Because of the numerous benefits of electronic invoices, many countries are enacting regulations that mandate their use. The US was one of the last countries to embrace electronic invoicing, so only federal agencies are currently required to use e-invoices.
However, though electronic invoicing is not yet mandatory for B2B transactions in the US, more and more businesses are embracing it and choosing to send and receive invoices electronically instead of using traditional paper-based invoices.
Why has electronic invoicing moved from being considered a nicety to a must-have for US businesses? This article will discuss this!
The top reasons e-invoicing is a must for US businesses are:
1. Improves compliance with US regulations
One of the most important reasons to adopt e-invoicing is for compliance with current and upcoming e-invoicing mandates in the US.
The 2015 e-invoicing mandate issued by the United States Office of Management and Budget (OMB) made e-invoicing compulsory for business-to-government (B2G) transactions from the end of 2018.
While e-invoicing is not yet compulsory for business-to-business transactions, this will likely change soon. The US (through the Business Payments Coalition) tested the viability of a B2B e-invoicing system in 2022. And the results were positive. So, regulations requiring businesses to exchange e-invoices with one another are expected.
Embracing e-invoicing now will help you prepare for upcoming B2B e-invoicing mandates, ensuring you will be compliant when the time comes. Moreover, knowing the benefits of e-invoicing, many US businesses already require their contractors and suppliers to use e-invoices. Thus, waiting to adopt e-invoices can make you miss out on business opportunities.
Also read: What is E-invoicing Compliance? A Detailed Guide.
2. Helps avoid penalties
Embracing e-invoicing helps US businesses avoid potential fines and legal risks that come with non-compliance with relevant e-invoicing mandates.
For example, businesses that incorrectly report total amounts on their tax returns due to invoicing errors can face accuracy-related penalties, which are 20% of underpayments. But with e-invoicing, you can easily generate accurate invoices for tax reporting, minimizing the chances of discrepancies that can trigger penalties.
The US has a complex system with a host of state-level electronic payment requirements. Embracing e-invoices helps you comply with these requirements and avoid associated penalties for non-compliance. For example, failure to comply with New York’s e-file requirements for tax documents can result in fines of up to $100 per violation, with a maximum of $500,000.
E-invoicing can also help you comply with industry-specific invoicing regulations and avoid associated non-compliance penalties. For example, improper handling of electronic health records (including invoices containing protected health information) can result in penalties under the Health Insurance Portability and Accountability Act (HIPAA). This can range from $100 to $50,000 per violation.
3. Saves time
One of the biggest reasons to adopt electronic invoicing is that it offers a faster and more efficient invoicing process. Conventional paper invoice processing involves a lot of manual tasks. For example, you have to type the invoice, print it, and take it to a postal service to mail it to the customer. Then, it’ll take a day or more to get to the customer. Needless to say, these manual steps consume valuable time.
E-invoicing streamlines these processes, reducing the time spent on paperwork and administrative tasks. With just a few clicks, you can send your electronic invoice via email, and your customer will receive it immediately.
When your business is the customer receiving the e-invoice, you can process payment earlier and take advantage of early payment discounts.
4. Reduces errors in invoices
Electronic invoicing reduces the need for manual processes. And this eliminates the risk of human errors that often plague manual processes. Thus, e-invoicing helps ensure invoices are accurate before they are sent or processed.
Manual invoicing processes are prone to errors. Common errors include data entry mistakes, such as typos when typing or incorrectly entering invoice information. Another common mistake is miscalculations, which lead to incorrect invoice amounts. Whatever its nature, errors can lead to disputes, delayed payments, and potential penalties.
Electronic invoicing mitigates these human errors by reducing manual processes. For example, these systems use data extraction technologies to automatically capture and enter invoice details, minimizing data entry and associated risks.
E-invoicing systems perform automatic calculations for invoice totals, taxes, and discounts, reducing the errors of manual calculations. The system also comes with built-in validation rules that check for discrepancies and inconsistencies in invoice data before processing.
5. Lowers invoicing cost
Electronic invoicing eliminates various costs associated with traditional paper-based invoices.
Unlike paper invoices, e-invoices do not require physical paper, printing, or postage. Therefore, embracing e-invoicing leads to savings on paper, printing supplies, printer maintenance, and postal fees. Also, e-invoices do not require physical storage space, saving you the costs of providing filing cabinets, document management systems, and storage rooms.
Research shows that e-invoicing can save a business about 60 - 80 percent of traditional invoicing costs. Over time, these cost savings can become substantial and boost a business's bottom line.
6. Leads to faster payment cycles
By expediting the invoicing process and reducing errors, electronic invoices help you get paid faster. Remember that electronic invoices are delivered instantly. In addition to faster delivery, some e-invoicing systems have features like automated reminders and approval workflows. With these, your invoices can be processed earlier, leading to faster payments.
Also, eliminating errors in the invoicing process leads to faster payment. Errors in invoices lead to disputes or customer clarification requests, making payment processing take longer. Since e-invoicing reduces errors, there will be fewer disputes or requests for clarification, leading to quicker payment processing.
Not only does e-invoicing help you get paid quicker, but it gives you a more predictable cash flow. You can predict how soon you will be paid when you send an invoice to a customer to request payment. And knowing this helps you manage your financial planning and liquidity better.
7. Integrates with ERP systems
Unlike traditional paper-based invoices, electronic invoicing systems integrate with existing ERP (Enterprise Resource Planning) and financial systems. This integration further enhances data accuracy and operational efficiency by enabling the automatic transfer of data between systems.
For example, when an e-invoicing system is integrated with ERP and financial systems, invoice details are automatically transferred and recorded, eliminating the need for manual data entry and reconciliation.
Also, changes or updates in invoicing data are immediately reflected in the ERP and financial systems, ensuring that financial records are always up-to-date. This also means that the integration with ERP systems streamlines workflows because once an invoice is processed in the e-invoicing system, it automatically triggers related processes in the ERP, such as updating accounts payables.
So, adopting e-invoicing solutions and leveraging these integrations can help US businesses create efficient workflows that support their overall business operations.
Also read: The Role of ERP Integration Services in Achieving E-Invoicing Compliance in the US.
8. Improves record-keeping and data management
E-invoicing simplifies record-keeping and management as it stores all your invoices in a digital format. Effective record-keeping (including invoice records) is essential for managing business finances and preparing for the tax season.
More so, keeping invoice records is not a choice but a must because the US has a 7-year invoice archiving requirement. This means when you issue an electronic invoice, you must keep the invoice and every supporting document for at least seven years.
Unfortunately, traditional paper-based invoicing can make organizing and accessing records challenging. First, they require physical storage space, so you need to invest in dedicated filing cabinets, shelves, or rooms.
Even with these, storing paper records can become cumbersome as the number of invoices grows. Physical documents are also susceptible to damage from fire, water, or general wear. Retrieval of an invoice can also be slow and cumbersome, especially if the invoices are not organized properly.
E-invoicing simplifies the record-keeping and data management process. Because invoices are stored in digital form, there is no need for physical storage spaces.
The data can be backed up and stored in the cloud, ensuring that records are preserved even in the event of a disaster. Retrieving a particular invoice is also easy. You can instantly call up any invoice by searching for particular keywords and facilitating audits and financial reviews.
9. Enhances security
Unlike paper invoices, e-invoices are not vulnerable to loss, theft, or tampering, offering better security and fraud prevention. E-invoicing systems also offer advanced security features that protect digital records.
For example, they use encryption protocols to protect invoice data as invoices are transmitted over the Internet. So, even if the invoice is intercepted, it cannot be read, and its data cannot be misused. Some e-invoicing systems even offer role-based access controls, restricting who can view invoices and minimizing the risk of unauthorized access.
Some e-invoicing systems also offer features like digital signatures and checksums that prevent tampering. These features make it easy to detect whether an invoice was altered after issuance, providing assurance that it is genuine and unmodified.
10. Has a lesser environmental impact
Adopting e-invoicing reduces paper use, thereby reducing the environmental impact associated with paper production. It also reduces office waste that gets to landfills.
Thus, adopting e-invoicing can enhance your company’s reputation as an environmentally conscious organization. This can help you qualify for local and state-level green business grants and tax credits that provide financial incentives for businesses that implement environmentally friendly practices.
11. Improves client relationships
Electronic invoicing provides quick, accurate, and more organized invoicing processes. This reflects well on your overall professionalism and increases client satisfaction.
E-invoicing platforms use standardized formats that ensure consistency in the presentation of invoice information. This results in clear and well-organized invoices that help clients easily understand the charges, leading to less confusion and the need for follow-up inquiries.
Another way invoicing improves client relationships is by improving invoice accuracy. By reducing manual processes and making invoices more accurate, e-invoicing helps prevent disputes that could strain business relationships.
Yet another way e-invoicing improves client relationships is by speeding up the entire billing cycle and offering better reporting. Clients benefit from receiving invoices promptly and having enough time to review and pay them. E-invoicing systems provide clients with a portal where they can check their invoices and payment history. This allows them to manage their accounts more easily, improving client satisfaction.
Takeaway: Adopting e-invoicing for your US business
While the US does not currently mandate e-invoicing in B2B transactions, the benefits are numerous. Moreover, the B2B e-invoicing mandate is around the corner. So, adopting e-invoicing is more than a nicety for US businesses.
The US uses the Digital Business Networks Alliance (DBNA) to facilitate the exchange of e-invoices between entities. The DBNA is a four-corner network similar to PEPPOL. This means you need an Access Point (AP) provider to give you access to the network so you can send electronic invoices to other individuals.
Storecove is a certified access point provider. When you connect with Storecove, we will give you access to the US e-invoicing network, allowing you to send e-invoices. Our solution ensures the invoice meets relevant standards.
Ready to start sending compliant invoices and reaping the benefits? Contact Storecove today to set up your e-invoicing process.
More information about E-Invoicing in the USA?
Contact us for more information or schedule a consult with one of our e-invoicing experts.
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