How many retailers bill their B2B customers is changing– rapidly and globally. Instead of mailing or faxing paper invoices, relying on PDFs or email attachments, companies are increasingly sending electronic or e-invoices. These digital transactions reduce paper, speed approvals, and reduce errors and processing costs.
The trend of e-invoicing is building in the United States, with the U.S. e-invoicing market expected to grow from $4.84 billion in 2019 to $15.5 billion by 2027. That push toward e-invoicing will only increase, especially for businesses that have international customers.
Upcoming global e-invoicing mandates are shifting e-invoicing for these businesses from a “should” to a “must” do.
Understanding the global e-invoicing mandate
In 2014, Italy became the first country to make electronic invoicing mandatory for business-to-government transactions, and five years later, that requirement expanded to include B2B and B2C interactions.
To increase transactional transparency and address VAT discrepancies, other countries adopted similar requirements. Today, more than 80 countries have imposed e-invoicing mandates on businesses.
Typically, an e-invoicing mandate stipulates that when retailers send a B2B bill, they must submit it in a specific format through a government tax authority portal. This enables the government to track purchases and collect taxes. Once the government approves the invoice, it goes to the customer for payment. Although most retailers impacted by these mandates are in Europe, the requirement also affects retailers with locations conducting business in any of the 80 countries.
Retailers operating in North America are not currently required to provide e-invoicing, but that may soon change as more countries implement this directive. However, when that time comes, retailers in the United States and Canada may not be ready. Nearly one-half of companies surveyed said they still invoice by paper.
Complications lie ahead
Switching to e-invoicing isn’t just a matter of digitizing the billing process, but it becomes a complex endeavor. Consider invoicing a business in Europe. Many people think of Europe as being one country instead of many. But each European country has its own regulations and businesses must make sure their invoices comply with each requirement.
For example, France postponed the original compliance timeline of July 2024 and set a new timeline of September 2026 for large and medium businesses and September 2027 for small enterprises. In Germany, however, different federal states have their own e-invoicing regulations.
In addition to complying with each country’s e-invoicing specifications, retailers must decide who handles the process. If a U.S. or Canadian retailer has overseas subsidiaries that are affected by the mandates, the retailer has to determine whether the subsidiaries, corporate headquarters, or a global provider should be responsible. Even within one company, the finance, tax, or procurement departments might handle e-invoicing– making it difficult to maintain consistency. Often the local retailer or partner may be more aware of invoicing requirements than the headquarters, which adds to confusion.
Getting e-invoicing right is essential– companies that don’t comply with e-invoicing mandates face fines. Governments can also delay payments to non-compliant companies, affecting business cash flow.
While much of the attention is on the requirements to provide e-invoicing, it’s also critical to acknowledge how e-invoicing can benefit retailers by making it easier for retailers to exchange documents with all of their trading partners. The process decreases the likelihood of errors and speeds payment cycles.
As the world moves deeper into e-invoicing, forward-thinking retailers aren’t waiting for a mandate to get on board with the process.
How U.S. and Canadian retailers can get ready for e-invoicing
- Know the current e-invoicing regulations. Many companies aren’t familiar with the mandates and can be caught unaware. Stay up-to-date on shifting regulations in the retail industry by monitoring government websites and retail industry publications.
- Look at your current invoicing system. If you currently use an e-invoicing system, look at factors such as data format, integration capabilities, security, and storage requirements to see how compatible the current system is with the new requirements and if gaps exist.
- Evaluate e-invoicing providers that offer legal compliance with the myriad of regulations.
- Implement and test the new process, including training employees on the procedures. Do pilot tests to ensure the new process integrates with the entire system.
- Assess and ramp up current security and privacy measures. E-invoicing mandates often have heightened requirements to protect sensitive information and to follow enhanced privacy regulations.
With e-invoicing increasingly becoming a global requirement, retailers–even those not currently impacted– will ultimately have the advantage if they prepare now.
