Smooth invoicing is crucial to the cash flow of any business. Yet in some cases, it is also an expensive and time-consuming process. More and more companies are therefore opting for digital invoicing or e-invoicing. But again, what is the difference between the two?
The difference between digital and electronic invoices
Under digital invoices include all forms of invoices that are are not on paper and readable by people. In short, any invoice that you can send, view and process digitally. A electronic invoice is an invoice formatted in a structured data format, is automatically transmitted and then processed electronically in an accounting system.
Structured data vs. unstructured data
An electronic invoice is nothing more than a structured piece of data in EDI, UBL, XML or another format. E-invoices are generated and sent without human intervention. Because the invoice can be sent directly to accounting, the process is fast, inexpensive and has an extremely small error rate.
A PDF invoice is an unstructured data file, fed with data entered into an ERP or through a link to other processes. Based on that data, the ERP package creates the invoice, which is then converted to a PDF and sent to the customer. This process can be fully automated through an ERP integration or API.
Beware: not every digital invoice is the same
Most Belgian companies invoice via digital invoicing. Large and medium-sized companies usually opt for an automated system through a billing service provider. But why do they choose to do so?
An important condition for a legally valid digital invoice is its integrity and that its authenticity must be guaranteed. Unfortunately, an “ordinary” PDF does not provide that guarantee, because you can already modify it with a little bit of dexterity. So many companies are unknowingly out of order with the rules. Moreover, this makes them vulnerable to fraud.
Whether you choose digital billing or e-invoicing: in partnership with an approved billing service provider you can guarantee invoice authenticity and integrity by automatically adding a timestamp and/or a secure link to an online customer portal with each outgoing invoice. Either way, there is 100% legally valid billing.
Two-corner versus four-corner
A digital invoice, which you send manually as an attachment to an e-mail or through your accounting software, is exchanged between two different parties by default. This is called a two corner model. The sender and receiver first make agreements (often tacit) about the format of the invoice and the technical connection.
E-invoicing employs a four corner model. In addition to sender and receiver, the service provider(s) of the sender (the billing service provider) and the receiver are also in the cycle. Think payment providers, dunning services or a collection agency. If the receiver does not engage a service provider, then there is a de facto 3-corner model.
The big advantage of a four corner model? It removes all administrative burdens in the invoicing process from both the sender and the recipient. The sender sends its invoices punctually in any format. The sender’s billing service provider ensures that the invoice automatically reaches the recipient in the desired format.
E-invoicing through the European Peppol network
Electronic invoicing or e-invoicing is done through the PEPPOL network, a European network that allows companies to invoice each other using a standardized protocol. The advantage of this system is its tremendous speed, but also that the output format of the sender can be automatically translated into the form requirements of the recipient.
The 5 pluses of e-invoicing
- Processing of all formats
- Data exchange in real time
- Shorter turnaround time per invoice
- Time savings and fewer errors
- Forward-looking solution
Both options have advantages. A company that sends B2B invoices exclusively may prefer e-invoicing. For a company that bills largely to individuals, fully automated digital invoicing with time stamping is often the right solution. In practice, many companies opt for a hybrid model plus a digital customer portal.
Interested in switching to e-invoicing yourself? Check out our solutions via the button below.
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