Swisscom IT Services’ Andreas Brandl tells FDE about developments in e-invoicing, including economies of scale, market penetration and the 2012 Swiss government e-invoicing initiative.

FDE: How do you define e-invoicing?

Andreas Brandl: Common sense would suggest that an invoice issued, sent, received and processed in a purely electronic format is an e-invoice, as long as it is legally compliant. However, if you change the perspective and look at it from a CFO’s point of view, things are a bit different. In this case, I would consider an invoice received and processed electronically an e-invoice, probably not taking into account how it has been issued.

This may be a less strict definition, but if you focus on your own organisation it is perfectly valid. CFOs who constantly seek to cut costs, not just in times of economic difficulty, are more successful taking this perspective.

Is this a reflection of your own service portfolio?

Yes, it is. We complement our core e-invoicing services with scanning and printing services. This allows for a 100% rate of electronic invoices, from a single customer’s perspective, in a short timeframe. We decouple our customers from the abilities of their trading partners.

We have recently finished a project with a large Swiss bank in three months and are now processing all of their invoices from a total of 17,000 suppliers. This is simply not possible with more traditional on boarding strategies relying solely on electronic means and the buying of the suppliers.

But isn’t this a more costly approach than a purely electronic invoice?

Yes, it is. But if one takes the savings per invoice into account, it is still only a fraction of today’s processing costs. And it doesn’t exclude bringing your trading partners to an electronic solution; it just offers more flexibility and a quicker return on investment.

How much appetite for e-invoicing have the Swiss had to date?

In terms of our own business, we have seen a stable annual growth easily exceeding 30% over the last two or three years regarding transactions and revenue. However, the market is still young and there is still a huge amount of non-electronic invoices issued every day. This is good news for CFOs; it means that there is still a huge potential to reduce costs associated with invoicing processes.

Although Swiss companies started quite early with e-invoicing in 2004 after the first e-invoicing related legislation came into force, there was no major uptake or exponential growth in the broad market. But we haven’t seen this happening in other European countries, with the exception of the Nordic countries perhaps. As far as I can tell, there is no major difference.

What is the 2012 Swiss government e-invoicing initiative? How will this initiative change the invoicing landscape in Switzerland?

The e-invoicing initiative is part of a broader initiative called ePower. The goal is to make better use of information and communication technologies for the benefit of Switzerland as a location for business. It is supported by many companies in the industry, including Swisscom. The most popular goal these days is the legislative initiative on e-invoicing. Put simply, it demands that the Swiss government only accepts e-invoices as of 2012.

As far as the invoicing landscape is concerned, I expect a major change, particular for SMEs. Currently, mainly large enterprises focus on e-invoicing, often as part of ongoing process improvement programmes or as a reaction to budget cuts. SMEs are generally only taking part in electronic processes at the demand of their large customers. This initiative will force SMEs to actively deal with the subject as well, for their own benefit.

There is a similar legislation in the Nordic countries and the benefit for the whole industry has been quite obvious. It is not by accident that they have the highest e-invoicing penetration in Europe. Substantial market uptake always requires the involvement of the big players, and the public sector in any country is one of the largest. Therefore, I expect a rapid growth in the coming years, at least if there are clear signs that the initiative is going to be successful.

At the moment, it is still at a rather early stage. My hope is that the relevant stakeholders will understand that the initiative is not to impose additional hurdles to enterprises, but to support a development which is beneficial for all players in the market.

What are the key benefits for companies that choose e-invoicing?

As far as invoice recipients are concerned, the most obvious point is to reduce process costs. Most studies conclude that a single paper based invoice costs €50–€80 if all process activities are taken into account – from opening the envelope to archiving for ten or 20 years. This figure is also confirmed by most of our customers. An electronic process can reduce these costs by more than 50% and there are other advantages such as data quality, high security and good cycle times.

However, you need a reasonable volume of invoices to start with. E-invoicing is another good example of economies of scale. Another important aspect – in my eyes often underestimated – is that a company introducing e-invoicing should seek to eliminate the whole of their existing processes rather than just reducing the volume. For example, if you cut your paper invoice volume for domestic invoices to 30% you may be able to reduce the headcount in the relevant departments more or less accordingly, but you still have a process to maintain. This is exactly why 100% e-invoicing rates, in my opinion, are so important: they allow eliminating processes completely.

The benefits for invoice issuers are less obvious. There are cost savings in the area of printing, enveloping and postage, but they are less significant unless you have very large numbers.

Other financial benefits can be seen in earlier payments and thus improved liquidity, certainly not to be underestimated in these days. But there is another very obvious advantage often overlooked: the customer demands it. The ability to issue invoices electronically is often a key requirement in RFPs across all industries, regardless of the nature of the products or services.

This alone should be sufficient to deal with the subject in advance, especially with the Swiss government initiative already on the horizon.

How has Swisscom IT Service’s e-invoicing solution evolved? What is on offer today and what is planned over the next few years?

We started to work on e-invoicing solutions as we know them today back in 2002, based on a strong foundation in EDI-clearing and e-procurement. It was not a hot topic then but we believed that invoicing would benefit most from electronic processes. We had the first VAT compliant service in Switzerland.

In the meantime, it has become an international solution that is currently compliant in 32 countries. The scanning services are newer; they have only been part of our portfolio for six months.

Our future developments have a clear focus on making it even easier for small companies to participate in e-invoicing processes. There is still room for improvement on applications, processes and commercial models. We are also looking into the basic principles of successful social networks and trying to adapt those elements so that they might also work for business communities. We will come up with a first solution in that area later this year.

Concerns about VAT and digital signatures have been raised. What are these concerns and how have they been addressed?

Tax revenues are a major source of income for governments. Therefore it is quite understandable that VAT authorities and enterprises raise concerns when well established processes are moving away from a known traditional approach to electronic solutions. They are concerned about new options for tax fraud.

The new directive on invoicing and VAT published by the European Commission early this year proposing equal treatment for electronic and paper invoices may set false expectations in the market and even uncertainty to some extent. Although there are no formal or specific requirements for electronic invoices, the basic principle of tax auditability is still in place. In other words, a taxable person still has to prove that an invoice is real and unchanged over the whole storage period. This can now be done by any appropriate method, for example by providing additional documentation or even related business documents like delivery notes. In my opinion, digital signatures have proven to be the most effective way to guarantee integrity and authenticity of an invoice. Other methods include a deferred risk of objections during a tax audit.

However, I appreciate the new directive because it creates new momentum for the market. From a practitioner’s point of view, I expect no major changes to solutions in place today.
 

CEN/ISSS invites everyone to attend the 4th CEN Industry Conference on Electronic Invoicing and Compliance. The conference takes place in the Diamant Building in Brussels on June 18th 2009.

After the completion of the CEN/ISSS eInvoicing Phase I Workshop in 2006, a Phase II workshop was launched in 2007. Now, during the Open Meeting on June 18th 2009, the final deliverables of this Phase II will be presented to reach out for public comments and reviews.

CEN/ISSS e-Invoicing Phase II: five Working Groups

Five projects have gone under way, with Working Groups:

1.      An adoption programme for increased electronic invoicing in European business processes

2.      Compliance of electronic invoice implementations with Council Directive 2001/115/EC and the national legislation as regards electronic invoices;

3.      Cost effective authenticity and integrity of electronic invoices and related business documents regardless of formats and technologies;

4.      Implementation of compliant electronic invoice systems in using emerging technologies and business processes;

5.      A framework for the emerging network infrastructure of ‘invoice operators’ throughout Europe.

 
Resulting in several deliverables, the Working Groups and the entire CEN e-Invoicing Workshop aim to stimulate further standardisation in the domain of electronic invoicing in Europe. It should be noted that the activities are explicitly not directed towards standardisation of a document format such as UN/CEFACT or UBL.

 
What kind of deliverables can we expect?
So what kind of results can we expect at the Open Meeting on June 18th 2009? To get answer on that question we could take a look at the presentations performed during the Open Meeting in 2008.

In short – to be honest: as far as the EEI Platform can see- it is expected that at least the following deliverables will be presented:

-          The Draft Good Practice Guidelines (Working group 2 and 3)

-          E-invoice Gateway (Working group 1)

-          Review of CWA 15576 (Working group 4)

-          Review CWA 15582 (Working group 4)

 
NOTE: The EEI Platform has been chair of Working group 4 for some time. It resigned from this position due to a conflict of co-operation with one of the Workshop chairs and a difference of vision with regard to the expected deliverables and their content. The EEI Platform proposed to deliver:

-          A Common Body of Definitions

-          An Interaction Framework

-          An E-invoicing Innovation Guideline

 
Progress put into perspective
So what progress has been achieved during the last twelve months? The only way to find out is to go the CEN/ISSS e-Invoice Open Conference. But not before you had a chance to look the presentations from 2008. That way you could put the new information en statements into perspective:
 
 
2008 – Working Group 1
Raising awareness of electronic invoices 

2008 – Working Group 2
Overview on compliance of electronic invoices  

 
2008 – Working Group 2:
Compliance of electronic invoices  

2008 – Working Group 2:
Legal and regulatory inhibitors  

2008 – Working Group 3:
Cost effective means to guarantee authenticity & integrity  

2008 – Working Group 4:
Emerging technologies and business processes

2008 – Working Group 5:
Interconnection of service providers 

 
With the final deliverables, the CEN e-Invoicing Workshop has stimulated further standardization work in the domain of electronic invoices in Europe, with a view to supporting:
- the compliance of electronic invoice implementations to Council Directive 2001/115/EC and the national legislation as regards electronic invoices;
- the effective implementation of compliant electronic invoice systems in using emerging technologies and business processes, in business-to-business as well as in business-to-government scenarios; and
- the emerging network infrastructure of invoice operators throughout Europe.

The eInvoicing Workshop Phase II is mandated by the European Commission to provide advice on the European electronic invoice implementation process. With more than 60 companies actively participating, the Workshop has become the sounding board of the electronic invoice industry – comprising software companies, service providers, end-users as well as tax authorities (e.g. Spain, NL, UK, Italy, Romania).

 
CEN/ISSS conference “Electronic Invoices & Compliance”
JUNE 18th, 2009 10:00 – 17:00 CET
DIAMANT BUILDING
Boulevard Reyers 80, 1030 BRUSSELS, Belgium

 
The Open Conference is free of charge !
For participation, please register before 10 June at: http://www.cen.eu/isss/meetings

If you have any question about the registration, please contact:
Emmanuelle Ramaz, Workshop Assistant CEN,
Innovation & Business Development Department
e-mail: emmanuelle.ramaz@cen.eu
Tel + 32 2 550 08 13

Agenda

09:30 Arrival and registration
10:00 Welcome and introduction CEN Secretary General Stefan Engel-Flechsig & Anders Grangard (CEN/ISSS Workshop Co-Chairs),
10:15 Perspectives on e-Business (Welcome note by the European Commission, DG Enterprise)
10.30 Summary of the Phase II results: Stefan Engel-Flechsig
11.00 WG2: Overview on compliance of electronic invoices – Joost Kuipers
11.15 WG2: CEN Compliance Guidelines – Christiaan van der Valk
11.45 WG2: Legal and regulatory inhibitors – Tony Nisbett

12:15 Lunch break

13:15 WG : Cost effective means to guarantee authenticity & integrity – Johan Borendal & Nick Pope
14:00 WG 4: Emerging technologies and business processes – Anders Grangard & Adrian Mueller
14:45 WG 5: Interconnection of service providers – Ahti Allikas & Jari Salo

15.30 Coffee & tea

16.00 WG 1: Raising awareness of electronic invoices – Georg Lindsberger & Helmut Aschbacher
16:30 Final discussions and recommendations from the audience
17:00 Wrap-up, close of meeting & networking
 
 
For participation please register before 10 June at: http://www.cen.eu/isss/meetings
 

 
Gianfranco Tabasso, a member of the EC’s experts group on e-invoicing and co-ordinator of CAST, stresses the importance of working capital management improvement programmes and its relationship with e-invoicing, and the automation of the financial supply chain (FSC).

When times are hard liquidity becomes the top priority for companies. Unfortunately, the current crisis in the capital markets and the shaky state of the banking system has made it harder to come by external sources of financing, such as capital and loans, and has increased costs.

With falling sales revenues, senior managers are increasingly looking for ways to free up cash within their companies such as delaying investments, cutting operating expenses and reducing working capital requirements.

Freeing up cash
Working capital management (WCM) is a CFO’s primary responsibility and the major source of internal financing, with corporations on both sides of the Atlantic operating with excess working capital, estimated in the order of €1,000bn.

“Companies that cut CC days improve their ROCE, showing up in the first quartile of C2C ranking in their industry.”

Working capital accounts roughly for 15% of sales and 20% of total capital employed. The appeal of focusing on working capital stretches beyond the balance sheet by positively affecting P&L. Effective management of working capital can also allow a one-off release of cash and ongoing cost benefits. Working capital management is therefore of strategic importance and a key driver for operational and financial performance and market valuations.

Improving the cash conversion cycle (C2C) is a key responsibility of CFOs and cash cycle (CC) days are the key indicators of WCM. There is a relation between good WCM and financial performance. Companies that cut CC days improve their ROCE, showing up in the first quartile of C2C ranking in their industry. For instance, according to Ernst & Young, between 2001 and 2005, 3M company managed to reduce CC days by 26%, and improved ROCE in the same period from 25% to 39%. BT cut C2C from 27 to 11 days and went from a negative ROCE in 2001 to 10% in 2005.

The potential of WC
Ernst & Young estimates that the leading 1,000 European companies have a €420bn ‘excess’ of working capital, or 18% total working capital. By implementing best practices they could see an annual cost reduction of €18bn. For these companies, realising the full working capital cash and cost potential would reduce debt by 33%, increase net profit by 8% and improve ROCE from 13.5% to 15.4%.

The same projection shows that these companies have a WC reduction potential of -47% (inventory -16%, A/R -15 %, A/P +24%). Comparable US companies have a -36% potential, having done some of the work already.

Improvement programmes tackle each component of WC and specialists and well-established methodologies can be used to reduce inventory, re-negotiate terms of trade with clients and suppliers, improve payments and collections, and improve conditions with banks.

Working capital and e-invoicing
You may be convinced of the importance of WCM improvement programmes but what is their relationship with e-invoicing and automation of the financial supply chain (FSC)?

FSC automation and e-invoicing are the most powerful tools to reduce working capital requirements, cut operating costs, increase quality of service, reduce operational risks, and improve relations with suppliers, customers, banks and other parties along the chain.

Unlike other methods for improving WC that usually end in a zero-sum game, dematerialisation, standardisation, and full integration of the links of the chain creates a win-win situation.

Corporate Action for Standards (CAST), an ongoing initiative of the European Association of Corporate Treasurers, estimates that if European companies switched from paper to electronic invoicing they would make annual savings of €243bn. Individual companies could reduce administrative process costs by as much as 80%.

A combination of e-invoicing and ‘reverse factoring’ could also cut financing delays by 37 days and reduce interest rates for suppliers.

Another area that is labour-intensive and prone to errors is automatic reconciliation of A/R with incoming payments. CAST studied a number of cases and found that possible improvements affected each component of the cycle, including sending, receiving, controlling and booking of an invoice, payment, remittance advice, reconciliation and booking of payment.

CAST recommended the use of new XML standards for the invoice, remittance advice and payment, improvements in ERP functionalities and more cooperation between the parties. The result is a higher degree of end to end straight-through processing (E2E STP) which benefits all parties.

Until recently, few CFOs thought of electronic invoicing, standards, the internet and FSC automation as strategic projects that demanded their attention and involvement. It was considered too technical, something to be left entirely to CIOs and IT managers. The evidence gathered by CAST in 2007-2008 shows how the presence of financial departments is still minimal in FSC automation projects.

But times are changing. A survey of German CFOs shows how e-invoicing ranks as the number one area for potential improvements. The study found:

• 76.4% of CFOs prefer an integrated solution for the financial supply chain to optimisation of single components because there is more potential in a harmonised approach
• 52% consider the interlocking of financial processes with customers and suppliers to be fundamental
• Although 25% of the IT budget is allocated to financial processes only 6% are content with their financial processes.

“Standards are primarily set by banks, ICT providers and consultants, all from the ’sell side’.
 

Setting standards
To work efficiently and operate at low cost, a ‘network economy’ needs commonly accepted standards. To obtain cooperation, the solution must benefit all participants in the chain, for example it should achieve E2E STP in communication and interfaces with internal procedures, which is possible only by adopting the same standards.

After years of confusion and dispersion, a ‘new world order’ is taking shape, with ISO and UN CEFACT recognised as the international standards in the business domain. Under the aegis of ISO 20022, a new family of XML standards has been developed over the last four years, covering the area of payments, invoicing, financing and securities.

Various standards organisations, covering single industries, are adopting XML and wish to register under the ISO label, which guarantees compatibility and acceptance. While this is fine in principle, there is a problem with the limited involvement of end-users in setting standards. Corporates and CFOs take standards for granted and few companies send their experts to organisations and working groups that evaluate and develop business standards. Standards are primarily set by banks, ICT providers and consultants, all from the ‘sell side’.

Another anomaly with standards is that, despite their importance, there is little or no money supporting their development. Experts have other jobs, their time for standards is limited. There is no money for field research and testing.

SWIFT is a notable exception. It employs experts, has a budget, pays expenses of working group members and has always tried to include corporates in its development process. But often, corporate response has been disappointing.

Therefore, CAST’s other major objective is to familiarise CFOs with the world of standards and commit them to support development work.

Standards organisations need corporate people to define business requirements, evaluate and test finished results. Corporates experts must sit at the same table as banks, ERP providers and standards experts to produce workable solutions. SEPA is the latest unfortunate example of standards decided by banks alone.

Tying it together
E-invoicing is the linchpin of the financial value chain because it starts the payment cycle, records monetary amounts in GL and provides VAT to governments.

Directive 2006/112/EC, amending Directive 2001/115/EC, currently rules VAT and e-invoicing but the EC has published a proposal of amendments and an expert group created by the commission is at work to provide a European e-invoicing framework to overcome barriers and provide incentives for faster growth of e-invoicing, particularly among SMEs.

What are the barriers and the problems of e-invoicing? The primary barrier is legal uncertainty in cross border e-invoicing. The VAT directive left too many options to member states and too much room for interpretation. The result is the existence of national legislations with differences that make it complex and expensive for a multinational and/or its service provider to be compliant in all the countries where it operates.

Today there is little interoperability between operators of different countries, because of competition, cost, complexity, and the risk of ‘loss of control’ when conferring a file to another intermediary who is not the final end-user.

Some of the differences and complexities concern the use of electronic signatures. The directive defines three systems for producing a valid electronic invoice: EDI, advanced electronic signature, and other means to prove authenticity and integrity. Most countries opted for electronic signature. The Nordic countries, the UK and a few others chose EDI and other means.

In the current directive, the concern of the legislator is data protection including proof of origin, authenticity and the integrity of the electronic document, from its creation to its archiving. The proposal changes all of this. Directives must be technology-neutral with no prescriptions but only high principles, a code of practice and best-practice guidelines. The basic principles are:

• equal legal treatment for paper and electronic invoices
• control in internal processes of companies is more important than data protection.

Electronic signature is allowed but no longer prescribed as a method for producing valid e-invoices.

To be approved and adopted by member states by the end of 2012, the new directive must be voted in unanimously by the European Council. National communities are starting to evaluate the proposal and its implications. Smooth sailing through the council is by no means guaranteed.

Source: www.the-financedirector.com

These include the European Commission Recommendation 1994/820/EC, the European Directive 1999/93/EC and the European Directive 2001/115/EC. These standards have served the dual purposes of facilitating VAT administration on the one hand and fostering e-commerce on the other.

What Is The Importance Of E-Invoicing VAT Transactions In E-Commerce?
The invoice of a commercial transaction is one of the most important documents in any business. The invoice must conform to accounting, tax, business and even linguistic rules. Guidelines governing indirect taxes such as VAT that are levied on the basis of a commercial transaction specifically provide rules for authenticity of origin of an invoice as well as the integrity of its content. The invoice is also necessary in order for the recipient to claim a VAT refund. With the transformation of conventional business into e-business, all member states have individually tried to regulate the complex legal issue of invoicing. These disparate efforts resulted in a disruption of the smooth functioning of the Internal Market.

The Commission launched a multi-annual project “Simpler Legislation for the Internal Market” (SLIM) in 1996 to streamline key Internal Market Legislation. The Commission’s report on the SLIM initiative was approved by the Internal Market Council on November 27, 1997. This report includes a commitment to study “the details considered necessary for drawing up an invoice for VAT purposes and the legal and technical requirements for electronic invoicing”.CEN, the European Committee for Standardization or Comité Européen de Normalisation, was founded in 1961 with twenty nine national members to develop voluntary European standards and to foster the European economy in global trading.

In 2003, at the request of the European Commission, CEN set up an open “E-Invoicing Focus Group” and issued a report analyzing the requirements on standardization issues relating to electronic invoicing resulting from the new VAT legal framework. The Council Directive 2001/1115/EC recognizes the legal validity of electronic invoices for VAT purposes and specifies the related, required, technical conditions.

What Is The European Commission Recommendation 1994/820/EC.?
The Commission Recommendation was developed at the request of the European Trade and Industry Electronic Data Interchange (EDI) user groups to provide the required legality, acceptability and security in the use of EDI in European member states. The Recommendation includes the Model European Interchange Agreement that was developed in line with the work carried out by the International Chamber of Commerce and several major industry sectors, including the automotive, electronics, retail and distribution sectors.

Trading partners were advised to agree and sign interchange agreements based on the European model prior to commencing the exchange of EDI messages. The Recommendation specifically deals with the definition of EDI, EDI messages, essential characteristics of EDI messages, security of EDI messages, admissibility of evidence regarding EDI messages, storage of EDI messages, EDI standards, applicable laws and security measures when using EDI.

Article 2 of the Commission Recommendation also provides for alternative provisions for accepting electronic invoices when they are sent by EDI, and the agreement then provides for the use of procedures guaranteeing authenticity of origin and integrity of contents. The Recommendation deals with the legal status of EDI by mandating that EDI is admissible in a member state to the extent permitted by national law.

How Did Directive 1999/93/EC Contribute To The Development Of E-Invoicing?
The European Parliament and Council issued Directive 1999/93/EC on Community Framework for Electronic Signatures. The Directive introduced a legal framework to guarantee EU-wide recognition of electronic signatures. This Directive recognizes the importance of the electronic signature as a prerequisite for e-invoicing and security of data transmitted electronically.

The purpose of the Electronic Signature Directive is to facilitate the use of electronic signatures in e-invoicing and to contribute to their legal recognition. It establishes a general framework for electronic signatures and certain certification services to ensure the proper functioning of the internal market. Electronic signatures are also considered important as they facilitate the wide use of e-invoicing. Apart from its commercial value, the invoice is an accounting document, it has legal implications to both transacting parties and it is the basis for VAT declaration and reclamation, statistics declaration for intra-community trade and export and import declaration for extra-community trade.

How Has Directive 2001/115/EC Enabled E-Invoicing For VAT?
European Directive 2001/115/EC specifically deals with e-invoicing. It clarifies the implementation of e-invoicing and aims to introduce harmonized procedures for paper as well as e-invoicing across all member states. The Directive outlines the liability of taxable persons and their service providers for the integrity of content and authenticity of origin of electronic invoices for VAT purposes. This relates mainly to the invoices exchanged electronically and to the storage of invoices.

Under the Directive, no member state can refuse the invoice of goods or services sent by electronic means provided that the authenticity of the origin and integrity of the contents are guaranteed by means of an advanced electronic signature (AES), or by means of EDI as defined in Commission recommendations. Member states may, however, require the advanced electronic signature to be based on a qualified certificate. Invoices may also be sent by other electronic means subject to acceptance by the member state(s) concerned.

Although the EDI invoice message has been adopted by several industry and trade sectors in Europe, it has not been implemented to its full potential. Paper invoices have been maintained to overcome difficulties surrounding VAT regulation. Several member states introduced special procedures to allow EDI paperless invoicing but still require companies to apply for permission from the tax administration and in some cases to exchange summary VAT control messages, electronically or on paper. For cross-border electronic invoicing, companies are exchanging electronic invoices for company administration application, but are forced to parallel the exchanges with paper invoices to meet member state VAT requirements.

Source: ibls.com

GlobalSign, one of the longest established Certification Authorities (CA) and specialists in SSL Certificates and Digital Identities for securing PDF documents, has today announced the success of the Antwerp Port Authority project, designed to meet the requirements of Circulaire nr AOIF 16/2008 (E.T.112.081) for the creation and retention of e-invoices. In January 2004 the European Directive on invoicing (EC/115/2001) came into effect with 25 European member states, including Belgium, implementing the directive into their local VAT legislation; the resultant Circulaire was released in Belgium on the 13th May 2008.
 
Across Europe eVAT rules apply to both the supplier and to the recipient of goods and services. The supplier is obliged to select a technology that guarantees the authenticity and integrity of the e-invoice created – authenticity assures the message content was actually created by the person or legal entity that signed it, and integrity shows that no changes could have been made to the content of the e-invoice during transit without detection. Conversely it is up to the recipient to ensure the e-invoice is stored in such a way as to be assured of the authenticity and integrity during the storage period (7 years in Belgium).
 
Recognising the advantages of VAT corporate governance through e-invoicing, including reduced paperwork, reduced costs, as well as improved customer relations and greater operational efficiencies, the Port Authority sought a solution that would comply with current legislation. Stakeholders in the project also recognised the need to reduce their carbon footprint across the supply chain and therefore welcomed the initiative.

As an authorised participant in Adobe’s Certified Document Services (CDS) programme, GlobalSign’s DocumentSign solution enables the Port Authority to digitally sign their PDF documents and to embed the trust status of the e-invoice and the creation time for recipients to easily view and store. The solution leveraged the expertise of GlobalSign, Adobe and SafeNet to offer a compelling proposition to the Antwerp Port Authority to meet their e-invoicing requirements.
 
“We needed a reliable partner to generate added value for our business and for our customers”, said Jan Goossens, Software Development Manager, Antwerp Port Authority. “GlobalSign, with its extensive security expertise and leading technology is the best choice to prove the authenticity of our invoices and bring peace of mind to us and all our customers.”
 
“We’ve seen a marked increase in the number of projects across the whole of Europe in recent months as the worldwide economic climate causes enterprises both large and small to re-evaluate their invoicing processes to drive down costs and remain competitive,” said Steve Roylance, Business Development Director, GlobalSign. “DocumentSign is not only a cost effective and easy solution for businesses to use, but is also compliant with European e-VAT legislation.” Background on the Antwerp Port Authority The Antwerp Port Authority offers an ideal gateway to Europe with future expansion plans in place to meet the 8% increase on freight year on year through its central European location on the Belgium coast.
 
Antwerp is currently the second largest port in Europe and the fourth largest in the world with 170 million tonnes of freight volume. More than 200 forwarding companies based in Antwerp help to secure shipping contracts across multiple market sectors including steel, fruit, coffee and tobacco. Numerous stevedoring companies handle more than 16,000 seagoing ships and 65,000 barges annually that call at the port.
 
Background on the three way partnership for success – GlobalSign, Adobe and SafeNet
In 2003 Adobe Systems Inc took the visionary steps and created a compliant solution known as Certified Document Services (CDS) to address the growing need for document Authenticity and Integrity across multiple markets. The key components of the service leverage core skills from Certification Authorities such as GlobalSign to deliver digital identities to organizations under a defined certificate practice statement including certificate status information and secure time information. SafeNet Luna SA hardware security module (HSM) is used to store digital signatures and protect cryptographic keys. SafeNet HSMs provide reliable protection against compromise for applications and information assets to ensure regulatory compliance, reduce the risk of legal liability, and improve profitability. Both elements are essential to the overall framework of the CDS solution aiding the Port authority to meet the requirements of the directive.

www.globalsign.com

Late June 2008 the CEN/ISSS eInvoice Phase II Workshop unveiled the Draft Good Practice Guidelines. The objective of this document is to reduce some of the principal areas of uncertainty and resulting inefficiencies on the e-invoicing market with one single set of good practice. These guidelines should be applicable to both businesses and tax administrations across Europe.

CEN and eInvoicing
CEN is acronym for: COMITÉ EUROPÉEN DE NORMALISATION and has a focus on standardisation aspects. CEN carries out numerous standardisation efforts, one of which is the CEN/ISSS initiative. CEN/ISSS is the name given to CEN’s ICT (Information and Communication Technologies) sector activities. It provides market players with a comprehensive and integrated range of standardisation services and products, in order to contribute to the success of the Information Society in Europe. CEN/ISSS works through CEN Focus Groups, Technical Committees and Workshops.

The CEN/ISSS eInvoicing Phase II Workshop
The CEN/ISSS Workshop Phase II has assumed the overall responsibility, as far as CEN is concerned, for the standards aspects of the European Commission’s expert group on electronic invoicing, complementing and linking with the relevant Commission groups, and ensuring the relevant global standards activities are correctly informed and primed.  In this activity, it aims to ensure collaboration with other CEN/ISSS groups, including WS/ePPE and WS/eBES, with UN/CEFACT (TBGs1 and 5), ISO TC 68 and ETSI/TC ESI.

The eInvoicing Phase II Workshop objectives
The objective of this particular Workshop is to help to fill gaps in standardization for the use of electronic invoice processes, to identify the various practices in member states, to integrate the emerging technical and practical solutions into effective good practices, and to define and disseminate these good practices for e-invoices in close coordination and cooperation with private industry, solution providers and public administrations.
 
Five initial projects
Five initial Task Groups (TG’s) have been established with a focus on:

-          Enhanced adoption of electronic invoicing in business processes in Europe;

-          Compliance of electronic invoice implementations with Council Directive 2001/115/EC and Directive on the Common
   System of Value Added Tax (2006/112/EC) as well as Member States’ national legislation as regards electronic
   invoicing

-          Cost-effective authentication and integrity of electronic invoices regardless of formats and technologies

-          Effective implementation of compliant electronic invoice systems in using emerging technologies and business
   processes and

-          Emerging network infrastructure of invoice operators throughout Europe.

TG2 and TG3: The Draft Good Practice Guidelines

TG 2 (compliance of electronic invoice implementations) and TG 3 (cost effective authentication and integrity) decided to cooperate and created the Draft Good Practice Guidelines. The Draft Good Practice Guidelines identify two major obstacles when it comes to the regulatory aspects of e-invoicing adoption.

First, “businesses that implement electronic invoicing are often faced with thousands of technical and process implementation options along the way. In the absence of implementation-relevant rules emanating from tax administrations or standards bodies, the uncertainty surrounding these many choices creates a significant barrier to investment in electronic invoicing. As a result, for those vendors and users that choose to invest nevertheless, it is hard to make any value judgment as to how “compliant” their services and solutions are. Corporate e-invoicing users, Service Providers and solution vendors that are taking steps to develop and maintain VAT-compliant services naturally have a desire to have to a concrete yardstick against which to measure and with which to demonstrate their compliance.”

Second, nowadays “most tax administrations do not provide accreditation services or self-assessment programmes to assist e-invoicing users or their Service Providers to ascertain that e-invoicing systems are VAT-compliant. Tax administrations’ audit methodologies and tools are often developed based on the experiences of law enforcement and not widely propagated to businesses as compliance checklists.”

How it works

As stated above, the Draft Good Practice Guidelines seek to reduce some of the principal areas of uncertainty and resulting inefficiencies on the e-invoicing market with one single set of good practice Guidelines for both businesses and tax administrations.

It consists of two documents: one word document and one Excel sheet.

The Word document provides context to the Excel document and tries to explain how one should use the Excel. The Excel sheet identifies the main issues in question at each processing step during the life cycle of an electronic invoice for different invoicing methods (direct invoicing from Supplier to Buyer as well as Self-Billing) and provides detailed process guidance for a variety of implementation options including web publication, the use of various integrity and authenticity-enhancing methods and the retention of electronic invoices.

The Excel sheet takes into account:

-          who directs the e-invoicing process

-          whether an intermediate party is involved

-          the possibility of a self billing variant

-          the method being used to guarantee authenticity and integrity: EDI, digital signatures, other instruments

-          the predefined (business) process steps necessary to perform e-invoicing

Based on your choices in these variables, the Excel sheet should be able to present you:

-          the inherent tax risks that your organisation poses when initiating e-invoicing based on the choices made.

-          the tax requirements necessary or even obligatory needed to address the risks

-          the controls or solutions that should be in place to ensure the risks are avoided

Concluding remarks
The Draft Good Practice Guidelines are very promising, as they are intended to rule out uncertainty on e-invoicing form a legal/VAT/compliance perspective.But there are some downsides to this version of the Draft Good Practice Guidelines.

Hence the only two percepted barriers to full scale adoption of e-invoicing: standardisation and awareness, would remain.

First of all the Excel sheet does not, or at least not very easily, provide the results needed for an organisation get a sense of safety. It might be a good idea to create a database version that is much more accessible.

Second, this Draft Good Practice Guideline is still a concept. Or as the Word document states: “These Guidelines and Commentary are a work in progress and out for review. While every effort has been made to ensure consistency with legal requirements that apply to e-invoicing in the European Union, no guarantees of legal compliance or fitness for purpose are made by the drafters or CEN; any use of these documents is at the user’s own risk”.

Download the Draft Good Practice Guidelines (Word)
Download the Draft Good Practice Guidelines (Excel)

Electronic invoicing and invoice automation promise to unlock major benefits for almost everyone. Corporates, SME’s, banks, public administrations, service providers and even consumers can profit from electronic invoicing. The most striking benefit would be the multi-billion cost savings across Europe. Supplemented with a large amount of non-financial benefits, e-invoicing and invoice automation can be a major enabler in contributing to European competitiveness.
 
Common practice across Europe nevertheless shows that the penetration and adoption of electronic invoicing and invoice automation in Member States is relatively low. When it comes to European cross border e-invoicing, it is even lower.
 
EEI Platform
Nevertheless several initiatives in Europe on e-invoicing and invoice automation, it stands out that there is not a platform with a focus on sharing information, promoting members’ interests, building social networks and obtaining knowledge.
 
Mission
The mission of the EEI Platform is to accelerate the awareness, adoption and penetration of e-invoicing invoice automation and its related domains (payments, accounting, credit management, archiving, authenticity) across Europe. Creating benefits and opportunities for its visitors, members, partners and stakeholders.
 
Objectives
In achieving this mission, the EEI Platform aims at several objectives that distinguishes the EEI Platform from other initiatives. The mission and objectives are carried out using an activity and instruments framework. This activity framework is based on a S.M.A.R.T. approach: Specific, Measurable, Accurate, Realistic, Time based.

Benefits
Packed with functionalities and opportunities to generate as much benefits as possible for our members and partners.

                          Postal:        EEI Platform
                                             Brunelsingel 122 
                                             6841 KB ARNHEM
                                             The Netherlands 

 Step four:       PAY THE DIGITAL INVOICE

About one month ago, it was distributed a draft of the conclusions of the EC electronic invoice experts regarding future regulation needs to push development and disemination of electronic invoices.

I was disappointed to find that one of the conclusions implies that electronic signature is seen as a barrier for further development of the electronic invoice, and a feature that some of the members of the expert group see as superfluous feature.

In my opinion, electronic documents need ways to reinforce security to allow to tell apart fake documents from authentic documents. Ths is generally true even for informative documents with less impact on companies results.

It is also true that electronic signature is not the only way to reinforce security regarding autenticity of documents. For example, a document can be assumed to be authentic if it is retrieved from a trusted source, even if it is not completed with an electronic signature. But then we must define what are the requirements of such “trusted sources” to keep that assumption.

On the other hand, both approaches, electronic signatures and reference or trusted sources (which in turn frecuently are based in electronic signature derived schemes) need more precise definition to avoid lack of interoperability, which, in my opinion is the real barrier for electronic invoice wide deployment.

Some common authenticity mechanisms are required both for electronic invoices (those that are born electronically from the beginning) and for invoices certified scanning (invoices digital copies that become equivalente to an original, after a security mechanism has been added to a common scanning).

This approach, “certified scanning”, has been initiated in Spain with high success.

Certified scanning is a process in which an electronic signature is applied to a image file while it is scanned from a document paper. This image is stored in a secured database and the main concepts and terms of the paper document are added as metadata to the contextual fields of the image file in the database.

Once a paper document is “certifiedly scanned” the digital copy becomes equivalente to an original, and the paper source can be destroyed. The new “electronic original” can then be used for auditing purposes.

For the companies that receive thousands of invoices, “certified scanning” adoption imply benefiting from most of the advantages of the electronic invoice without dealing with the slow adoption pace that their suppliers could show.

If we want to support “certified scanning” we need a common definition of the requirements for that conversion. And they should not be very different form the requirements for “electronic invoices” .

If we accept authenticity mechanisms not based in electronic signature, they should be common for both approaches. And if electronic signature is still to be used in the future as the authenticity mechanism of the electronic invoice, the broad options in variants should be reduced and clearly defined (in my opinion, the XL definition of CAdES -TS 101 733- or XAdES -TS 101 903- should be used, including both validation and timestamping, from the signer side).

Source: ePractice

The government of the Netherlands is aiming to be able to process 10% of incoming invoices (i.e. around one million invoices) electronically within three years. The benefits will include corresponding improvements in efficiency, reductions in errors and cost savings. Yet e-invoicing does not seem to be taking off. That is why the Ministry of Economic Affairs has commissioned Telematica Instituut and Zenc, within the framework of its Electronic Invoicing Action Plan, to conduct a detailed study of a number of scenarios related to the government’s e-invoicing infrastructure.

The study will produce a selection tool to generate scenarios for the organisation of the e-invoicing infrastructure. The selection tool will take account of such considerations as organisational aspects (whether the work is done in-house or outsourced), security (the authenticity and integrity of the invoice) and invoice validation and transformation.

The project will run for ten weeks, with the final report being presented to the Ministry in mid-August.

For more information: Bob.Hulsebosch@telin.nl or Paul.OudeLuttighuis@telin.nl

By simplifying and focusing on practical solutions we can make good progress – and avoid costly complicated structures.

Status report from the Expert Group on e-Invoicing

“There is no future for paper invoices” said Bo Harald, Chair of the newly formed Expert Group, when it met for the first time in February 2008. As of June 2008, he adds that the Group’s programme of work is well underway.

This short status report provides stakeholders with information about the progress of the Group since its formation. It has now held three meetings and established a series of initiatives to address a key opportunity for enhancing efficiency and productivity in the digital environment.

The Expert Group consists of 30 specialists from a cross-section of industries, countries, bodies comprised of large and small enterprises and backgrounds (including taxation specialists). It was set up as a result of a Commission Decision in October 2007, following the report of an Interim Task Force.

As set out in the Commission Decision, its tasks are to identify business requirements and responsibilities for the execution of specific work, as well as to steer the creation- by the end of 2009- of a European e-Invoicing Framework. The purpose of the Framework is to establish a common conceptual structure to support the provision of e-Invoicing services in an open and interoperable manner across Europe. A mid-term report will be issued before the end of 2008.

The Lisbon Strategy for Growth and Jobs regards the development of interoperable e-Invoicing solutions as a vital component of the strategy. Such solutions will act as a catalyst for automation of the complete supply chain by enterprises of all sizes as well as public sector organisations. The advent of the Single Euro Payments Area provides an opportunity for the closer, pan-European integration of the internal processes of enterprises to payment systems. There are important environmental arguments and major cost savings in prospect.

But thus far, progress has largely been confined to larger enterprises, which have made considerable progress with Electronic Data Interchange (EDI) and on the automation of their own supply chains. For the achievement of pervasive adoption, the small and medium sized enterprises, the public sector and the consumer need to discover the benefits. In so doing they can become part of a practical and standardised environment, where e-Invoicing is as easy and available as initiating an electronic payment or making an on-line purchase.

Three streams of work underway

In organising the work, the Expert Group has created three activity streams and has established a rolling Work Plan. Progress is being made during meetings of the Group and during the intervening periods. Additional experts are being mobilised to support specific tasks.

The first stream is the development of a compelling set of high level Business Requirements drawing on substantial existing work and survey material in this area, together with the actual experience of current solutions. Such business requirements will cover the needs of all users and market participants. Particular work is being undertaken to better understand the requirements of small and medium sized enterprises and their relationships with each other and with large enterprises, the public sector and consumers. Here the availability of clear and unambiguous information on implementation and legal requirements is vital. There will need to be benefits for all users in terms of simplifying workflow, cost-savings, ease of use, a good choice of service providers and software, and a core standard for the e-invoice, which meets a wide set of needs.

As the business requirements are developed it is intended to provide opportunities for wide-ranging consultation among stakeholders and among bodies undertaking separate reviews of e-Invoicing issues, so as to validate these requirements.

The second stream is the development of proposals to simplify and evolve the Legal and Regulatory framework for e-Invoicing. In particular, this work is addressing the requirements set out in existing Value Added Tax (VAT) legislation, as implemented across Member States of the European Union in accordance with the relevant Directives. The group is also looking into the broader legal issues related to e-Invoicing such as archiving, company legislation and intra-community rules. The Expert Group is aware of the current review being undertaken by the Commission of the Invoicing Directive 2001/115 as later incorporated in the VAT Directive 2006/112 and is anxious to deliver its first constructive proposals within the timeframe afforded by this review.

The requirements for the “guarantee of authenticity of origin and integrity of content” of electronic invoices are the subject of particular study. Whilst recognising the importance of aligning with these principles, the Group is of the view that, where practicable, e-Invoices should be treated in the same way as paper invoices and there needs to be a uniform implementation of legal provisions and a set of commonly agreed mechanisms that are technology and business model neutral.

It is felt important to protect today’s legacy investments, but to also consolidate requirements into a new “European e-Invoicing Recommendation”. This concept will be further discussed at the meeting of the Expert Group on 3 July 2008, as part of its review of all feasible approaches to the next steps in the evolution of the legal and regulatory environment. The importance of creating greater legal clarity and harmonisation is of great importance, particularly for the smaller enterprise.

The third stream concerns the development of a vision for how the market could better respond to user needs through Network solutions supported by Standards. Interoperability between trading parties and their service providers could provide greater reach and networked connectivity between them. Greater standardisation of processes and invoice content could provide the necessary ease of use and predictability.

Nevertheless the current heterogeneity and fragmentation, the multitude of standards in use and the set-up costs of the necessary interfaces are significant barriers. Work is proceeding on the creation of a “Network Model”, which could form the basis of a framework for interoperability. Within such a framework, there should be maximum competition between solutions, service providers, consortia, schemes etc, but perhaps based on a minimum set of standards and protocols adopted by market participants. At present the feasibility of this approach is being tested with reference to a modelling exercise involving members of the Expert Group and other experts.

In the area of standards for invoice content, there is substantial evidence that convergence between a number of European and global standards initiatives (within UN/CEFACT, ISO TC68 (the ISO20022 standard) and CEN (various Workshops) has and is continuing to take place. The Expert Group will encourage and promote full transparency of these activities, and ensure that its recommendations are submitted where appropriate to these standards processes, so that its recommendations can be validated by stakeholders and practical approaches found. It is unlikely that a single standard for the invoice will emerge or even be desirable given the diversity of user needs, but with careful design a core cross- industry invoice with appropriate extensions is within reach.

European e-Invoicing Framework

Mindful of its final deliverable, the Expert Group has given thought to the nature and content of the European e-Invoicing Framework. At this stage, it is conceived of as a set of actionable recommendations and proposals, for which the support of others will be sought. It will be organised as a series of layers or pillars that need to be addressed and which interrelate.

Whilst, encouraging the development of solutions and schemes, the Framework will not be a contractual framework for market participants to formally adhere to. However, elements such as the possible framework for interoperability would require wide adoption and acceptance if its benefits, once proven, are to be achieved.

Further intense discussion inside and outside the Expert Group will take place before the shape and content of this deliverable is finalised.

Final Comments

In commenting on the Group’s work so far, Bo Harald says” We are making good progress and if recent estimates of the costs savings to society of EUR 238 billion over six years are close to the truth, we have 238 billion reasons to be successful”

The European Commission is facilitating the work of the Expert Group by providing logistics support and secretarial assistance. It is also acting to ensure that the Expert Group is informed about the EU legal and political framework and procedures and is therefore able to take these into account in its work. The Commission is encouraged by the current progress of the Expert Group and recognises that bringing about change on this scale requires very high quality work, in particular by providing a compelling solution to the technological, business and legal challenges confronting the broad range of stakeholders in the area of electronic invoicing.

Source: Blogger

Some of us only see the cost saving when our organisations make the – as such inevitable – move into e-invoicing. Others see environmental issues as the most central. Both are important – but there are at least 5 mega-class reasons for making e-invoicing a reality as fast as possible. And no real reasons for dragging our feet.

238 billion lower costs – better productivity in EU – but only the beginning
According to a study for the EU-commission the cost saving potential in the business to business sector can reach 238 billion €. This is well in line with what others like the Finnish State Treasury, public sectors in France, Italy and Denmark and enterprises like Electrolux, Finnair and many other have published. The European Association for Corporate Treasurers has estimated that the annual savings potential is 243 billion €. But these impressive totals cover only the processing aspects – much more productivity improvements can be achieved by:

- lower credit risk when more frequent invoicing lowers outstandings

- lower fraud risk when e-invoices sent via service providers provide authenticity and integrity

- better cash flow also through faster payment

- lower IT costs when interfaces to service providers and software for invoicing, accounting, VAT and
   payments are standardised

- further automation when e-orders, e-statements etc in the procurement process use the same data
   elements and standards and are sent in the same channels

- lower cost for financing when invoice financing can be automated

- much higher productivity when staff is freed up from boring, badly paid routine work to customer 
   service,sales and process improvements

The move to e-invoicing in Europe is a natural part of the implementation SEPA – it is bringing the business case to it and will use the already designed payments standards.

he same tools can – and should – be used also for business to consumer transactions – judging from estimates in Finland this could save a further 30-40 billion in Europe – and then the time saved and convenience gained by citizens have not yet been included. Every second invoice in Europe – 15 billion in all – is sent to a consumer and SMEs are increasingly asked to send e-invoices also to consumers.

Banks have to take their responsibility and for their part enable 0-investment and 0-it-skill alternatives for SMEs that serve both b2b and b2c.
 
Better service – actually no other alternative
All enterprises – big and small – must today take into account that their customers have an urgent need to cut costs in their administrative processes. If you do not provide e-invoices you are in many cases automatically at a disadvantage. We have also seen that already 5 public sectors in EU (Denmark, Finland, Italy, Spain and Sweden – 10 more on their way by 2010) have declared e-invoicing as the only alternative – an increasing number of progressive enterprises are doing the same. So if you want to do business with these in the first place you do not have a choice – starting from invoicing – but soon enough involving all messaging with the same tools.
 
Carbon foot print – all need to take responsibility
The environmental issue is big by any measure – the energy and raw material needed for producing paper for, printing, enveloping, distributing and recycling close to 30 billion invoices per year is a pure waste when digital alternatives are available.

The latest estimate heard was that one invoice has a 100g CO2 footprint – times the remaing unautomated 28 billion annual paperinvoices totals: 2.800.000 tons CO2. And e-invoicing will naturally pave the way from further CO2 savings from digitalization of related documents and processes.

IT is as we know consuming considerable amounts of energy both in data processing, transmitting messages and archiving and a lot of efforts are being put in to get away from present wastefull procedures. Structured data is not a big culprit however – especially when compared to pictures and video.

Learning just in time – not just in case
We have already seen that the information overflow, abundance of new technology, globalization has lead to a fragmentation of time for many of us. We also realise that the speed with which new useful tools are actually becoming embedded in the economic processes of society at large is increasing dramatically. This all leads to a need to learn in practise – just in time. It is not meaningful or even possible to learn things as much as before just in case the skill will be needed somewhere – it may well be outdated by then.
 
Just like e-banking was a case of learning by doing – in private and employee roles – so will e-invoicing be. The practise – needed by every enterprise (24 million in EU) and most citizens will form a step on the ladder to the next level (fig 5) – additional digitalization and automation of services – all the way to a real time economy.
 
Radically smaller workforce in the near future – have to be so much more productive
Unemployment has been and still is in some countries a considerable stress factor and matter of concern for policy makers. But when we look at fig 6 we realize that we will have a major challenge with shortage of labor force – 10s of millions soon and by 2050 over 100 million fewer in the work force will have to be so much more productive to keep up the present GDP and also continue to produce growth.
 
Without sufficient growth it is not possible to afford the present level of public sector services when a much larger part of population will reach the age where more services – and hands – are needed. Very obvious that anything that can be automated must be – and there is no time to loose.
 
Conclusion
I am sure you agree that the five mega-class reasons are compelling. It is easy to understand why EU, so many national states and progressive enterprises have lifted this to the top of their agendas. Service providers have to redouble their efforts and policy makers take even bolder measures to move up on this ladder.
 
It is already becoming normal practise in most EU countries to charge extra for paper invoicing. A small stick is almost always a much more efficient way to steer consumers away from too costly practises – than even a big carrot. Even those who prefer to pay extra for the paper invoice will benefit as price competition returns the cost saving achieved to all customers.
 
In the business to business sector it is important that enterprises set a clear deadline for paper, e-mail or other unstructured data invoices – and communicate it repeatedly. Everyone will save costs and many other important benefits will be achieved – as described above.
 
There cannot be place for any hesitation – a new mindset is needed (Fig 7)

Source: Bo Harald: Blogger