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What is an Electronic Invoice, What is it for and What are its Benefits?

The digital transformation of the economy has led to a digitalization of all business processes. Among them is invoicing, where the electronic invoice is replacing the paper invoice with increasing frequency. That is why it is convenient that you know their advantages, how to send them and what elements they should contain.

What is the electronic invoice and what is it for?

The electronic invoice is a conventional invoice that is issued in electronic format. This format already complies with the Billing Regulations, so, as we said, it has the same validity as paper invoices from a legal point of view .

The management of business systems , increasingly digitalized thanks to ERPs , has significantly promoted the use of electronic invoices . In reality, even the most basic accounting and billing systems have done this.

Its function is to guarantee that the natural or legal person who signs the invoice is who they say they are ( authenticity ) and that the content of the invoice has not been altered ( integrity ).

In commercial relationships, the acceptance of this type of invoices by suppliers or clients may be express or tacit, as established by the European Commission. However, generally, this acceptance must constitute informed consent on the part of the interlocutor, in which the channel used to issue and receive electronic invoices is notified.

Types of electronic invoices

There are two types of recognized electronic invoices: structured and unstructured .

Structured electronic invoices

As their name indicates, they are those that are issued in a structured format, such as XML or EDIFACT . These types of invoices are issued when the software of the sender and receiver have some type of electronic communication that allows automating the flow of invoices in and out.

This is the case of public administrations or large clients that have computer infrastructure adapted to receive electronic invoices automatically.

Unstructured electronic invoices

Unstructured invoices are those that do not have a specific format, and that require some type of human intervention to be recorded in the companies’ billing applications .

This is the case of electronic invoices that are sent and received in PDF format, through an image or in Doc format.

Advantages of electronic invoice

The electronic invoice has a series of advantages over its paper counterpart. Among them are the following:

  • Cost savings.
  • Improved efficiency.
  • Integration with the company’s business management applications , such as an ERP or accounting and billing software .
  • Optimization of the treasury , since being integrated with these applications, it can be determined at any time when the invoice is due and, if necessary, send the appropriate correspondence to clients and suppliers.
  • Accounting automation.
  • Reduction of management times.
  • Elimination of human errors.
  • Greater efficiency and optimization.
  • It adapts to new technologies , with what this implies, especially at a legal level. Currently, a good part of the relationship with public administrations requires the use of electronic invoices and, in the future, this will be mandatory in all relationships with the public sector.
  • It allows you to manage non-face-to-face activities in a simple way . This is especially relevant in a context like the current one, in which many activities are carried out remotely. Without electronic invoices, it would be necessary to issue invoices by regular mail, which would be time consuming.

How to send an electronic invoice

For an electronic invoice to have the same legal validity as a conventional one, it must meet a series of requirements :

  • The issuer must transmit it from one electronic device to another (generally from one computer to another), collecting the consent of both parties with this standard.
  • You must use one of the following universally recognized and accepted formats: XML, PDF, HTML, DOC, XLS, JPEG, GIF or TXT. Normally, in commercial relations between freelancers and companies, the PDF format is usually used, and XML is reserved for relations with public administrations and large companies.
  • The invoice must be posted within business management systems.
  • The invoice data must be able to be kept not in the PDF , but in the database that generated it.

Main elements of the electronic invoice

The electronic invoice has the same elements as the paper invoice. Specifically, for it to be valid from a legal point of view, it must contain at least the following information:

  • Invoice number. Their numbering must be consecutive based on their date.
  • Date of issue.
  • Information about the issuer, including the name, the NIF if it is a self-employed person or the CIF if it is a company, and the complete address.
  • Receiver data, with personal data.
  • Description of each marketed product or service provided , as well as the number of units per concept and the amount.
  • Total description of the amount, mentioning the tax base, the tax rate applied and the total amount to be paid. In the event that there is a withholding on the invoice for personal income tax, it must be reported by subtracting the percentage thereof.
  • Due date.

Conclusion

Companies and self-employed workers tend to use electronic invoices in their business relationships more and more. The economic benefits that automating the electronic invoicing process can bring to your company are many compared to the costs of using paper invoices. Furthermore, the use of these invoices contributes to improving our relationship with the environment.

Also Read: Computer Programmer, Web Developer: How To Invoice?

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