Top 10 E-invoicing Mistakes Multinational Businesses Must Avoid

In today's digital-first business landscape, e-invoicing and digital reporting have emerged as transformative tools capable of streamlining financial processes and enhancing transparency. It is no longer a choice in most markets - it's a prerequisite to conducting business.

Yet, as with any technological advancement, they come with their own set of challenges. From the maze of terminology to the nuances of data entry, knowing where the hurdles are can help.

This “countdown listicle” delves into the top ten common mistakes we still see multinationals making. It is the outcome of some internal discussions between our dedicated team - and what we feel are the most common issues in this space. Much of this list has a general application; however, point 9 is directly relevant for platforms and marketplaces.

As we navigate these challenges, we'll also shed light on actionable insights and best practices to ensure your e-invoicing journey is compliant and efficient.

[10] Fighting Fires (Instead of Planning)

E-invoicing and digital reporting mandates are often announced well over a year in advance. Typically, the lead time from announcement to implementation can be as much as 3 years. However, many companies still need to catch up when deploying compliance solutions (which leads to mistake number 6 below - focusing only on compliance and not efficiency).

One upcoming example is for digital businesses providing SaaS. These businesses are often centralised in one or two jurisdictions and sell globally. There is no obligation to report cross-border transactions except for a handful of jurisdictions. However, this is changing as more countries turn from domestic reporting to cross-border trade (see the EU ViDA proposal as an example).

To avoid fire-fighting, stay aware of the mandates being published by subscribing to reputable sources of information. Fonoa publishes news of new developments through its blog and LinkedIn page (follow us to stay informed).

[9] Overlooking Tax Compliance for Sellers

At its core, e-invoicing (and here, we actually mean digital reporting) is a form of data-sharing. Data sharing has grown in popularity to monitor the tax compliance of sellers operating on digital platforms and marketplaces.

These sellers can often be small and medium-sized enterprises that need to gain the experience or knowledge to handle global tax compliance. These businesses often need more resources and expertise from larger corporations, making them more vulnerable to the complexities of global tax compliance.

Consequently, such sellers choose not to enter the market or simply leave after facing the consequences of failing to adhere to their tax obligations. For the marketplace operators, this has broader business implications (beyond just regulatory compliance), leading to missed revenue opportunities.

To combat this, leading digital platforms and marketplaces already support their sellers with tax compliance by making it easy to report transactions to the government and generate compliant invoices, ensuring that they continue to operate in markets with complex e-invoicing obligations.

[8] Forgetting About Maintenance

Implementation is just the beginning. In their rush to adopt the latest e-invoicing solutions, many multinational businesses overlook the ongoing maintenance these systems require. This oversight can lead to a host of challenges down the line.

Firstly, as businesses evolve, so do their models. An e-invoicing system that was perfect for a company's needs two years ago might not be suitable today. Just think about what would happen if you launched a marketplace, changed the contractual setup, or launched a new line of business.

Regular reviews and updates are essential to ensure the system remains aligned with the company's current operational model.

Errors are a major source of maintenance work - these can arise from a myriad of issues ranging from data mismatches to software glitches and need regular monitoring and resolution. Similarly, outages, while often unforeseen, are a reality of any digital system. Businesses must have contingency plans in place.

Moreover, the regulatory landscape for e-invoicing is far from static. Countries continually update their e-invoicing regulations to address emerging challenges and technological advancements. Staying compliant requires businesses to be on their toes, regularly updating their systems and processes to align with the latest regulations.

In essence, e-invoicing isn't a set-it-and-forget-it solution. It demands ongoing attention and maintenance to deliver its full potential and keep businesses compliant and efficient.

[7] Misunderstanding Archiving and Retrieval Needs

Supporting components of e-invoicing are essential elements that contribute to the effectiveness, legality, security, and efficiency of electronic invoicing processes. These components ensure that e-invoices are compliant with regulations, authentic, easily accessible, and capable of replacing traditional paper-based invoicing. Some of the key supporting elements of e-invoicing include:

• Digital Signatures: Digital signatures provide authentication and ensure the integrity of the e-invoice. They involve using cryptographic techniques to create a unique digital "signature" for each invoice, which verifies the sender's authenticity and ensures that the content of the invoice hasn't been tampered with during transmission. Most countries now require the use of locally approved e-signatures, which might require physical devices, for invoices to be legally valid.
• Archiving and Storage: E-invoices must be stored securely and in compliance with regulatory requirements. Archiving solutions ensure that invoices are kept for the required period, often varying by country, and are readily accessible for auditing or disputes. Proper archiving prevents data loss and ensures the availability of historical financial records.
• Audit Trail: An audit trail captures the entire lifecycle of an e-invoice, from creation to delivery and receipt. This ensures transparency, accountability, and compliance with regulatory requirements.
• Encryption and Security: E-invoicing involves the exchange of sensitive financial information. Encryption protocols safeguard the confidentiality and security of data during transmission and storage.

[6] Focusing Only on Compliance (Not Efficiency)

For many businesses, the primary driver behind adopting e-invoicing is compliance. While meeting regulatory standards is undeniably crucial, an exclusive focus on compliance can blind companies to the broader benefits of e-invoicing. Viewing e-invoicing merely as a cost or a box to tick can lead to missed opportunities.

E-invoicing, when implemented thoughtfully, can be a catalyst for operational efficiency. It can streamline workflows, reduce manual errors, and offer valuable insights into financial trends. Moreover, while the initial implementation might come with costs, it's an investment that pays dividends in the long run. Adopting a short-sighted approach, which emphasises meeting the minimum requirements, can lead to more expenses, especially if corrections and overhauls become necessary.

We suggest approaching e-invoicing not just as a compliance tool but as a strategic asset that, when leveraged correctly, can drive both compliance and efficiency.

[5] Assuming Standardisation

The easiest and most significant mistake you can make is to assume that e-invoicing and digital reporting are standardised globally. As you can already guess, this is not the case.

The lack of global standardisation presents a significant challenge for multinational businesses. While the digital shift promises efficiency and transparency, companies often grapple with a patchwork of regional standards and practices.

Each country or region may have different onboarding and registration procedures, unique invoicing formats, specific data requirements, and reporting protocols. This diversity complicates integration and implementation efforts and amplifies the risk of non-compliance.

In the words of the OECD FTA report - each country's implementation has been “undertaken based on the different domestic contexts – legal, business, compliance culture, budgetary considerations and so on. There is no obvious “right” solution, although the resulting proliferation of electronic invoicing systems has led to the wrong global outcome as regards the costs to cross-border business and international compliance management.”

[4] Failing to Consolidate Globally

The benefits multinational businesses can realise by consolidating e-invoicing and digital reporting globally will depend on the global provider. However, here are ten things you could be missing out on:

1. Streamlined Processes Using a single provider ensures uniformity in the invoicing and reporting across different regions. This uniformity simplifies training, implementation, and daily operations.
2. Cost Savings: Managing multiple providers can be expensive due to varying pricing structures, integration costs, and administrative overheads. Consolidation often leads to bulk discounts and reduced administrative expenses.
3. Enhanced Compliance: A global provider is more likely to stay updated with the regulatory requirements of multiple countries. This ensures that businesses remain compliant across all regions, reducing the risk of penalties and legal issues.
4. Centralized Data Management: With a single provider, businesses can have a centralised dashboard or platform to view, manage, and analyse invoicing and reporting data from all regions. This centralisation aids in better decision-making and offers a holistic view of the company's financial health.
5. Improved Vendor Relationships: Working with a single provider fosters a deeper, more collaborative relationship. This can lead to better service, quicker issue resolution, and potential customisation to suit the business's unique needs.
6. Reduced Integration Challenges: Integrating multiple systems from different providers can be technically challenging and lead to data silos. Consolidation eliminates these challenges, ensuring seamless data flow and integration with other enterprise systems.
7. Consistent User Experience: Employees and stakeholders experience a consistent user interface and functionality, regardless of the region. This consistency improves user adoption rates and reduces the learning curve.
8. Efficient Support and Troubleshooting: With a single point of contact for support, issues can be addressed more efficiently. There's no need to juggle between different providers or face potential conflicts in case of system integrations. We also call this the “one-throat-to-choke when things go wrong” benefit.
9. Strategic Focus: Instead of managing multiple vendor relationships and navigating different systems, businesses can focus on strategic initiatives and core operations, knowing that their e-invoicing and digital reporting needs are in capable hands.
10. Future-Proofing: A global provider is more likely to invest in R&D to stay ahead of technological advancements and regulatory changes. This ensures that the business's e-invoicing and reporting systems remain cutting-edge and adaptable to future needs.

In summary, consolidating e-invoicing and digital reporting providers globally offers businesses operational efficiency, cost savings, and a strategic advantage in an increasingly complex regulatory landscape.

[3] Confusing Terminology

Ironically, even this blog post blurs the terminology. Apologies in advance.

The distinction between "e-invoicing" and "digital reporting" remains a grey area for many tax professionals and those specialising in tax products. In numerous discussions, especially with those new to the field, terms like e-invoicing, fiscalisation (or e-fiscalisation), and digital reporting are often synonyms. While this might seem harmless, the nuances between these terms are crucial.

Mistakenly using these terms as equivalents can lead to profound misunderstandings. For example, a business might adopt an e-invoicing solution, assuming it encompasses digital reporting needs. They might later discover they've fallen short of specific regulatory standards. Likewise, presuming that features like digital signatures and e-archiving are included in a digital reporting package can be an expensive oversight.

Such terminological mix-ups can have financial implications and undermine trust with business associates and stakeholders. Industry professionals need to articulate these terms with precision, ensuring alignment within their teams and with external partners.

Dive into this e-invoicing glossary to align your understanding with stakeholders and avoid potential pitfalls.

[2] Ignoring Data Issues

Inaccurate data entry remains one of the most prevalent challenges in e-invoicing, often stemming from human error. Whether it's a missing data point (such as a tax number) , a mistyped figure, an incorrect date, a customer duplicate, or a misplaced decimal point, these seemingly minor mistakes can have outsized consequences.

The implications of inaccurate data entry in e-invoicing are manifold. For starters, it can lead to discrepancies in financial reports, making them unreliable or misleading. More concerning is that incorrect invoicing data often results in regulatory penalties, especially where it leads to misreported taxes or non-compliance with financial standards.

Beyond the direct financial implications, inaccurate data entry can also strain a company's resources. Rectifying errors often requires additional time and effort, diverting staff from other essential tasks. It underscores the importance of rigorous data validation processes and continuous training for staff involved in invoicing. In the era of e-invoicing, where speed and efficiency are prized, accuracy remains paramount.

[1] Failing to Allocate Ownership

The multifaceted nature of e-invoicing often leads to ambiguity regarding its internal ownership within an organisation. E-invoicing isn't just a technical or financial process; it intersects various departments, each bringing its perspective and expertise to the table, from Procurement, which may be concerned with vendor relationships and contract terms, to Tax (and TaxTech) teams, who ensure regulatory compliance, to Business Operations and Finance, who handle the practical aspects of invoicing and payments. Then there's the FinTech team, ensuring the technology aligns with financial needs, and Engineering, which integrates and maintains the systems.

This diverse involvement can be both a strength and a challenge. While it ensures a holistic approach to e-invoicing, it can also lead to fragmented ownership. Without a clear delineation of responsibilities, there's potential for overlaps, gaps, and miscommunications. For instance, the Tax team might assume that the FinTech team monitors regulatory changes, while the latter believes it's the former's responsibility.

To navigate this, businesses must establish clear roles and responsibilities. Regular cross-departmental meetings foster collaboration and ensure everyone is aligned. A designated e-invoicing champion or lead who liaises between departments and provides consistent communication can also be invaluable.

While e-invoicing touches multiple facets of a business, its successful implementation hinges on cohesive internal ownership and collaboration.

Conclusion

In the rapidly evolving world of e-invoicing, staying informed and proactive is the key to success. While the challenges are real, they are not insurmountable. By being aware of common pitfalls and adopting best practices, multinational businesses can harness the full potential of e-invoicing, turning challenges into opportunities. Remember, as the digital landscape continues to transform, those who approach e-invoicing with compliance and efficiency in mind will meet regulatory standards and gain a competitive edge.

How can Fonoa help?

At Fonoa, we are experts in the field of e-invoicing. We can help you make sense of the international requirements. We support e-invoicing globally with a single API connection and an easy-to-use platform.

If you want to know more about this space and how Fonoa is already helping global businesses in e-invoicing and reporting, check out our website and consider joining the Fonoa webinars.