There is some clever and sophisticated digitalization of tax collection happening outside of our borders and across the oceans. Specifically, invoice automation like mandatory e-Invoicing and e-Reporting standards for business-to-business (B2B) sales and invoice transactions. Mostly in Europe and Asian countries that levy the value-added tax (VAT). You might be thinking, “Why do I care about this?” The answer is because inevitably you will feel the impact even if these standards are not yet enforced where you do business. Whether that’s a positive or negative impact depends on how you decide to leverage this change today.
By now, it’s pretty clear that to keep and maintain accurate business tax records, you need some sort of invoice automation software to keep everything organized. That’s why countries are joining forces and creating a common online invoicing network system.
This invoice automation system unifies B2B organizations, so they have a link to share invoices electronically, leading to a streamlined procurement and invoicing process, while also giving tax authorities the ability to monitor transactions and ensure regulatory compliance. This would make auditing for the IRS a lot easier and even though it won’t happen in the USA anytime soon, internationally it’s becoming mandatory across the board.
Organizations everywhere are realizing the potential benefits of a unified invoice automation system, and they want a piece of the pie. As of May 2022, more than 80 USA organizations have voluntarily agreed to be a part of a pilot program of building and testing a similar virtual network to exchange invoices electronically.
Over the next few years, every country in Europe will have this e-Invoicing and e-Reporting as a mandatory requirement. If you have international sales or sites, you will need to come up with a solution that’s compliant with that nation’s tax laws before it goes into effect. This is the main reason why organizations are becoming early adopters, so they gain a competitive advantage and are prepared for the change once it becomes a requirement for their business.
Another benefit of e-Invoicing and e-Reporting is the significant cost savings involved. The French estimate that the typical cost of an invoice in France is 10 euros for a paper invoice, but with an e-invoice, it’s less than a postage stamp. In addition to the cost savings, there are major process efficiencies, in terms of creating, sending, and receiving payments for invoices.
The data entry of building and tracking invoices and then entering them into each of your systems can lead to some expensive errors. Having this all done electronically through one platform that every business has access to, cuts down on postage fees, reduces duplication of work, greatly decreases the number of manual steps, and allows payments to be sent and paid within minutes.
Digitizing tax collection allows businesses to efficiently access data with insights because these transactions are now fully transparent and captured online in real-time. Having these numbers available at your fingertips, whenever you need them, boosts innovation, highlights opportunities, and powers continuous improvement ideas.
Smart integrations with Enterprise Resource Planning (ERP) software solutions will unify the tax collection process even further. The ability to receive and post invoices to an ERP system automatically enables businesses to forego any error-prone and labor-intensive processes of entering the data into your central ERP system.
There are also some intangible benefits to digitalizing complex tax processes. 92% of workers agree that automation has improved their lives in the workplace. It boosts the mental wellness of yourself and your finance team. People are no longer guessing and struggling with trying to keep up with the never-ending regulatory tax changes and worrying about whether certain forms are filed accurately and on time. All of this is done for you with invoice automation.
The purpose of this article isn’t to scare you into action, but rather to plant the seed and lay some groundwork that you can expand on in the future. Technology is changing how we live, and we need to change along with it. If you have questions or wonder how this global e-Invoicing exchange impacts you and your business, reach out to our team of experts. We’re here to help!