Electronic data interchange (EDI) has been the mainstay of e-Invoicing, followed more recently by digital signatures, providing the means to exchange compliant electronic invoices. It can be difficult for companies to decide which of the two is best for their company. In this series of blogs I will examine the pros and cons of each method of e-Invoicing within commonly contested categories.
Compliance and auditability
Within the EU, the European Commission VAT Directive states that the authenticity of the origin, the integrity of the content and the legibility of an invoice - whether on paper or in an electronic format - should be ensured from the point of issue until the end of the period for storage of the invoice. Both EDI and digital signatures must remain compliant to their own respective legislation that guarantees the authenticity of the origin and integrity of their contents. EDI must adhere to 1994/820/EC that states that the data must be transferred within a secure network and that any messages are identical at the points at which they are sent and received. This may also need to be supported by a summary list and sometimes by a trading partner list. At the same time, digital signatures must conform to 1999/93/EC that guarantees the authenticity of the data through third party ‘certification authorities’. Solutions that adhere to these remain legal within overarching EU regulations.
Audits are frequently conducted by government authorities to ensure compliance with all the necessary regulations. Accordingly, both EDI and digital signatures must provide a detailed and transparent payment history upon request. While these audits can be very time-consuming and resource intensive, e-Invoicing solutions can easily provide auditors with all the legal information they require without the need to put resources into unnecessary activity. Well managed EDI systems will store the different evidence components, such as the interchange agreement and security control conformity, which are required to prove to the auditor that the archived invoices are authentic and unchanged since the date of issue. Digital signatures can quickly show information regarding authenticity and integrity just by the click of a mouse.
While both solutions remain compliant to EU legislation and can easily provide relevant information to auditors, different countries have different requirements for guaranteeing the authenticity and integrity of an e-Invoice. Germany and Spain require an EDI invoice that is also electronically signed while France and Denmark are less stringent and authorise either EDI or digital signatures. The UK and Netherlands allow any type of secured e-Invoicing method meaning that EDI or digital signatures aren’t required 100% of the time. As both EDI and digital signatures equally comply and conform to the surrounding EU legislation, to get the most out of e-Invoicing, you need to make sure that your solution takes into account relevant country specific requirements, be it EDI, digital signatures, or both.
My next blog will cover the differing levels of complexity when setting us and using EDI and digital signatures.
