The digital race
Will Europe catch up with Latin America?
The Latin American nations have been leading the world on the electronic invoicing front of late, with many now mandating the use of e-invoicing for the huge majority of business transactions. Europe, however, is now making real progress to increase adoption and catch up, with Germany the latest country to issue a draft law to reinforce digitising the accounts payable process.
Germany is currently preparing to join Austria, Spain and Italy in making e-invoices mandatory for public sector processing of accounts. A draft law currently working its way through the Bundestag states that invoices will have to be transmitted and received electronically, and contain structured data (as in, a pdf is not sufficient) in a format that enables electronic processing.
The goal is to reduce barriers to pan-European trade that result from varying invoicing systems and standards through the adoption of a fully digital system. With this law, Germany also formalises what an electronic invoice is (not a pdf) and reinforces its status as far superior to its paper counterpart for meeting the needs of automated processing.
The move marks a shift into a new gear for Germany, and for Europe. The E-invoicing/Procurement Directive (2014/55/EU) requires that electronic invoices are accepted in all member states’ public sector procurement by 2018. While many member states are making headway, there is still work to be done to hit this deadline.
Germany has gone one step further with its e-invoicing mandate than what is required by the EU, due to its structure and processing stipulations. As one of the leading economies in the union this perhaps signals what is to come elsewhere. Unlike Latin America, however, I don’t foresee the mandate philosophy spreading into the private sector immediately. Fundamentally, the motivation at the heart of the race remains different.
In Latin American countries such as Brazil and Mexico, a large percentage of tax was thought to have been lost due to tax avoidance. The mandating of electronic invoicing is one way for each country’s government to ensure the VAT gap is filled. In Germany, however, far less tax avoidance and fraud takes place. The motivation, therefore, is to reduce processing costs and increase efficiency in line with Germany’s E-Government Act (E-Government-Gesetz) – a wise move if you ask me.
As a global provider, we know e-invoicing means fewer mistakes and faster turnaround times for large organisations, as well as reliable data for making future decisions. Suppliers, too, benefit from greater visibility of their invoices, and when they are likely to get paid.
Being a global operator also means we need to be malleable to each and every country’s requirements. With the UK in the process of leaving the EU, the structure of trade relationships will undoubtedly flex, so Tungsten’s role in supporting businesses to navigate international trade has never been more important.
Tungsten is helping businesses prepare for, and enact, the digital revolution the world over, and in the race to optimum efficiency we’ll help them achieve their personal best globally.