B2B electronic invoicing: digital accounting
Electronic invoicing is becoming increasingly common, with many companies and businesses nowadays only accepting electronic invoices. Offering greater efficiency and data visibility, e-invoicing can help companies communicate with suppliers and customers, ensuring a reliable cash flow.
But what are the features of B2B electronic invoicing? What are the benefits? What procedures should be put in place for a 100% effective invoicing system?
Continue reading the article to find the answers to your questions.
B2B e-Invoicing: Definition, Operation and Obligations
B2B e-Invoicing: definition
B2B e-Invoicing, consists of sending a digital version of an invoice to a private individual, VAT-registered (i.e. a company owner or freelancer). We can therefore say that B2B electronic invoicing is a digital invoicing system from one company to another company or to a freelancer.
A small clarification: electronic invoicing corresponds to the use of an electronic invoicing system to track transactions between the company and its customers or suppliers. One should therefore not confuse electronic invoicing with systems that simply scan paper invoices.
Another small clarification: when we speak of a B2B e-invoice as being sent to a private individual, we mean a VAT-registered person who owns a business. We therefore do not refer to the end consumer, as in that case we speak of a B2C e-Invoice.
How to send or receive B2B e-invoices?
For the issuing and receiving of electronic invoices, the Inland Revenue has created a digital system, called Sistema di Interscambio (SdI), the equivalent of a kind of virtual postman.
This digital platform is free of charge to all taxpayers with a VAT number or from the Public Administration (PA). Thanks to this system, the Inland Revenue Service is facilitated in its action of checking and verifying invoices issued by private individuals and public bodies at any time.
Electronic invoicing therefore involves the creation of a digital version of the invoice in an xml file. It is then received and sent to the end consumer via the interchange system. The revenue agency will then be able to proceed with the digital storage of electronic invoices in the reserved area of the taxpayers who wrap themselves in the SdI.
What are the differences between PA and B2B invoices?
The two invoicing systems are equivalent in terms of procedure and operation. The difference lies in the compilation of the invoice with the correct codes:
- in PA (Public Administration) e-Invoicing, you enter the PA Office Code to indicate the recipient of the invoice
- in B2B e-Invoicing, you enter the addressee code, a 7-digit alphanumeric series to identify the receiver of the invoice. If the addressee is not registered in the interchange system, '0000000' is entered as the addressee code and the addressee's PEC address is entered in the 'addressee PEC' field.
What about B2B e-Invoicing without a PEC or recipient code?
If the recipient of the e-Invoice is a natural person, he/she will not have a personal recipient code, although he/she is a VAT holder. In this particular situation, the e-Invoice must be completed by entering the VAT registration number of the natural person in question.
If the invoice is issued with an incorrect PEC or incorrect VAT ID code, the invoice will be sent to the addressee following the VAT ID data entered. However, he will simply receive a digital copy of the invoice that can be downloaded on Fisconline or Entratel.
Is electronic B2B invoicing mandatory?
In recent years, the invoicing system has undergone many changes.
- In 2015, tax legislation imposed the obligation of electronic invoicing to the public administration.
- In 2017, the conversion process towards electronic invoicing for private individuals, i.e. B2B, began. Taxpayers could still use e-invoicing on an optional basis.
- In 2019, the tax legislation made e-invoicing mandatory also for private individuals.
Who is not obliged to use B2B e-invoicing?
The following taxpayers are exempt from the obligation to use e-invoicing for their company
- those who benefit from the flat-rate scheme
- those who are covered by the regime dei minimi or regime di vantaggio;
- those who supply goods and services to non-residents, EU and non-EU citizens.
Why choose B2B e-Invoicing?
Incentives for taxpayers using B2B e-Invoicing
Although the latest legislative decree made B2B e-invoicing compulsory, the following tax benefits remain available for taxpayers who embrace this system
- reduced obligations concerning the suspension of reporting for transactions with EU blacklisted countries;
- the elimination of the spesometer;
- the filling in of INTRA forms for the purchase of goods and services, and the letter of intent.
Another point in favour of taxpayers using e-invoicing concerns VAT: refunds will be issued within three months of the annual declaration, and the addition of the guarantee compliance visa will no longer be required for amounts exceeding EUR 15,000.
The advantages of B2B electronic invoicing
The main advantages of electronic invoicing are
- reduced postage, printing and storage costs of invoices;
- environmentally friendly process (no paper and printing and other negative environmental impacts)
- reduced invoice payment times (faster disposal of outstanding invoices)
- increased productivity of entrepreneurs;
- reduced processing time of invoices entered directly into the entrepreneur's accounting system;
- enhanced communication between entrepreneurs.
From a fiscal point of view, e-Invoicing affects
- a better quality of the tax administration's services to taxpayers (pre-completion of tax debts or tax refunds, no further obligation to file any VAT returns, or minimisation in stages);
- timely suppression of tax fraud and evasion;
- minimisation of errors.
A more detailed analysis of the benefits leads us to a division into four macro-areas in which the benefits of B2B electronic invoicing can be tangibly seen.
1. Improved efficiency
Paper invoicing requires employees to retrieve data from invoices and manually enter it into the company's accounting system. Electronic invoicing systems can perform this step automatically, saving time and reducing human errors.
2. Statistical analysis
Electronic invoicing systems allow you to organise invoices by customer, which means that you can easily monitor which customers are consistently late in paying their invoices. This visibility could help your organisation analyse trends and plan for the future.
3. Improved cash flow
When you can keep track of all invoices and see at a glance how much money you can expect to receive over the next month or months, it is easier to ensure that your company has adequate cash flow.
4. Improved collaboration
Electronic invoicing systems facilitate communication between buyers, suppliers and customers. Through increased collaboration, you can build strong relationships with the people and organisations on which your business depends.
Disadvantages of B2B e-Invoicing
Although electronic invoicing has many advantages, there are some disadvantages of which you should be aware. Trying to adopt an e-invoicing system without proper training or knowledge of how the system works could lead to confusion and wasted time. However, with the right training, this problem can be overcome.
Some customers may prefer to receive a paper invoice. Although some electronic invoicing systems are designed to be paperless, it is often possible to print a copy of the invoice for the small group of people who prefer not to work with digital technologies.
Electronic invoicing is an integral part of the digitisation process. As we have seen, it provides many advantages in the fight against tax fraud and other tax loopholes. During and after the global pandemic, we have seen some acceleration of the digital economy and digitisation through the adoption of new technologies.
At EU level, e-invoicing is only mandatory in public procurement procedures, although countries are increasingly focusing on the effects of its benefits. In this respect, requests for derogations from the VAT Directive by some EU Member States seem justified, especially in view of the current dimension of the Tax Gap and corruption.
On the other hand, it is also necessary to consider the fiscal incentives mentioned above, which may encourage taxpayers to use e-invoicing. Considering all the advantages of e-invoicing, it is to be expected that taxpayers will decide to use it more and more.
How about you, are you planning to start using e-Invoicing for your company?
Article translated from Italian