s definitely brought about a revolutionary change: the World Wide Web opened up completely new possibilities for electronic data transmission. Companies began using e-mail to send documents, which made the process faster and more cost-effective. However, e-mail was not optimized for automated data exchange, which led to incompatibilities.

In the 2000s, technical standards – data formats – were developed to ensure interoperability between different systems. The XML (eXtensible Markup Language) format was introduced as the standard for structured data exchange. It enables a uniform presentation of invoice data and laid the foundation for the further development of e-invoicing.

In 2013 and 2014, the ZUGFeRD format also appeared on the scene: developed in Germany, it is a hybrid format in which structured XML data is integrated into a PDF file. This allows companies to send their invoices electronically while providing a visual representation for human readability.

Since 2017, it has been possible to create so-called XRechnung invoices: XRechnung refers to a format based on the international UBL (Universal Business Language) standard that was developed specifically for use in public administration to exchange electronic invoices in a standardized format. The aim was to simplify and standardize electronic invoicing between companies and public administration.

In addition to various standards, electronic signatures have also been established to ensure the authenticity and integrity of invoice data.

The future of e-invoicing promises further technological advances: the use of artificial intelligence and machine learning enables systems to automatically process and interpret invoice data. Blockchain technology could improve the security and traceability of billing processes. It remains exciting!

E-Invoicing: technical challenges in implementing e-invoicing

If companies want to remain competitive in the future, they will not be able to avoid efficient, automated processes, especially in procurement (e-procurement) and order processing. Anyone who wants to successfully convert their operations to e-invoicing must take a number of technical features into account during implementation.

The most important aspects in brief:

• Data formats: to ensure electronic exchange and automated processing of invoice data, e-invoices should ideally be created in a structured data format.
  Common formats include XML, EDIFACT and UBL or openTrans.
  
  The choice of the right data format ultimately depends on the specific requirements of the recipient and the applicable standards. If an e-invoice is to meet the requirements of the EU standard EN 16931 then the XRechnung and ZUGFeRD formats mentioned above come into play, as well as the Peppol BIS format.
  

Find out how to create invoices in ZUGFeRD and XRechnung formats.

• Data validation: when sending e-invoices, great attention should be paid to carefully validating the data to ensure that the transmitted information is correct and complete. This can be achieved by means of appropriate validation rules and procedures, which ensure that the invoice data meets the defined standards and contains no errors.

• Security: of course, data should be protected as well as possible during transmission and also stored securely to prevent unauthorized access, manipulation and data loss. The security aspect is therefore of particular importance. There are effective measures for this, such as data encryption, digital signatures for authentication and integrity assurance, as well as secure transmission methods (e.g. AS2 or AS4).

• Data integration: it must be possible to integrate electronic invoices into the recipient's existing systems and processes. These include accounting and ERP systems, workflow systems, archiving systems, etc. Ideally, e-invoices should be seamlessly transferred into these systems, either through direct integration or with the help of appropriate interfaces and converters.

• Metadata and additional information: in addition to the actual invoice data, an e-invoice sometimes also contains so-called metadata and additional information. This includes, for example, information on sending, payment method, taxes and customs duties, as well as other contractual agreements. The use of metadata enables more accurate processing and a more comprehensive understanding of the invoice data.

• Long-term archiving: electronic invoices must also be archived long term in accordance with legal requirements and retention periods. Aspects such as the storage of structured data, the storage of visual invoice images, the safeguarding of integrity and the long-term availability of archived data are important here.

The realization of electronic invoices therefore requires careful planning, implementation and collaboration between companies, IT departments, suppliers and customers to ensure a successful implementation.
If you don't want to tackle your e-invoicing project alone, you can of course get help from an external IT service provider. However, experience has shown that smaller companies in particular often have problems finding a suitable service provider.

Would you like to switch your company to e-invoicing? We are here for you: as a solution partner for electronic data interchange, inSyca is happy to support you in your endeavor, from the first analysis to the go-live. Let's talk!

Advantages and significance of e-invoicing in accounting

E-invoicing is becoming more and more prevalent in modern accounting and represents a significant development in the field of contemporary billing.
Reasons why it makes sense to use electronic invoicing:

• Increased efficiency: provided that the e-invoice is stored in a structured data format, it allows for the automated processing of billing data. Instead of manually capturing and processing paper documents, electronic invoices can be imported directly into the accounting systems and processed. This enables companies to save a considerable amount of time and money, as manual entries and errors are reduced.

• Save costs: companies can save a lot of money by switching to e-invoices. For example, there are no costs for printing, sending and storing paper invoices. In addition, process costs can be significantly reduced by automating the invoice workflow. The electronic archiving of invoices also leads to savings in physical storage costs.

• Faster processing times: electronic invoices can be processed much faster, which consequently has a positive effect on incoming payments. Automated processing also reduces throughput times and enables efficient processing. This, in turn, leads to improved liquidity management and allows companies to benefit from cash discounts and other payment benefits.

• Reduction of errors: manual entry of invoice data is often error-prone and can lead to inconsistencies and incorrect information in accounting. Switching to e-invoicing minimizes the risk of human error as the data is taken directly from the electronic format. This, of course, also improves the quality of the accounting data in terms of accuracy and reliability.

• Compliance and traceability: electronic invoices make it easier to comply with regulatory requirements and make transactions traceable. Electronic signatures and encryption technologies ensure the authenticity and integrity of invoice data. In addition, e-invoices can be archived electronically and easily retrieved, thus fulfilling the legal retention obligations and enabling easy verification if necessary.

• Eco-friendliness: the transition to e-invoicing reduces paper consumption and thus to some extent the ecological footprint of companies. With paperless ordering and accounting, companies make an effective contribution to environmental protection and support sustainable business practices.

We can see that it is worthwhile to rely on electronic invoices and, overall, on automated order processing. Companies that switch to e-invoicing not only benefit from many advantages of a modern and effective accounting practice – they also gain a significant competitive advantage.

International e-invoicing: the Peppol network

Anyone who deals with the topic of e-invoicing, especially in an international context, sooner or later encounters the term Peppol. Behind this abbreviation stands Pan-European Public Procurement On-Line – the most important network for e-procurement and business transactions in Europe.

Simply put, Peppol, as a so-called eDelivery network provides standardized technical specifications and protocols so that companies, authorities and organizations can send and receive electronic documents securely and efficiently. Peppol promotes cross-border trade and improves interoperability between different e-procurement systems by providing a unified EU-compliant approach to the exchange of information such as invoices, orders and shipping notices.

UBL and AS2/AS4 – standards and protocols at Peppol

As we know, electronic messaging depends on the right data format. In order to use Peppol to send e-invoices or other electronic documents, they must be in a format based on the Universal Business Language – UBL (in accordance with the EU directive):

• UBL is an internationally recognized standard designed specifically for the electronic exchange of business information.
• A number of structured document types, such as invoices, purchase orders, delivery notes, etc., are defined via UBL.
  
• Practical: after formatting the documents according to the UBL scheme, the information is structured uniformly and can thus be read and processed by different e-procurement systems and partners – across different countries and organizations.

Data formats that meet UBL's criteria and can therefore be used for Peppol are:

• XRechnung
• ZUGFeRD
• Peppol-BIS

Another important role is played by the transmission paths, or transmission protocols. Above all, a lot of emphasis is placed on the security aspect. AS2 and AS4 have established themselves as protocols here:

• AS2 (Applicability Statement 2): AS2 was originally developed as a protocol for particularly secure and reliable exchange of business documents over the Internet. It uses a combination of HTTP (Hypertext Transfer Protocol) and S/MIME (Secure/Multipurpose Internet Mail Extensions) to securely transmit data.

• AS4 (Applicability Statement 4): AS4 is an advanced version of the AS2 protocol and provides enhanced capabilities for exchanging business documents, including support for web services and larger file exchange. AS4 is based on the web services standards such as SOAP (Simple Object Access Protocol) and ebMS (ebXML Message Service).
  Furthermore, the AS4 protocol impresses with its excellent security standard: compared to AS2, AS4 supports a wider range of encryption algorithms and key lengths, which potentially enables higher security levels. It also offers additional authentication options, such as the use of username/password combinations.

Standards and protocols are part of the Business Interoperability Specifications (BIS): it defines the rules and requirements for the exchange of electronic business documents through Peppol and specifies how the documents should be structured, formatted and transmitted to ensure fluid interoperability between the different participants and systems.

Peppol in a square – the 4-corner model

Communication via Peppol essentially takes place via four cornerstones: to put it simply, sender and receiver do not exchange their messages directly, but via a Peppol access point each.
So if a supplier wants to send an XRechnung to his customer, for example, he first sends it to his Peppol access point. There, the message is automatically forwarded via the Peppol network to the access point of the respective trading partner, which can receive the invoice from there (see figure).

What is a Peppol Access Point?

Technically, a Peppol Access Point is nothing more than a gateway or interface that allows companies to exchange electronic business documents over the Peppol network. The Access Point serves as a connection point between a company's internal systems and the Peppol infrastructure.

However, Peppol Access Points are also IT service providers who have successfully qualified at Peppol to act as an Access Point and offer this as a service.

inSyca is also listed as a certified Peppol Access Point. We offer the connection to the Peppol network primarily as part of our EDI platform linQsupply^® in order to provide small and medium-sized companies with a simple solution for electronic data interchange.

The key tasks of a Peppol Access Point

• Conversion and validation: Access Points convert incoming documents into the required format and ensure that they comply with Peppol standards and specifications. This includes validating data fields, verifying the structure, and ensuring compliance with the required metadata.

• Encryption and security: an access point provides mechanisms for encrypting the transmitted data, thus ensuring security and confidentiality during exchanges. In addition, the use of digital signatures to verify the integrity and authenticity of the documents is supported.

• Routing and delivery: Access Points are of course also responsible for forwarding documents to the right recipient and ensuring that they are delivered successfully. Regardless of geographical location and technical infrastructure, a secure exchange of documents between different participants in the Peppol network can be guaranteed.

• Monitoring and tracking: a Peppol access point provides the necessary monitoring and tracking functions to track the status and progress of the transmitted documents. This allows organizations to monitor the replacement process, identify issues, and meet the requirements of service level agreements (SLAs).

Learn more about the Peppol network!

Conclusion

Today, the digital transformation is making itself felt in the world at all levels, including trade and business. Automated processes take supply chains to a new level in terms of efficiency and speed, and one of the most important prerequisites for this is the paperless exchange of information.
In order to remain fit for the future, more and more companies are using modern technologies such as electronic data interchange and are also making sure that their suppliers are able to meet the corresponding requirements. Electronic documents are already mandatory in some areas, such as e-invoicing according to EU standards, which is mandatory in public procurement.

From January 1, 2025, the obligation to use e-invoicing also applies to the B2B sector in Germany.

As much as some may find these digital changes uncomfortable, it is worth keeping in mind the benefits that modern achievements bring. E-invoicing also contributes to the optimization of business processes. It helps companies operate more efficiently, reduce costs, accelerate payment cycles, and meet the demands of the digital economy.