We all know that invoicing processes are increasingly tangled up in real-time and other complex tax requirements around the world. However, when you ask companies if they are in control of the storage of their accounts payable and accounts receivable invoices, you often get somewhat surprised—if not vaguely insulted—reactions. Really, what kind of company doesn’t know where their fiscal crown jewels are stored, and under what conditions?
Many companies, it turns out.
Once you’ve explained that you don’t mean the PDF invoice copy that may be stored somewhere on an internal server or in a document management solution but the demonstrably one and only ‘original’ tax invoice without which it’s very difficult to prove that a supply actually took place—and once you’ve explained what kinds of legal requirements apply to such archiving—you’ll see facial expressions go from surprised or insulted to increasingly alarmed.
How e-archiving became such a mess
Naturally, no one expects larger companies to store all their invoices in one and the same archive and under the responsibility of a single corporate function. That is impossible for a variety of reasons:
- History of localized tax responsibility. In many cases, subsidiaries have retained the responsibility to deal with local tax, and since this included storing paper invoices in the past, this responsibility has often been extended to electronic invoices, too.
- Multiple procurement and billing applications. Where transactional applications for exchanging commercial data such as orders and invoices have been centralized, the responsibility has often been moved from local subsidiaries to the functions or vendors that manage these centralized applications. Especially where these centralized applications are modern and cloud-based, this leads to a scattering of invoice archives:
- Such applications tend to offer comprehensive end-to-end processes, including the archiving of electronic and scanned invoices and receipts.
- The ownership of these applications may have moved from IT to a surprisingly broad array of internal functions; for example, your HR department may be the responsible owner of a travel and expense management application; as a result, and possibly unbeknownst to them, human resources professionals all of a sudden also own a critical piece of fiscal archiving.
- Localization requirements. In some cases, invoices and other critical tax documents under the jurisdiction of the tax administration of a country must be stored within that country’s borders.
- Mergers and acquisitions. Many multinational companies still carry a legacy of past acquisitions in their system and application landscape, together with different ERP and transactional systems which, naturally, are connected to different invoice archiving systems.
Getting e-archiving under control
Having multiple archives doesn’t mean you’re not in control. However, rapid technological changes, ambitious finance and business transformation projects and—last but not least—a virtual tsunami of real-time transaction control mandates have spread companies’ tax and IT budgets razor-thin in the last decade. Compliant invoice archiving was never the highest priority and often became an afterthought.
In our experience, most multinational companies need to convene a team of experts representing a variety of functions to begin to inventory all the different archives where their invoices are stored. After a couple of hours of retracing invoice flows through a thick labyrinth of ERP consolidation and modernization programs, complex legal entity and billing setups, countless order and invoice applications and cloud-based transaction automation vendors, the conclusion is often that invoices and other critical transaction tax evidence are stored in at least five—but often more than ten—disparate archives scattered across business and IT domains. Just collecting data on who has access to these original tax invoices and creating a more structured way of managing such access, so that at least tax auditors can be directed to the right place relatively quickly, is quite an undertaking.
“Where is my invoice?”
One of our customers, years ago, went through such an exercise and called the resulting 15-plus page document with URLs and logon credentials “Where is my invoice?”
However, getting back in control doesn’t end with centralizing information about where to find your invoices. Frankly, that’s the easy part. The next question is: How do we know that all these archives are compliant? Invoice archiving requirements can be classified in some 15-20 categories and, like most tax and legal requirements, can differ substantially per country. If you’d like a walk-through of these categories, this document is a good start.
And ensuring that all invoices that are stored—oh, and requirements typically differ between invoices that are ‘born digital’ and those that are scanned from an original paper invoice—while respecting the applicable requirements for each relevant jurisdiction across those categories tends to be a laborious task. Add to that the fact that compliance as a snapshot in time is meaningless information—your archive vendor needs to have elaborate routines in place to monitor legal changes affecting all invoices you entrust to them, and implement whatever adjustments are needed to meet new requirements in a timely manner—and you’ll find that the challenge is of herculean proportions. To be sure that every vendor ensures continuous compliance on your behalf will often require a detailed review of contracts, service level agreements, technical and process documentation, internal and outsourced requirement monitoring arrangements, etc.
E-archiving and moving to SAP S/4HANA
If you are moving to SAP S/4HANA or have other plans to modernize your business systems, the timing may be right to undertake a review of your invoice archives and introduce more rigorous criteria for vendors that offer to store this critical tax data.
To make it easier for global companies to digitally store their precious invoices in a responsible manner regardless of which application manages the underlying invoice exchange flow, Sovos has built an API-based strategy and a vast OEM partner network that all point to the same globally compliant archive.
Find out more about Sovos e-archiving solutions.