We discussed in my last blog post that a correctly implemented electronic data interchange (EDI) system can be more effective than digital signatures at securing the confidentiality of data contained within e-Invoices. Digital signatures, on the other hand, can be transmitted by various means and consequently, it is harder to guarantee a secure document exchange. In this blog, I will be looking at how both methods compare in their data processing and integration capabilities.

According to the current EC VAT Directive, an invoice is defined by its contents, and these contents require a specific minimum set of data to allow a document to be classed as an invoice. The challenge lies in the fact that there are variations from country to country on what is specifically required as minimum invoice data fields. All countries require the details pertaining to VAT to be included, but discrepancies lie in the extra pieces of information that certain countries require. For example, France requires additional commercial fields that are not needed elsewhere.

This variation also extends to electronic invoice formats, where different countries and indeed different industry verticals all have unique cultural or industry preferences, and even legally mandated requirements. For example, issuing an e-Invoice to the Spanish government requires an XML Facturae format, but to do the same in Denmark requires the OIOUBL XML format. Sending an invoice within the Petro-Chemical industry requires the ChemXML format, but to do the same within the Auto industry will soon require the new VDA EDI format. Because of these differences, a supplier in Belgium trading with a buyer in Spain may find that while an invoice may comply with Belgian laws and legislation, it may have to be converted into a different format to meet the cultural/legal/industrial requirements of the Spanish buyer.

This complexity applies to both EDI and digital signatures, but what sets them apart is the flexibility to convert the originating file from the supplier’s preferred format to the destination file in the buyer’s preferred format, ensuring that all data fields are preserved.

When digital signatures are used on EDI/XML documents the originating file is ‘locked’. This means that after mapping to the destination format, the new document must also be digitally signed. Contrast this to EDI processes without the use of digital signatures where data processing and integration is part and parcel of the standard end-to-end process. The EDI process facilitates format conversion as there are fewer restrictions hindering the process. Additionally, EDI solutions maintain comprehensive audit trails of mid-term conversion so that tax requirements for long-term auditability can be met.

You can learn more about e-Invoicing at:

http://www.einvoicingbasics.co.uk/