What is the difference between digital and electronic invoices?

Digital vs electronic

Digital invoice vs electronic invoice

Old sources on the internet create a confusion surrounding the correct and modern meaning for the different types of invoices, despite them being fundamentally different. An electronic invoice (e-invoice) should contain data from the supplier in a format that can be entered (integrated) into the buyer's Account Payable (AP) system, without requiring any data input from the buyer's AP administrator. A digital invoice is an invoice that can be viewed and processed digitally.

An e-invoice is one of the possible digital file formats, just like invoices in PDF or Word formats are. A digital invoice is not necessarily electronic because an incoming PDF or Word invoice still requires manual data input from the buyer's AP administration. Only when this is automated it may be called an electronic invoice or e-invoice.

When is it an electronic invoice (e-invoice)?

An e-invoice is a systematically built digital file with the data in a fixed location and dedicated meaning. There are many different formats for e-invoicing and a global standard is currently missing. The most common formats are EDI and UBL.

EDI has been a popular standard for a long time, but expensive for SMEs. A growing list of governments worldwide has selected UBL 2.0 as their preferred format. The European Commission (EC) is working on its successor; UBL 2.1. This is due to become the standard format for companies that deal directly with the EC.

The following guidelines apply to e-invoices:

  1. Structured invoice data issued in Electronic Data Interchange (EDI) or XML formats;
  2. Structured invoice data issued using standard Internet-based web forms.

 

When is it a digital invoice?

A digital invoice is an invoice that can be viewed and processed digitally. The digital invoice is easy to archive and connect to accounting software. With optical recognition (OCR) digital invoices are booked into systems semi-automatically. This contributes to lower working pressure.

Financially accessible online solution contribute to the growing success of digital invoices in favor of the old paper invoice.

What is a digital invoice, but not an e-invoice:

  1. Unstructured invoice data issued in PDF or Word formats;
  2. Scanned paper invoices.

 

The purpose of modern invoicing

Electronic invoicing is ultimately not an end in itself, but a means of achieving a goal. The sending party is assured that the invoice will reach the right person faster, at lower costs. The ultimate goal of a recipient is to book a purchase invoice with as few human actions as possible. The medium an invoice uses to travel between organizations and the way that it is processed is of no concern if it happens quickly and without error.

The benefits of an e-invoice are negligible or non-existent for the recipient without a smart system that automates invoice processing. That is when the real benefits of e-invoicing become apparent.

The benefits of e-invoicing include:

  1. Ease. Processing is digital and automatic;
  2. Speed. No more paper flow;
  3. Accuracy. Human errors minimized;
  4. Cheaper. No print and postage costs.

Want to know more about the benefits for your organization? Read our Invoice Processing 2.0 white paper.

White paper: Digital Invoice Processing

Modern invoice processing comes in a variety of shapes and sizes. This white paper is based on our own insight that you can use to measure your invoice maturity against your peers.

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