E-Invoice Formats Explained: A Comprehensive Guide to All Types (In-Depth Analysis)

Traditional paper-based invoices are being replaced by electronic or e-invoices, which offer numerous benefits such as cost savings, faster processing, and reduced errors.

You may be curious to know how many types of e-invoices there are. Several types are available depending on the country where you do business.

This blog post will explore the different types of e-invoices, their benefits, government regulations, and compliance requirements. It will also highlight the best security and data privacy practices.

Types of e-invoices

Electronic invoices are of different types, each with its specifications. As a result, your customers may request that you send invoices and credit notes in a specific format that their ERP systems can accurately receive and interpret.

Think of it as communicating in a particular language. When sending e-invoices, ensuring they have been generated in a format the recipient’s system can read is essential.

For example, an invoice in PDF format is not typically considered electronic because transferring the information from a PDF to the recipient’s system is often complicated.

In addition, individual companies prefer different invoicing standards, and some standards are generally limited to specific countries or sectors.

Common e-invoicing formats and standards

Generally, e-invoicing formats can be separated into three types:

Structured format

These invoices consist solely of data without a visual representation. They do not provide a graphical layout but focus strictly on the structured data necessary for processing.

While they may not be visually appealing, structured formats like XML are designed to be easily read and processed by automated systems.

Structured e-invoice formats are used in countries like Spain (FacturaE), Italy (FatturaPA), Finland (Finvoice, TEAPPSXML), and the Czech Republic (ISDOC). Invoices follow standardized data fields, enabling automation and compliance.

Unstructured format

Contrasting structured formats, unstructured formats encompass invoices that retain their visual appearance, such as PDFs or Word documents, but lack an embedded file connection or structured data.

Unstructured invoices are more akin to their traditional paper counterparts and are primarily used for record-keeping purposes.

However, processing such invoices may require manual data extraction and entry into the recipient's system.

Unstructured e-invoice formats are flexible and often appear as PDFs. They are widely used in countries where invoices don't need to follow strict data structures, making them human-readable but less suited for automation.

Hybrid format

The hybrid format combines the advantages of both structured and unstructured formats. It includes a visual representation of the invoice alongside an embedded file, facilitating processing capabilities.

The hybrid format is typically recommended for those using software-based invoicing systems. Unstructured invoices, like digital ones, may still be acceptable but are often limited to record-keeping purposes rather than seamless payment processing.

It's important to note that different countries may have specific standards or format requirements for e-invoicing compliance. Some nations mandate using XML-based formats, while others accept PDF invoices.

Staying updated on the regulatory landscape in your operating jurisdiction is crucial to ensure compliance with the applicable standards.

Hybrid e-invoice formats combine both structured and unstructured elements. Examples include Germany's ZUGFeRD, France's Factur-X, and Peppol BIS Billing 3.0, which provide machine-readable data alongside human-readable PDFs for versatility.

How have e-invoicing models evolved over the years?

The history of electronic invoicing dates back to the 1960s, when the first EDI message of a shipping manifest was sent by the Holland-America line using Telex. Since then, various breakthroughs have occurred, including the File Transfer Protocol (FTP) in the 1970s.

Let us look at the major dates and milestones in the development of electronic invoicing:

1990s: Large companies increased their adoption of EDI systems in the '90s, which enabled one-way or two-way communication between organizations.
2000s: Many governments began implementing electronic invoicing through various legislative initiatives. One significant step toward e-invoicing evolution was Directive 2001/115/EC, which improved VAT obligations and electronic formats.

From 2005 onward, various countries, such as Brazil and Mexico, implemented e-invoicing mandates that required businesses to adapt e-invoicing formats for tax compliance.

2010s: Electronic invoicing became more prevalent as platforms and solutions became more user-friendly. They also became easier to integrate with new or existing financial software to provide a more streamlined solution for all businesses.

The European Union took another significant step with Directive 2014/55/EU to facilitate the adoption of electronic invoicing in Europe.

2020s: As technology advanced, e-invoicing experienced a significant surge, especially during the global pandemic. This led to automated and cloud e-invoicing solutions that enabled real-time e-invoicing and enhanced collaboration.

Due to the evolution and wide adoption of electronic invoicing, many electronic invoicing models are available, with countries adopting those that work well with their tax authorities. Here are the most popularly used e-invoicing models today:

Post-audit method

The post-audit method is becoming less popular as governments mandate electronic invoicing. In this model, invoices are sent directly to the buyers without requiring approval or validation from the tax authorities.

The tax authorities do not get involved during the transaction but later review the transactions during audits.

CTC (Continous Transaction Control) method

This is one of the most effective methods of ensuring operational experience and e-invoicing compliance. This model requires business owners to send their invoices to the tax authorities for real-time validation before issuing them to the buyer.

The CTC model enhances the accuracy and transparency of business financial records while minimizing the risk of regulatory fines and penalties. The following are the electronic invoicing models within the CTC model:

Clearance CTC model
Interoperability model and PEPPOL CTC
Centralized model
Decentralized model
Real-time reporting model

Overview of B2B, B2C, and B2G e-invoicing

Business transactions are generally categorized into three, making it easier to implement electronic invoicing mandates. These include:

Business-to-business (B2B)

B2B involves the exchange of documents in electronic format between businesses. It allows companies to streamline operations, solidify business relationships, and enhance cash flow management.

Business-to-government (B2G)

Here, businesses submit electronic invoices for transactions with public institutions and bodies. The government's participation in electronic invoicing enhances transparency, encouraging business owners in the country to adopt it.

Business-to-consumer (B2C)

B2C invoicing focuses on generating electronic bills for direct customers. It is usually integrated with existing payment systems and aims to make payment processes more convenient and user-friendly. Users can also integrate it with online banking solutions to streamline the process.

What are the legit format types of an electronic invoice?

There are several legitimate format types for electronic invoices, and the specific formats accepted may vary depending on the country, industry, and requirements of the receiving party.

The following are examples of different legitimate format types of electronic invoices you may encounter.

FacturaE (Spain)
FatturaPA (Italy)
Finvoice 3.0 and TEAPPSXML 3.0. (Finland)
ISDOC (Czech Republic)
NemHandel/OIOUBL (Denmark)
PEPPOL (EU, Australia, New Zealand, Singapore, Canada, USA)
Svefaktura (Sweden)
UN/EDIFACT, EANCOM and ODETTE, XML and even ASCII or PDF (UK)
XML-based UBL or X12 ED (US)
UBL-OHNL (The Netherlands)
E-Invoice (Estonia)
EDIFACT or UN/EDIFACT (United Nations/Electronic Data Interchange for Administration, Commerce, and Transport)
EHF (Elektronisk Handelsformat) (Norway)
ZUGFeRD, XRechnung (Germany)

The PEPPOL format has gained significant popularity among this list in the European Union and other regions worldwide. Despite being a relatively new standard, PEPPOL is already widely adopted by businesses.

Is electronic invoicing mandatory?

Governments worldwide are working to adopt electronic invoicing, one of the most effective ways of curbing tax fraud while enhancing business operations. This leads to introducing and implementing e-invoicing mandates that impact businesses of all sizes.

Electronic invoicing may or may not be mandatory for you, depending on your country’s progress in electronic invoicing. In some countries, such as Malaysia, all business owners must adhere to e-invoicing regulations, while it's optional in other countries.

To learn more about electronic invoicing in your country, contact Storecove.

Government regulations and compliance requirements for e-invoicing

Government regulations and compliance requirements for e-invoicing vary across different countries and jurisdictions. These help ensure electronic invoices' transparency, accuracy, and legal validity.

Understanding and adhering to these regulations is essential for businesses to avoid penalties and maintain compliance. Here are some key aspects to consider:

Legal framework

Familiarize yourself with the legal framework governing e-invoicing in your country. Different countries may have specific laws, regulations, or standards defining electronic invoicing requirements.

For example, in the European Union, Directive 2014/55/EU establishes a common framework for e-invoicing in public procurement.

Electronic signature and authentication

Many countries require electronic invoices to be accompanied by an electronic signature to ensure their authenticity and integrity. The electronic signature serves as proof of the invoice's origin and integrity.

Understanding the specific requirements for electronic signatures in your jurisdiction and ensuring compliance with applicable standards is essential.

Data retention and archiving

Government regulations often outline requirements for the retention and archiving of electronic invoices, including their storage duration, format, and accessibility.

Ensure that your e-invoicing system complies with these requirements and allows for secure and organized storage of electronic invoices for the mandated period.

Tax compliance

Tax-related regulations are a critical aspect of e-invoicing compliance.

Some countries may require specific formats or data elements to be included in the invoice for tax compliance purposes.

Ensure that your electronic invoices include all necessary tax-related information, such as VAT or GST numbers, tax rates, and other applicable tax details.

Invoice format and content

Government regulations may specify the required format and content of electronic invoices.

This includes invoice numbers, dates, supplier and customer details, itemized descriptions, and monetary amounts.

Adhere to these requirements to ensure the invoices are legally valid and compliant.

Data privacy and security

Ensure that your e-invoicing practices align with data privacy regulations, such as the General Data Protection Regulation (GDPR) in the European Union.

Implement appropriate data protection measures, including encryption, access controls, and data handling practices, to safeguard sensitive invoice data.

Compliance reporting

Some jurisdictions may require businesses to report or submit periodic compliance reports related to e-invoicing. Stay informed about any reporting obligations and ensure timely and accurate submission of required information.

It is crucial to consult with legal experts or specialized consultants in your country to fully understand the specific government regulations and compliance requirements for e-invoicing.

How e-invoicing works

Generating invoices in a structured electronic format allows businesses to streamline financial operations by enabling strategic management of their accounts payable (AP) and accounts receivable (AR).

There is no standard universal e-invoicing model that all businesses can use. Different countries have adopted distinct approaches by customizing their electronic invoicing systems to meet their economic, regulatory, and technological requirements.

What is not considered an electronic invoice?

There are many forms of electronic invoicing, but not all documents are exchanged in a structured format using a secure channel. The format and channel help ensure no delivery delays or failures, prevent interception, and enable automation and seamless integration.

Some of the invoicing methods that do not meet the requirements of an electronic invoice are:

PDF invoices

PDF invoices issued through email may be a step toward digitizing invoicing processes but are not considered electronic invoices. Users have to enter the data manually or use OCR (Optical Character Recognition) technology to extract invoice data, which may increase the risk of error and inconsistencies.

Structured invoices issued via email

Emails are prone to unauthorized access, and invoices issued using this format face a significant security risk. Even when generated in a structured format, invoices sent via email are unsecure and lack delivery and traceability assurance.

What is the difference between e-invoices and traditional invoices?

The main difference between a paper invoice and an e-invoice is the state of both documents during their life cycles. Electronic invoices are digital, starting from their generation, issuance, processing, and storage.

ERP systems generate them in a specific data format that is machine-readable. Traditional invoices mainly refer to scanned paper invoices and other documents used for decades before digitization began.

How to create an e-invoice

Creating an e-invoice can be straightforward when using the right tools or software. It would be helpful to use an IT solution that can “translate” the invoice you have made in your ERP system into an invoice your customer’s ERP system can receive and read.

That said, the following are the general steps for creating an e-invoice:

Notify customers

Before initiating the process of sending e-invoices to customers, ensure they are willing and capable of receiving electronic invoices.

In certain countries, obtaining written consent from customers may be necessary. Additionally, verify that you have the correct email address if you plan to email the invoices.

Set up e-invoicing

Utilize advanced accounting software to establish automated invoicing systems and customize invoice templates for each customer's requirements.

Ensure that your e-invoice format incorporates all essential information, including transaction details, supplier and customer identification, accepted payment methods, and any applicable taxes or discounts.

Generate the invoice

Ideally, your accounting software will generate e-invoices automatically based on sales orders. This includes relevant taxes and customer-specific discounts, simplifying the process and reducing the likelihood of errors.

How to send an e-invoice

Here are the steps involved in issuing an invoice to your buyer successfully:

Invoice validation

Use a secure integrated solution to send the invoice to the recipient. If your government requires you to issue them with the document for validation, use the appropriate means since most models in use today verify documents in real-time.

The invoice may have to be checked and validated to ensure it meets the regulatory standards. If it doesn’t, it will be rejected, which may prevent the transaction.

Issuance to recipient

Once verified, send the invoice to the customer in their preferred format to facilitate quick and efficient transactions.

How to receive an e-invoice

Invoice recipients have to meet various requirements, including regulatory and system requirements, to receive, process, and store electronic invoices. Here are the steps for receiving invoices:

Invoice receipt

This process begins when the seller issues an invoice directly integrated into your financial system.

Data processing and validation

Your system should be able to receive and process the invoice data and prepare it for review and validation. Using a common structured format makes integration seamless and enhances data accuracy.

Your ERP or accounting and invoicing system automatically reviews the document to ensure compliance with set regulations. Business owners can also use third-party electronic invoicing service providers to help convert documents into formats readable by their systems.

Preparing for payment

After validating the document, your system processes the invoice data, including updating the accounts payable (AP) and preparing the invoice for payment to complete the transaction cycle.

Benefits of e-invoices

The adoption of e-invoices brings numerous benefits to businesses. Many of these benefits stem from e-invoicing, which allows for greater automation of accounting and payment processes for suppliers and customers.

Some key advantages include:

Increased productivity

E-invoicing significantly minimizes suppliers' manual workload. With ERP systems' automation capabilities, employees no longer need to dedicate time to manual data entry. Instead, e-invoices are automatically generated and dispatched when sales transactions are recorded, or products are shipped to customers.

This automation liberates employees to focus their valuable time and energy on more strategic and high-level tasks, fostering productivity and efficiency within the organization.

Automated matching and validation

E-invoicing simplifies the automated matching process for customers, enabling the seamless reconciliation of invoices with purchasing and shipping documents.

This ensures that the invoiced amount accurately corresponds to the items ordered and received by the customer. As a result, significant effort is saved by eliminating the need for manual verification and cross-referencing.

Moreover, suppliers can efficiently reconcile the payments they receive with the original sales transactions.

Security of communication

The potential to manage document delivery via private networks such as a VAN (Value-Added Network) or specific point-to-point protocols such as AS2 ensures secure and confidential delivery.

Reduced cost

Eliminating paper invoices and manual invoice processing procedures translates into lower costs for trading partners as you save money on paper, envelopes, printing, postage, etc.

Improved document integrity

Electronic signature processes enhance the assurances of both senders and receivers concerning the integrity of content and the authenticity of its origin.

By incorporating electronic signatures, the integrity and unaltered nature of the invoice content are safeguarded, ensuring that the information remains unchanged during transmission.

This also helps curb business transaction process fraud between B2Bs and B2Gs.

Improved cash flow

E-invoicing can significantly shorten payment cycles, allowing suppliers to improve their cash flow. Automation helps suppliers send invoices on time, which means customers can pay faster because they can quickly validate the invoices they receive.

Traceability

E-invoicing tracks transaction history and the entire document journey automatically, so you don't have to spend time doing it manually.

Enables supplier discounts

Many suppliers offer discounts for prompt payment — and impose penalties for late payments. Customers can benefit from e-invoicing by paying more quickly and taking advantage of supplier early-payment incentives.

Fewer errors

Transaction data is automatically copied to e-invoices, removing the possibility of data-entry errors. This also lessens the likelihood of time-consuming and aggravating payment disputes.

Environmentally friendly

E-invoicing reduces paper consumption, CO2 emissions, and operating costs, leads to increased profitability, and establishes a transparent, trustworthy brand reputation.

If e-invoicing is now required in the countries where you do business, and you are yet to begin the process for this new regulation, partnering with a service provider like Storecove would be helpful for companies and suppliers looking for more interoperability and connectivity.

Storecove is a certified electronic-invoicing solution provider, meaning B2Bs and B2Gs can use our platform to send and receive electronic invoices.

Best practices for security and data privacy in e-invoicing

The utilization of an electronic invoicing presentation and payment platform enhances the security of invoice delivery. Unlike sending invoices directly through unsecured emails, this method employs a different approach.

Instead, an email notification is sent, prompting users to access the platform to view the invoice data securely.

This approach helps mitigate potential risks associated with email invoicing, such as:

Receipt by an incorrect person or email bounce-back due to human error.
Risk of interception or payment redirection by unauthorized individuals.
Vulnerability to spear phishing attacks that exploit false payment requests.

By leveraging an electronic invoicing platform, best practices for security and data privacy in e-invoicing, such as additional security features, including two-factor authentication and rule-based access controls, can be implemented.

These measures ensure that only authorized users can view and manage invoice information, thereby fortifying the overall security posture of the invoicing process.

You may also like: 5 Advantages of Using an E-invoicing Portal in 2023.

Takeaway: Learn about the diverse types of e-invoices for effective usage

E-invoicing offers businesses significant advantages over traditional paper-based invoices.

Understanding the different types of e-invoice documents (structured formats like XML, unstructured formats such as PDFs or Word, and hybrid formats), complying with government regulations, and following the best security and data privacy practices are essential for a smooth and efficient invoicing process.

No matter where you run your business, you must be prepared for this change. It is crucial to acquaint yourself with the e-invoice regulations and be updated on any changes to the rules in the country where you do business to ensure compliance.

By embracing e-invoicing, businesses can streamline operations, reduce costs, and improve productivity.

To experience the benefits of e-invoicing firsthand, you can work with a service provider like Storecove.

We offer a comprehensive e-invoicing solution to ensure businesses like yours use the proper sending and receiving infrastructure. Contact us for more information.

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