Standardization of e-Invoicing in the U.S. Takes Steps Forward
e-invoicing Trends, Buyer-Supplier Ecosystem, PEPPOL, Business Network, E-invoicing
The United States is moving forward with country-wide e-invoice standardization. In this blog, I’ll share my thoughts on why this news should have a positive influence on the global e-invoicing market.
What’s particularly good about this piece of news is that the U.S. is taking inspiration from the work that has already been done in Europe and elsewhere in the world to improve the interoperability of the e-invoicing market. This development bodes well for eventually removing barriers from global e-invoicing.
Currently, e-invoicing in the U.S. is characterized by multiple technical standards, formats, and networks, three-corner e-invoicing models and point-to-point connections. This means a lot of the e-invoicing happens in closed networks: either through direct connections established between the trading partners or, for example, in industry-specific networks, where a single e-invoicing service provider connects a buyer organization and its suppliers and offers them a tailored service.
The highly fragmented market makes it cumbersome – and costly – for U.S. businesses to benefit fully from electronic invoicing. For example, suppliers are often forced to join multiple networks, as their customers are using different e-invoicing service providers. The lack of interoperability prevents the widespread adoption of e-invoicing.
The benefits of the four-corner model in e-invoicing
The standardization of e-invoicing in the U.S. is part of a Federal Reserve initiative, which aims to improve the overall business-to-business (B2B) payment efficiency in the market. Currently, the working groups, which I also try to contribute to, are performing gap analyses to determine which technical standards and semantic models of the existing e-invoicing world could be utilized in the creation of the U.S. e-Invoice Interoperability Framework.
It seems likely that e-invoicing in the U.S. will be based on an open, any-to-any network model that is similar than the initiatives in Europe (such as EESPA multilateral interoperability or OpenPeppol) and in Australia (Digital Business Council). And why should they reinvent the wheel?
The benefit of this four-corner model is that organizations need only a single, standardized connection to the network to exchange e-invoices, and possibly other electronic business documents such as orders, shipping notifications, and credit notes, with its trading partners. I am a true believer of the open network e-invoicing model, so I am glad to see this development in the market as it is in my mind a move in the right direction.
Effortless interoperability that makes it simple for any type or size businesses to engage in e-invoicing is exactly what is needed for the widespread adoption of e-invoicing. It is especially important when e-invoicing is not driven by binding government mandates, either to improve tax compliance (as in Latin America and now also in Europe, in Italy) or to improve the efficiency of business-to-government transactions (the new European standard on e-invoicing). At the moment it seems that standardization of e-invoicing in the U.S. will be clearly driven by the private sector.
Focus on enhancing global interoperability
Another positive trait in the current development of e-invoicing in the U.S is that the focus is not solely on the domestic market. The need for global interoperability is recognized, and discussions on how to ensure convenient and cost-efficient cross-border invoicing are ongoing. Building the e-invoicing framework based on existing models will help to prevent the creation of new technical barriers.
It is a crucial perspective as global interoperability continues to be the major challenge in e-invoicing. Within a single market, any commonly agreed e-invoicing structure will naturally simplify invoicing and make it straightforward for all organizations to adapt to the electronic processes in their operations. The challenges become obvious when you broaden the perspective and consider a globally operating company that wants to harmonize and standardize their invoicing processes.
As said, the local nuances can create huge complexities and, what’s more, accumulate considerable costs. I’ve heard of corporations that have EUR 7 million annual costs from only meeting the different e-invoicing standards in the different countries in the world they operate in – that is the challenge we meet in diversified markets.
The efficiency of one should not come at the expense of the efficiency of the other. For example, many countries from Europe to Asia and Africa are currently planning to implement real-time tax reporting through e-invoicing. I hope that those countries will also look around and make use of the best practices from the countries where real-time tax reporting has already been implemented. The needs of international corporations wanting to improve process efficiency to ensure competitiveness should not come second to the needs for public sector efficiency. Global interoperability should be an element in all modern e-invoicing initiatives.
Ahti Allikas has been active in the e-invoicing industry since the year 2000. He currently works as Head of Partners and Networks at OpusCapita, and is responsible for the development of the e-invoicing ecosystem. Ahti is a member of the executive committee of the European E-invoicing Service Providers Association (EESPA), member of management committee of the OpenPeppol Association (PEPPOL) and also member of E-Invoicing expert group in the European Multi-Stakeholder Forum on E-Invoicing (EMSFEI).
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