E-invoicing in the private sector using Peppol
Since its inception as an EU commission-funded project in 2008, Peppol has evolved to become the EU standard for e-invoicing and electronic exchange of business documents in general. What’s more, the efficiency and interoperability that the network delivers has fuelled its expansion into North America, Canada, and Japan. For Singapore, Australia, and New Zealand, Peppol has become the centerpiece of the countries’ e-invoicing initiatives.
Transacting other message types, such as product catalogues and orders is just as easy, and the document library supports the necessary documents for B2B/B2G process automation. For the moment, however, e-invoicing remains the most popular message form on the network.
While the public sector is the driving force behind Peppol uptake, there is expansion throughout the private sector as well. Whether it’s for B2G e-procurement or B2B e-document transactions, Peppol allows private companies with smaller revenue to access the global market on a more even footing, and rids larger private companies and multinationals from having to develop and maintain disparate electronic document networks. Peppol is a connect once, reach all network, which drives simpler connections, quicker payments, better data quality, and cost-savings. We will examine all this in greater depth throughout this blog post.
What are e-invoices?
Electronic invoicing (e-invoicing) involves the exchanging of invoices electronically to required formats and specifications. E-invoices are digital throughout their entire lifecycle, so just because an invoice is stored or sent using a computer, that doesn’t necessarily make it an e-invoice. PDF invoices sent through email are not electronic invoices.
What are the benefits of e-invoicing?
For both the public and private sectors, e-invoicing provides strong benefits from the outset, which are:
E-invoicing cuts down on the cost of printing and materials, but the main savings are found in the fact that no manual handling needs to take place, meaning fewer approvals are needed and manual errors are drastically reduced.
Comparing paper- or PDF-based invoices to e-invoices, figures put an approximate saving of €15 for each invoice processed!
Greater efficiency and faster payments
As referenced earlier, Peppol’s structured data file means that nothing needs to be manually entered into a business’s accounting system, or no employee needs to spend their time chasing missing or incomplete data. Payments can be reconciled quicker, leading to improved cash flow, which is especially important for SMEs.
Lower risk of fraud
A 2019 UK Finance report showed that business-related invoice fraud in that year alone totaled £92.7 million. Emails can be easily hacked and invoice details changed to perpetrate scams. Peppol’s registration process, including business number authentication and listing on the global Peppol directory, along with the network’s architecture, make it a much more secure choice for exchanging important information.
Easier facilitation of global trade
This will be talked about in more detail below, but Peppol only requires one integration to be able to trade with any other partner. The adoption of different electronic procurement systems or the reliance on a host of service providers is no longer required. This means greater market access for businesses of all sizes, and a benefit to public sector procurers, who now have a wider selection of suppliers to choose from.
Easy ERP integration
Peppol can be easily integrated with an ERP system without having to purchase any new software. This works by using a Peppol infrastructure provider’s API and connecting it to your existing software without having to worry about things like hosting or obtaining additional certifications.
In an increasingly ecologically conscious economy, e-invoicing means less printing and resource use. Physical storage space is also no longer required.
E-invoicing for public procurement and export: challenges and opportunities
Public procurement makes up a huge and important part of the global economy. To paraphrase the European Union website addressing the current status of public procurement:
- 250 000 public authorities in the EU spend around 14% of GDP (around €2 trillion per year) on the purchase of services, works, and supplies.
- Public sector procurement can be used to boost jobs, growth, and investment, creating an economy that is more innovative, resource and energy-efficient, and socially inclusive.
- High-quality public services depend on modern, well-managed, and efficient procurement.
- Improving public procurement can yield big savings: even a 1% efficiency gain could save €20 billion per year.
Acknowledging this, the European Commission identifies areas that are integral to efficient public procurement, which includes:
- Increasing access to procurement markets.
- Improving transparency, integrity, and data.
- Boosting the digital transformation of procurement.
Apart from being the home of Peppol, Europe is the perfect ecosystem to demonstrate why Peppol is so effective, as you have many countries within close proximity that have a desire to trade, but have been hindered by the different standards, business requirements, and laws of their respective countries. According to the OpenPeppol website, this range of different requirements leads to suppliers having to use different integrations and send e-invoices in multiple formats. This results in business siloes, where a supplier from one country can more easily trade in some regions than in others.
So what are the consequences of these difficulties faced by suppliers?
- Wasted time
- Needless complexity
- Greater expenses
- Some suppliers having a smoother access to the market than others
As we saw above when examining the benefits of the Peppol edelivery network, by having a single point of connection, businesses can expand their reach on a more level playing field, without incurring extra costs or roaming fees. This is undoubtedly better for suppliers, but it’s also better for public contracting authorities, who benefit from simpler trade, and now have access to an even greater pool of suppliers. Remember, even very modest efficiencies can save billions.
In this context, it makes a lot of sense that Singapore, Australia, and New Zealand have embraced the Peppol network. All three are countries with small populations that are comparatively isolated. As an imperative, they need to be making cross-border business document transactions as seamlessly as possible. This is exactly what Peppol does, removing some of the barriers to international trade by not just improving access to global markets as mentioned before, but allowing partners to efficiently comply with the tax laws of the country they are transacting with.
Directive 2014/55/EU on electronic invoicing in public procurement
EU directive 2014/55EU recently came into force, obliging central public contracting entities (as of April 18, 2019) and the remaining public entities (as of April 18, 2020) in the European Union to be able to receive and process electronic invoices in accordance with the European Standard on e-invoicing (EN-16931). As Peppol conforms to this standard in its entirety, it is the preferred European network, replacing or merging with national standards that advanced e-invoicing countries had adopted before there was a coordinated push for e-document interoperability beyond national borders.
What about B2B transactions?
While Peppol began with public procurement in mind, private companies conducting B2B transactions benefit in exactly the same way, both when transacting domestically and internationally. In advanced e-invoicing countries such as Norway, it is not just a requirement for public contracting entities to be able to accept and process e-invoices, but public entities’ suppliers are required to send them; there is no option of sending a paper or PDF invoice. While there is no such law in Australia or Singapore, inducements including grants and a guaranteed 5-day payment window to suppliers have been offered in order to encourage faster adoption of Peppol for the e-invoicing process.
What challenges do SMEs continue to face?
While the public sector and big businesses transacting across borders can benefit from e-invoice for export, SMEs often find it harder to make technological changes. Here are just a few of the reasons:
- Heavy administrative burden
- Lack of perceived benefits
- Implementation difficulties due to a lack of funds
- Implementation difficulties due to a lack of specialized knowledge in this area
- Poor user-friendliness of technological systems
Public bodies are recognizing this difficulty, which is why the European Commission is turning their attention to them, making recommendations into how SMEs can be better served when making the switch, and better articulating what benefits SMEs’ adoption of digital systems can bring. These benefits include a broader customer base and greater competitiveness when bidding for public procurement contracts.
It is in everyone’s interest for SMEs to become e-invoicing compliant, as SME participation in public procurement can also make a significant contribution to economic recovery.
The Australian 5-day payment guarantee was done with SMEs in mind; by quickly paying suppliers for orders up to AU$1 million — businesses with smaller financial reserves would have a greater cash flow to run and expand their operations.
Peppol e-invoicing: interoperability for business
We’ve heard a lot about interoperability, but how exactly does Peppol achieve this? While we will only broadly outline the technical details in this blog post, you can read our Peppol Crash Course (PDF) for more in-depth information.
In short, Peppol offers interoperability on both the transport of messages between Access Points (described below) and at the business document level:
- Network architecture is standardized through technical policies and specifications.
- Business Interoperability Specifications (BIS) form the basis for standardized documents. BIS for Peppol 3.0 is currently used, based on the UBL (Universal Business Language) XML.
Peppol Access Points
Access Points are the communication nodes in the Peppol network, built on the four-corner model, which unites different service providers. This means that no matter which Access Point you are operating with, you can exchange business documents with any other registered participant on the network around the world.
Combining architecture, business operability specifications, and ease of access to others through the global Peppol directory, interoperability for B2G and B2B e-invoicing is more seamless than ever before!
Peppol going global
As the OpenPeppol website puts it, Peppol fosters a single digital market, and its efficacy only grows with the number of participants. We have focused on the European Union, England, Singapore, New Zealand, and Australia, as this is where the Peppol Authorities are located and uptake is most widespread; however, as stated before, there are Access Points and growing Peppol use in the private sector throughout North America, and industry talk abounds concerning Peppol adoption by the Japanese government.
Within this context, it is the perfect time for businesses in the private sector to get a competitive advantage by adopting Peppol for their operations, or for service providers and ERP vendors to incorporate Peppol into their software, expanding their offering to existing and prospective clients.
If you’re a large private enterprise with your own ERP system, a service provider, or an ERP vendor, you will need to connect to Peppol through your own Access Point. To find out more, you can watch our explainer video to see how an Access Point can be obtained through a fast-tracked accreditation process. If you’re a small- or medium-sized business, your own Peppol Access Point is most likely not needed. You can simply go through your accounting software. We work with both SAP and Xero, making the sending and receiving of e-invoices on the Peppol network through the comfort of your own accounting software easy.
Galaxy Gateway is the largest Peppol infrastructure provider in the world, with a depth of experience and levels of service that is unmatched by our competitors. To get a demonstration or ask about our shared-instance or white-labeled Access Point options, book a call with one of our specialists today.