Digital invoicing can radically transform back-office operations
Firms of all sizes are taking advantage of new technology – from large corporates who are using the power of digital technology to rewire markets and empower customers, to small start-ups targeting speedy growth.
Companies that are agile, collaborative and data driven – in both their customer interactions and back office processes – are edging ahead of their competitors. This trend is only set to continue as the age of digital connectivity and artificial intelligence gathers pace.
Characterised by a fusion of technologies and attitudes that are blurring the lines between the physical and digital spheres, the rise of digitisation in all areas is bringing with it changes in behaviours and a new environment in which businesses will need to operate in order to compete to win.
We are in fact living in the middle of a new industrial revolution, one which is reshuffling our system and challenging the status quo.
This digital transformation brings immense opportunities but also a new set of challenges as businesses and communities learn how to adapt and reap the benefits.
There are many examples of new challenges thrown up by businesses attempting to navigate this new landscape. One currently in the spotlight revolves around the idea of the digital workforce.
Uber is a business that is often cited as a star of the digital business model, but last year faced heavy scrutiny in the UK due to a legal battle started by current and former Uber drivers. The case was brought largely to address Uber’s decision not to pay the national minimum wage or holiday pay, but also whistleblowing claims.
Uber, however, insisted it is a technology business only so could not be held accountable as an employer. In the judgment handed down last October, the employment tribunal ruling on the case found in favour of the drivers, ruling that they are workers and not self-employed contractors and that Uber is in fact a transport operator.
This Uber example demonstrates that the digital revolution is bringing with it labour relations complexities that must be considered. After all, the digital model is by its very nature disruptive, which in itself causes challenges. In the UK the ride hailing app’s operations are currently under scrutiny, but it continues to operate. In Italy, meanwhile, the app has been banned in its entirety.
Despite the teething pains, this fourth industrial revolution powered by digital transformation does bring with it a more efficient and effective way of doing business that should not be ignored. Besides the benefits of online banking, next-day delivery and streaming content, day-to-day business processes are also smoother.
Europe is believed by many to be ideally placed to lead the growth in digital business. Writing for the World Economic Forum, the European Commission’s vice president Maros Sefcovic posits this very view: “All around us we can see how a new economic paradigm is emerging. Europe is well set to embrace it and to create a smart green digital economy based on sustainability and high profitability – benefiting society as a whole.”
So, what impact does all this change have on running a business? With the onset of a digital first approach, compliance in business processes needs to be water tight – from order to cash. All digital transactions leave a footprint, so businesses will need to have more checks and measures than ever before on the where, when and how of doing business.
Take the digital invoice as an example. As an e-invoicing specialist, one question we frequently encounter at Tungsten Network is whether an electronic invoice is legal in a particular jurisdiction. The answer varies widely – as do the conditions that must be met. In the EU, the European Commission has issued a Directive to mandate the use of electronic invoicing by the public sector by 2018. Elsewhere, however, the status is different.
In India the question of whether e-invoicing could be compliant at all has in the past been far from clear cut. As a business that was able to ensure compliance in terms of tax and regulatory requirements in 47 countries, our members were requesting for some time that we add India to our network to become the 48th. Business opportunities abound in the fast-developing market of the sub-continent, so it made sense for us to delve deeper.
The main obstacle we discovered was around whether digital signatures were legally permitted to prove the authenticity of invoices. Businesses use these to attest to invoices’ authenticity. By attaching an encrypted code to any electronically transmitted document, it is possible to verify its contents and the sender's identity. This acts as a way of ensuring important information and documentation has not been tampered with and is secure.
Working closely with the regional governments of eight key states in India, Tungsten was able to demonstrate the benefits and help establish e-invoicing as legally accepted in India. Keeping up to date with global compliance issues is important, especially in the digital age, and something which Tungsten spends considerable time and resources on, which is why we created an Introduction to Compliance that explains the complexities of invoice requirements among countries around the world.
Your digital footprint
If you have the proper controls and checks in place, e-invoicing is an exceptionally efficient way for a business to keep on top of legal and tax requirements, because checking documents electronically is a much faster and more accurate process than performing manual reviews. And pulling historical documents from a digital archive is also much simpler.
This aspect of e-invoicing can be very appealing to governments as well, because fraudulent invoices can be identified more effectively. The prospect of a stronger economy with less money leaking out illicitly makes digitisation appealing – hence Europe moving towards increased adoption.
Germany is currently preparing to join Austria, Spain and Italy in making e-invoices mandatory for public sector processing of accounts. A draft law currently working its way through the Bundestag states that invoices will have to be transmitted and received electronically, and contain structured data (which means emails of pdf files will not be sufficient) in a format that enables electronic processing.
Understanding the motivation behind this trend in Europe is important, however. The goal is less to tackle the VAT gap and more about tackling the barriers to pan-European trade that result from varying invoicing systems and standards. According to figures from the European Commission, e-invoices could mean annual benefits of up to €40 billion, as they are easy to process, reach the customer faster, and can be stored centrally at very low cost.
Using only the example of digitising the invoicing process, one can see the benefits of the broader shift towards a digital back office. The most important thing to remember, however, is that going digital is a marathon not a sprint. Some businesses may be dashing off ahead with revolutionary ideas and big budgets, but the purpose of digitisation isn’t to make a splash or grab a headline.
The digital revolution is ultimately about improving the day-to-day running of a business, by taking manual processes and making them better. It’s about greater speed and accuracy and a reduction in cost. Given this, it’s not about when you embrace digital automation, it’s about how you do it.
The digital revolution will enable businesses to be far more agile in response to opportunities and challenges on the horizon. To ensure continued success within a changing business landscape, however, a strategy that focuses on resilience as well as responsiveness is vital. For this reason, maintaining high standards of compliance are as important as ever.
This article was originally published by European CEO