National e-invoicing vs. Peppol e-invoicing
The benefits of e-invoicing are only just being realized, resulting in recent strong uptake throughout the world. While this is a step in the right direction, there are often two main issues that arise, depending on what stage of development a country is at. The problem can be either:
- The lack of a national standard, resulting in inconsistency within a country.
- A coherent national standard, but one that is not interoperable between global trading partners.
VAN operators and service providers currently profit from setting up individual closed networks, allowing businesses to exchange electronic documents based on different standards, but this is not particularly cost-effective for SMEs who often exchange relatively few documents. For a larger business with trading partners in different countries and their own ERP system, they either need to have an in-house team that constantly develops and maintains new integrations, or pay the aforementioned service providers to take on the task of facilitating smooth e-invoicing transactions.
This is something the Peppol network is aiming to simplify. Growing out of a pan-European e-procurement initiative, Peppol operates on a connect once, reach all model, with shared document and infrastructure specifications making the global transfer of e-documentation interoperable. An open network, Peppol is being used with great success for B2G and B2B invoicing, moving beyond Europe and into Singapore, Australia, New Zealand, the US, Mexico, South Africa, and more!
Which countries are utilizing e-invoicing?
As we can see in the graphic above, Europe, North and South America, and ASEAN countries are really pushing ahead with e-invoicing, in most cases led by the government agencies who want to:
- Standardize the format of electronic documentation used by the public sector and its suppliers.
- Combat tax evasion.
- Cut costs in manual document processing
- Cut costs from catching invoices that deviate from the contract (often missed by manual document approval/processing)
- Adapt to the accelerated shift to remote working that has been caused by Covid.
A notable exception here is North America. While many private companies are utilizing e-invoicing as part of their business operations, there are no indications that the public sector intends to become a catalyst for expansion or standardization in this area.
As we can see, the implementation and use of e invoicing is being embraced by the public and private sector alike, but its application is inconsistent. In the globalized market that most businesses and governments operate in, there is much room for improvement — which leads us to a discussion about national e-invoicing standards.
Which countries have national e-invoicing standards?
As detailed in our other blog, Scandinavian countries such as Sweden, Norway and Denmark have long worked with e-invoicing, establishing national standards in the early 2000s, and in Norway’s case, mandating that all public sector organizations have the capacity to process e-invoices all the way back in 2012. Due to the need to tackle tax evasion mentioned above, South American countries such Colombia and Chile have also mandated national e-invoicing standards. In Brasil’s case, there are different e-invoicing regulations within the country. For Saudi Arabia, the country began to enforce e-invoicing in December 2020, with some issuing requirements but without a nationwide standard.
What are the limitations of national standards?
As the name suggests, national standards are great for domestic use. For countries that are developing e-invoicing capabilities, it is a great start. However, it quickly becomes apparent that even for countries that have a coordinated national e-invoicing initiative and set of requirements, there are limitations. Interoperability between different countries’ systems is not guaranteed, necessitating the development and maintenance of individual integrations for businesses and government bodies that wish to transact across borders. This is done either by the businesses and government bodies themselves or with the help of Value-Added Networks (VANs) and service providers.
The VANs and service providers often provide interoperable and secure document transfer through two-corner and/or three-corner models.
As we can see from the diagrams in the infographic above:
- The two-corner model establishes a direct connection between buyer and supplier. It is secure and quick to establish, but without scalability. For sensitive information, it can sometimes be the preferred option.
- The three-corner model sees a service provider create tailored connections between multiple buyers and suppliers. Problems arise when a supplier wants to transact with a buyer that uses a different service provider. If the supplier wants to keep their business, they will have to partner with multiple service providers.
E-invoicing in European countries – moving beyond the three-corner model
Within Europe, and especially the European Union, the fluid movement of people and goods has meant that interoperable e-invoicing is extremely important. The two-corner and three-corner models are not fit for such a dynamic trading environment, with suppliers transacting with a variety of public sector organizations and private companies throughout Europe and beyond.
This is where Peppol comes in, as a set of technical specifications that can be integrated into accounting systems and software to allow for B2G and B2B exchanges of electronic documents. Peppol is central to e-invoicing initiatives, but it can be used for many different e-business documents, such as e-Orders, e-Advance Shipping Notes, eCatalogues, and Message Level Responses.
Why Peppol is a more efficient and secure way to conduct e-invoicing
Peppol is now the European Standard for e-invoicing. As the EU commission says:
Public procurement accounts for roughly 18% of the EU’s GDP. To make it effective, the communication flow needs to be quick and cheap; to make it competitive, in the spirit of the Digital Single Market, all companies with the requisites across the Union should be able to tender for a contract.
Peppol provides a more level playing field for suppliers across the EU to win contracts and transact with public sector organizations.
The key to Peppol’s ease-of-use is its four-corner model, which unites different service providers within the network.
As shown, the four-corner model allows Access Points to connect for the secure exchange of documentation through the global Peppol directory. In this open network, it doesn’t matter which Access Point a buyer or supplier uses, they can directly connect to any other transacting partner on Peppol through their respective Access Point.
With document-level specifications, the Peppol standard ensures interoperability at the message level, allowing for the automatic processing of data in the receiver’s accounting system that conforms to the required terminology and entry fields. For this reason, the national e-invoicing formats developed by early e-invoicing adopters such as Sweden (Svefaktura), Denmark (OIOUBL), and Norway (EHF) are either increasingly merging with, or being replaced by Peppol specifications. Throughout Europe, Peppol is the preferred national document format.
Read about Peppol’s components and how it works in more depth on our page: What is Peppol and How Can Your Organization Benefit?
European e-invoicing directive 2014/55/EU
As of April 2020, all EU member states are required to ensure that their public sector organizations are able to receive and process e-invoices according to European Standard EN16931. As the Peppol invoice is compliant with this standard, the use of the network has only increased.
How do businesses benefit from the standardization of e-invoicing?
As already discussed, despite being the most advanced in the region, it is not just Peppol EU; any country in the world can take advantage of the network. In the last couple of years, Peppol has become central to Australia, New Zealand, and Singapore’s e-invoicing strategies, with the establishment of Peppol Authorities in the three countries. As a government-supported measure, they hope to encourage the public and private sectors to benefit from:
- Large reduction in costs – Automated preparation and processing are just two of the factors that result in a saving of ≈ €15 per invoice.
- Faster payments – Invoices are settled quicker — in Australia a 5-day payment deadline has been mandated for public sector purchasers (when the supplier is on the Peppol network) — leading to greater cash flow.
- A focus on higher-order tasks – Skilled workers can now focus on activities that add greater value to their company.
- Better data quality – Peppol documents are only sent if the required fields are filled out correctly. Employees no longer have to chase up missing or incomplete data.
- Reduced risk of fraud – E-invoicing through email is open to interception and hacks. Peppol is a secure network, with participants verified through their Peppol IDs.
- Facilitated global trade – Island countries that aren’t part of a strong trading bloc, like Singapore and the UK, can still transact with global partners relatively easily.
Ready to connect to the Peppol network?
What do you need to do to get started with the Peppol network?
As you can see, except for those small businesses operating through their ERP system, connecting to Peppol requires Access Point accreditation, a lengthy process to prove technical and operational competence that often presents difficulties.
Read about Access Point accreditation in our blog: Peppol Access Points – Setting Up Your Own Versus Working with a Provider
The preferred method is to partner with a Peppol Access Point provider. By working with an Access Point provider, you can take advantage of their shared-instance or white-label options, using their Access Point as if it were your own. By doing this, you avoid the accreditation process almost completely.
Work with Galaxy Gateway
As we’ve seen, Peppol is widely adopted to support e-Invoicing demands. Tickstar, which operates Galaxy Gateway, is the market leader, operating 20% of all active access points in the entire Peppol network, and more than 85% of all businesses registered on the Peppol network in Australia use Tickstar’s Galaxy Gateway Services. We have been dealing exclusively with Peppol since 2012 and are happy to assist your business with our user-friendly and scalable infrastructure. Depending on your business, by partnering with us you can benefit from all or most of the following:
- Simplified accreditation.
- Ongoing compliance with all Peppol Authorities amid fast-changing regulatory conditions.
- Listing on the global Peppol directory.
- Ability to issue Peppol IDs to your clients.
- Your software package being used by clients to access the Peppol network / expanded product offering for potential clients.
- Full development, hosting, and maintenance taken on by Tickstar’s team.
- Round-the-clock support and error handling, with fantastic service levels.
- Affordable packages that include Peppol SMP services and useful add-ons.
To connect to Peppol or learn more about how the network can serve your business, book a call with one of our specialists.