What is an electronic invoice?
Following the 2020 finance law, the word is on everyone's lips. Electronic invoicing will become mandatory in France for B2B exchanges!
However, do you really know what it is? Although the definition of what an electronic invoice is is specified by the General Tax Code, it remains broad. It opens the door to very different types of electronic invoices. From PDF to structured electronic invoices, the way in which they are used and the benefits you can gain from them are just as varied.
So what is an electronic invoice? What are the different types and what can you expect from them? We take stock!
Electronic invoice: definition
Let's go back to the beginning. The electronic invoice (with legal value) has a definition published in the General Tax Code in Article 289.
What does this article tell us? Here is the definition: an invoice is considered electronic by the tax authorities if and only if the invoicing process is dematerialised from start to finish. That is, at no point is the invoice printed.
A paper invoice that is scanned via an ADP/ADR tool is therefore not considered to be electronic: the paper copy retains the legal value in this case.
This definition is still valid as it stands for the time being. Although it is expected to evolve a bit by 2024, including clarifications on invoice formats and mandatory mentions. We will keep you informed 😉
Electronic invoices: ensuring their legal value
As we have already discussed in a previous article, dematerialising the end-to-end process is not enough to guarantee the legal value of your electronic invoices.
Indeed, in order to be able to really get rid of the cumbersome paper invoices, you must be able to meet certain criteria. According to Article 289 of the CGI, you must be able to guarantee :
The authenticity of the issuer of the invoice :
That is, to know the sender and to be able to guarantee that he is who he says he is.
Integrity of the invoice content :
You must be able to guarantee that the invoice (and the data it contains) is unalterable throughout its processing.
The legibility of the invoice :
At all times the invoice must be readable by a human being. This may seem absurd, but we shall see that it is not always so obvious.
Electronic invoices: the different types
As mentioned above, the definition of what an electronic invoice is is ultimately rather vague. In fact, it does not dwell on invoice formats and thus leaves the door open to different practices. Here are the main types of electronic invoices that you may encounter.
The "simple" PDF electronic invoice
No need for a long speech here, I imagine you have already seen what a PDF file looks like. So, provided you can guarantee the 3 criteria above (either through the electronic signature method or the reliable audit trail method), the classic PDF format can constitute an electronic invoice. An invoice created by your supplier in PDF, sent by e-mail (or deposited on a portal) and processed electronically, is perfectly valid for the time being.
However, following the 2020 Finance Act and the expected generalisation of the format by 1 July 2024, this format should disappear. Indeed, in order to improve the transmission of invoicing data and to refine the controls that can be carried out automatically, the State has decided to end the PDF format for the transmission of electronic invoices. Thus, this new law and the operating mode chosen by the State will give pride of place to the structured and mixed formats described below.
The structured electronic invoice
As you can see from the picture, this is a file that is not readable by humans. But the data is organised in a certain way so that it is automatically readable by software. The invoice contains tags, in blue on the picture, which will tell the software "on this line is such and such information".
Thanks to these formats (there are several: UBL, CII...), it is possible to automate the input of information, to make automatic checks on the presence of mandatory data, order numbers and more.
While it is easier for humans to read a PDF invoice, the structured electronic invoice meets efficiency challenges. For example, it will enable software to automatically detect duplicates or missing data and thus avoid processing or input errors.
In addition, some invoice collection solutions are able to translate a structured invoice into a human readable version, thus combining the best of both worlds. This is what Freedz does, for example.
The mixed electronic invoice
As the name suggests, the mixed invoice is a mixture of the two types of formats presented above.
This is an electronic invoice that looks like a PDF and is therefore human readable, but also contains structured data. The best example of this is the Factur-X format. This invoice format, which is currently being developed and is expected to be one of the new standards in 2024, is a Franco-German invoice format standard that combines a PDF file with XML.
Electronic invoicing: what to expect?
I am not going to give you a laundry list of the advantages of electronic invoicing, because there are many. As I mentioned above, the electronic invoice, especially when structured, allows you to automate part of the processing and to carry out a whole battery of checks to avoid errors. No more duplicate invoices, no more missing information, no more addressing errors, no more typing errors...
Ernst & Young, a well-known accounting firm, has estimated the cost of processing an electronic invoice at €5 compared to €15 for its paper cousin. All this while speeding up processing times. This obviously limits the risk of sanctions, solicitations from your suppliers and may allow you to benefit from discounts for early payment... Rather tempting, isn't it?
As we have seen, the definition of what an electronic invoice is is both precise and vague. However, the generalisation of electronic invoicing in 2024 should make all this more detailed. In any case, if you had to choose between the different types of electronic invoices today, the structured or mixed invoice brings more benefits and is a solution for the future.
But to ensure a smooth transition, it is best to choose a solution capable of handling PDF and structured formats. This is what Freedz does, allowing you to anticipate the desired mode of operation for 2024, based on the structured invoice, while being able to receive PDFs while waiting for your suppliers to adapt too.
And when you see the list of possible benefits, it would be a shame to wait until 2024, wouldn't it?
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