In his debut post as a guest blogger for OB10, Friso de Jong, Founder of the e-Invoicing Trust Foundation, which includes the e-Invoicing Platform, writes about new EU legislation and the use of digital signatures. While on the surface, it could seem as if their role is diminishing, Friso shares his thoughts on why they're here to stay.
Governments in some Latin American and Asian countries have mandated the use of advanced electronic signatures. But if you live in the EU, a new VAT directive is about to have a dramatic impact on the digital signature arena. Or at least that’s how it seems at first sight.
From 1 January 2013, a new European Directive comes into effect, which means that member states should have adopted and published the necessary provisions to comply. The EU Directive allows for e-invoicing in its simplest form in every member state and helps SMEs reap the benefits more easily.
No need for digital signatures
The keywords for the new EU e-Invoicing legislation are liberalisation, simplification, equal treatment, business controls and harmonisation. There is no formal requirement to use technical elements like advanced electronic signatures. But in practice things look very different.
It may sound weird to some, but electronic signatures have their own intrinsic value. So even though they will no longer be a requirement by law after 1 January 2013, I believe you will still keep using them.
It’s worth noting that ‘electronic signature’ is a legal term. A digital signature is a form of electronic signature based on certificates or PKI. Legally they are called advanced electronic signatures. If you have to identify yourself to receive a digital signature certificate, you have a qualified advanced electronic signature.
Six reasons to keep using your digital signatures
Here are the top-six reasons why I think you should keep using digital signatures:
1. Digital signatures make it easier to prove your fiscal compliance
According to the new EU Directive on e-invoicing you can apply the business controls you have that keep your invoices, payments and book keeping in check to e-invoices.
So, everything stays the same? Almost. By using business controls with e-invoicing the tax authorities assume that everything is okay. But they can ask you to dig deeper to provide more evidence to assure them you comply with the fiscal requirements. Remember, authenticity, integrity and legibility.
Electronic signatures, preferably an advanced electronic signature, offer the fiscal authorities a greater guarantee that you comply. Digital signatures make it much easier to prove your fiscal compliance.
2. Digital signatures make it easier to provide trade law evidence
Among its many purposes, an invoice is a signal to initiate payment. However, on many occasions an invoice just isn’t enough so we resort to sending reminder after reminder, which in some cases it leads to a lawsuit.
Imagine a lawsuit based on electronic invoices, or even worse electronic invoice data. A smart lawyer will try to undermine the integrity, authenticity and legibility of your e-invoice (data). By using a digital signature in the e-invoice, the message carrying the e-invoice, you create irrefutable evidence about the invoice and its contents, which makes the ’e’ aspect of your business transaction a non-issue.
That way you can focus on what is really important: convincing the judge and jury that you are entitled to payment of the invoice amount and additional damages.
3. Think about your reputation and responsibility: a customer-centric professional
Every company has a reputation. A digital signature adds to your reputation. It shows that you are a professional and that you can be verified through the credentials in the digital signature.
Adding a digital signature to an e-invoice is also an extension of the service you offer customers or clients as you help them comply with their fiscal requirements (see point 1 above).
Just because some legislation says you no longer have to use digital signatures, it doesn’t decrease your responsibility as a good business partner.
4. Acquisition fraud: ghost invoices
The electronic world mirrors the real, bricks and mortar world. Just as there is acquisition fraud with paper invoices in the real world, there is also fraud with e-invoices. These fraudulent invoices are used for phishing, installing malware, spreading viruses, espionage and all kinds of purposes.
With the uptake of e-invoicing (and liberalisation in the EU) you can expect an exponential increase in these fraud invoices. With digital signatures in the e-invoice or its message, your customers immediately know that this invoice comes from you as it is verified by a digital signature.
5. Return on investment
This applies to all e-invoicing service providers and companies that have already invested in digital signatures: don’t stop using them. You probably invested in them specifically for e-invoicing or other governmental requirements. If you stop using digital signatures you will not achieve your return on investment (or be able to use the governmental services).
So if you already have a digital signature service in place, keep using it.
6. The rest of the world
While the EU is liberalising electronic invoicing, many (if not most) of the countries outside the EU are following a different path. The Latin American e-Invoicing landscape, for example, has become very strict. To trade with these countries you will need a digital signature and sometimes more than one.
Here to stay
The digital signature is here to stay and it should. The next challenge, however, is making it easier to get one.
To keep up with Friso's thoughts on the development of electronic invoicing, follow him on twitter or The e-Invoicing Platform.