This blog was last updated on October 17, 2019
Since e-invoicing became a legal possibility – first in the EU in 2001, then LATAM in 2002, and subsequently worldwide – there have been commentators warning the business community not to overlook the fact that e-invoicing is part of a broader interlocking transaction of documents and processes. Often followed by wise lessons about procure-to-pay or order-to-cash cycles, such observers in my opinion often overlook the reason why so many conferences, white papers, reports and policy initiatives have for the past 15 years singled out the invoice: because, historically, tax law had the same obsession with invoices. There is more invoice-specific indirect tax legislation than tax rules concerning all other transaction documents and processes taken together.
Compliance is more than just a compliant invoice
Naturally there’s more to business-to-business automation than the invoice; it would be grotesque to claim otherwise. And yes, many tax laws suggest or even explicitly state that there’s more to compliance than having a compliant invoice. Any expert will agree that the invoice, in that sense, symbolises the transaction process of which it is, essentially, a formal summary that intervenes at a critical moment: when the supplier determines that it is contractually entitled to claim the buyer’s counter performance to a supply of goods or services: payment. If the invoice appears correct but there is no trace of the underlying transaction it summarises, your formal invoice compliance will usually not suffice. All that is true; nevertheless, the fact remains that the invoice is central to indirect tax compliance, and the sheer amount of e-invoicing legislation largely justifies the attention that the many legal, practical and business consequences of this relatively new legal and e-business discipline have drawn.
An extension of real-time controls
At least, that was my opinion until recently. What we’re now seeing is that tax administrations are extending e-invoice compliance measures to other transaction documents. This is especially true in countries which have gone down the path of real-time invoice controls. In Mexico, salary statements must be ‘cleared’ just like invoices. In Russia, there are special additional transaction documents for goods and services invoices that are also thrown into the mix as well. Turkey just went down the path of adding similar controls for transport documents – something Portugal introduced a couple of years ago. And many countries are introducing real-time controls on point of sale cash transactions. What we’re witnessing here is the extension of real-time controls to many other types of business documents and processes.
Which brings me to the main question of this post: is it correct to keep talking about these trends as “e-invoicing”? In my view, doing so creates a false sense of security for HR, e-commerce, logistics and other business professionals who will be equally affected by this trend. Or worse, practitioners in these areas could start their own specialised best practices, policy and standards discussions around real-time controls without realising that the world of e-invoicing has been grappling with these problems for over a decade.
So what shall we call this emerging, all-encompassing field? Real-time transaction controls? We would be very interested in your suggestions.
