how-e-invoicing-came-about

How e-invoicing came about and why is it the future of doing business?

As strange as it sounds, the first electronic invoices were sent over 30 years ago using electronic data interchange (EDI); since then, the use of e-invoicing has come a long way and has continued to evolve. Recently, the main new driver behind e-invoicing adoption has come from a state level…

The size of the global e-invoicing market is currently estimated to be around 4.9 billion dollars. In a study titled “The e-invoicing journey 2019 – 2025” Billentis expects the 2019 number of e-invoices worldwide to reach 55 billion, with annual growth rates of 10%-20% further down the road, indicative of a bright future ahead. By the year 2025, the value of the global e-invoicing market is projected to be 20.5 billion dollars.

There are two main drivers behind the projected growth. The first comes from the government level. Many countries, ranging from Latin America to Europe, looking for a solution to tackle widespread tax loss have started drawing a firm regulatory path to promote the e-invoice practice. EU member states have gone the furthest, announcing compulsory e-invoice legislation for public procurement while allowing the development of a country-specific set of regulations within a basic framework.

All of that has made the regulatory compliance more complex, however, progress is still on track. Figures from the European E-invoicing Service Providers Association (EESPA) show a continuous growth of e-invoice volume as well as the amount of funding on reported e- invoices, while at the same time, also point to even higher rates of adoption.

The second major driver in the expansion of the global e-invoicing market is developments in technology. Tech startups are bringing new, practical solutions to the market, making e-invoicing an easy-to-use and affordable billing tool.

Although the recent push came from the governments, advances in technology have historically been the biggest driver in the industry. The first electronic invoices were exchanged using Electronic Data Interchange (EDI), the concept of electronic communication for business purposes, traditionally relayed, well, on a piece of paper (more likely enormous volumes of paper).

It was a relatively expensive protocol, affordable mainly to big companies and hence deployed by them almost exclusively in a somewhat unique format of very questionable compatibility. During this phase, larger companies introduced Accounts Payable (AP) workflow software to process and store invoices, and EDI systems were used to automate individual relationships with mission-critical suppliers and customers.

The biggest innovation in invoicing came with the ascent of the internet, through web applications with a more robust user interface, allowing the online submissions of invoices in different formats (csv, pdf, xml). All of that has led to wider adoption of e-invoicing across different businesses and geographical locations, making e-invoicing affordable to all, regardless of the size. In this phase, companies have rolled-out programs to connect suppliers and buyers via internet-based AP systems. Sometimes these systems have replaced legacy EDI whereas, in other situations, the EDI systems themselves were modernized. Nowadays, vendors are launching ambitious projects to migrate their customer bases to cloud-based or cloud-enabled versions of their software, marking the start of a new development phase.