09. Jul 2019 | Uncategorized

Electronic Invoicing: Everything you Need to Know

Just because digital data isn’t written in ink doesn’t make it exempt from legal standards. Although electronic invoicing is more convenient than its paper alternative, the downside is that their virtual nature makes them more vulnerable to modification. Once you’re registered for VAT, you’ll need to make sure your electronic invoices meet the same standards that your physical invoices do, as well as making sure the information contained in them is secure. There are certain guidelines you must follow for issuing invoices electronically. will tell you everything you need to know about issuing electronic invoicing. but here’s a quick breakdown:

electronic invoicing
Dont worry about electronic invoicing – Here is a quick breakdown of VAT Notice 700/63 that will tell you everything you need to know about it. (© pixabay.com)

Advantages of Electronic Invoicing

Even with the slight additional consideration for information security, electronic invoicing has a lot of advantages over its paper predecessors.

  • Firstly, your email inbox acts as a backup data – so if you are having trouble finding an invoice in your own files, you can check back through your email for the missing invoice. It’s a good idea to archive emails, particularly invoicing emails, for this reason.
  • You’ll spend less money on paper – digital invoicing means lower overhead. Although you may not notice the cost of printing if you run a sole proprietorship, paper and toner does add up over time. There are additional hidden costs as well – it takes more time to find a paper invoice, for example, than it does to find a digital one, and modifying them can be a headache if you have to print them out.
  • Additionally (and perhaps most importantly), new standards of document security have made it easier than ever to create and send invoices that can’t be modified by others. Your email to your client is part of a (digital) paper trail that you can use if your business gets audited, or if you encounter any legal issues later.

Electronic Invoices need to meet the same standards of paper invoices

There are a set of rules managing what must be on VAT invoices, and electronic invoices are no exception. You must include the following:

• A unique invoice number that identifies the invoice
• The date the goods or services were supplied
• The date you sent the invoice
• Your VAT registration number
• Your name and address
• Your client’s name and address
• A description of goods and services including a code and unit price for each
• A subtotal
• The rate of VAT charged
• Any discounts applied to the invoice
• An invoice total

Most of these are standard elements of an invoice – however it’s important to note that just because an invoice is electronic doesn’t make it less formal than a paper one. Electronic documents still need all these elements as required by law. Your credit note needs all these details as well, plus a means of identifying the original invoice it refers to. Fortunately, you can use accounting software like Billomat to help you remember to include all the details you need on digital invoices.

You must choose between paper and electronic invoicing

While there are a lot of advantages to electronic invoicing, there may be some reasons you are hesitant to adopt the practice, including having clients who expect paper, or using paper filing systems in your own business. It’s acceptable to try out both simultaneously for a controlled trial, but once the trial is over, you must decide on one system or the other. It’s advisable to go with electronic invoicing if at all possible, since it’s the direction most businesses are headed in. Even if you’re not used to the practice, it’s better to jump in sooner than later.

You must make sure the origin and integrity of your digital data remains intact

The data in your invoice needs to be secure – you can do that in a variety of ways, from an electronic signature to ensuring there’s an audit trail connecting other information to the invoice. An easy way to do this is to use accounting software like Billomat to input raw accounting data pertaining to the invoice – that way, the additional information will verify the data on the invoice. In order to do this, you’ll need to have certain controls in place. For example, a control locking the details of an order once an invoice has been issued would ensure that the details couldn’t be altered after the fact, and would help vouch for the integrity of your data.

Electronic Invoicing Formats

There are many invoice formats you can use when doing electronic VAT invoicing, including XML-based standards, UN/EDIFACT, and PDF. When deciding on an electronic format, you may want to check with your client what format works best for them – although when in doubt, PDF formats are the most common and universal format you can use.

Data Storage

Electronic invoicing usually also means electronic data storage – and it’s up to you to ensure that your data is stored securely in the event of an audit. You’ll have to save your digital files securely for 6 years after you send them. While some people may see this as a reason to keep paper copies around, it’s not necessary – digital formats change, but six years isn’t usually enough time to make your files obselete. If you’re a sole proprietor with one computer and you’re running out of storage, getting an external hard drive for your business files can be an affordable alternative to a filing cabinet.

Although it may seem like a lot of extra considerations, most reasonable business practices are enough to ensure your data security. However, using accounting software and backing up your data is a good idea if you have any lingering concerns about going digital.

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