The Treasurer’s Guide to Trade Finance

A Reference Guide to Trade Finance Techniques

simplifying and harmonising VAT invoicing

rules, particularly by treating paper and

electronic invoices the same, and by

removing the need for electronic invoices

to be authenticated either by an advanced

electronic signature or EDI. This should

make it easier for small and medium-

sized enterprises to invoice electronically,

and reduce barriers to cross-border

electronic invoicing in the EU. However,

although the European Commission has

issued guidance to Member States, there

remains significant scope for different

interpretations of the Directive and the

guidance as the Directive is translated into

national legislation.

Companies are likely to gain from e-invoicing
in three main areas:

ƒ Efficient processing.
One of the initial attractions of e-invoicing
is the opportunity to reduce processing
costs associated with preparing, sending
and processing paper documents. Where
invoices can be automatically approved,
via an inbuilt validation process, this will
reduce costs even further.
However, a partial e-invoicing solution
(where paper documents are involved in
the process) may reduce process costs
at one point, but increase cost elsewhere.
For example, the Danish government’s
decision to accept e-invoices led to
the emergence of scanning bureaux,
shifting the burden of processing from the
government to its suppliers.

ƒ Improved visibility.
One of the main benefits of e-invoicing
across a supply chain comes from

the improved visibility of status it can

offer. Because a document is prepared

electronically, it can be more easily

tracked via the invoicing platform. This

allows suppliers to know when an invoice

has been approved, and when to expect

payment. It also allows all parties to

dispute any items more quickly, allowing for

a faster resolution, and ultimately reducing

the cost of unnecessary shipments.

ƒ Opportunities for financing.

Finally, the use of e-invoicing offers

opportunities for more varied invoice-

based financing. Because e-invoicing

accelerates invoice approval, it extends

the time in which an approved invoice

can be financed. Whether e-invoicing

is performed on a bank platform or

on a third-party service, banks will be

able to see whether an invoice has

been approved much more quickly,

and without the need for any further

documentation; at this point, funds can

be released to suppliers against the

approved invoice. Solutions are also

available which prepare an electronic

bill of exchange from the e-invoicing

solution, allowing a supplier to raise

funds from any party prepared to

discount the bill.

The evolution of the e-invoicing environment

is in its early stages. There is, though, little

doubt that all of these potential gains will

materialise over time. At present, a lack of

standardisation means there are still many

different solutions in the market place. These

will rationalise over time, as competition

coalesces the market around a smaller

number of solutions.