Invoicing is central to the cash flow and liquidity of any trading organisation. Small improvements in efficiency can improve working capital, reduce gearing and bring better liquidity. The report by the Commission's Informal Task Force on e-Invoicing cites research claiming that the average processing cost of a paper invoice across Europe is around €30. E-invoicing can cut that cost by 80%, it says.
A legal framework for e-invoicing is in place currently, but it does not work as it should, according to the report, which was published in July. Consequently, private and public sector organisations continue their reliance upon paper invoices.
The E-invoicing Directive, passed in 2001, required Member States to recognise the validity of electronic invoices and allow electronic storage. It set out mandatory items of information that must be included on every invoice; but it gave each Member State discretion to decide the details of the implementing legislation.
This discretion has resulted in diverse national laws. Some countries' regimes are very strict and mistakes may result in e-invoices being classed as non-compliant for tax purposes, triggering penalties that can include fines and even imprisonment.
The report gives examples of the problems that exist today. In some countries, electronic invoices are subject to rigorous security requirements that the report describes as "overkill". Germany, Italy, Poland, Portugal, Spain and Hungary require digital signatures on e-invoices. These so-called qualified signatures must be based on digital certificates issued to natural persons – i.e. they cannot be based on a company's certificate, according to the report.
Storage requirements for e-invoices also vary. Estonia allows complete freedom on the storage location for electronic invoices; Germany allows storage only in an EU Member State. The period for which e-invoices must be stored varies too: the mandatory period is three years in France and 10 years in Germany.
The report says the legal position is so complex for buyers and sellers because "e-invoicing lies at the crossroads of several areas of legislation – mainly VAT, accounting, payment, authentication, company transparency and data retention."
The report recommends documenting all legal issues and developing the EEI Framework as a formal Recommendation of the European Commission. Current barriers should be addressed within a period of 18 months, it says.
The initial focus will be the Business to Business (B2B) market, followed by Business to Consumer (B2C) and Government to Citizen (G2C).