What is an e-invoice and how does it work?

3 minute read

It wasn’t really so long ago that most invoices would be sent by mail: someone would type it up, or maybe even write it by hand, and send it off to be physically received by the client. In fact, that might still happen from time to time.

But technology is changing everything - invoicing included. It’s become common in recent years to send PDF invoices by email, cutting down on paper waste and postage. These days, however, there’s an even more efficient way to bill clients: via e-invoicing.

This article will tell you what e-invoicing is, how it works, and specifically what you have to do to use Singapore’s new e-invoicing system.

What is an e-invoice?

E-invoice is short for electronic invoice. However, it’s not the same as a simple PDF invoice, even though that’s another sort of invoice that can be entirely on screen.

We’re so used to seeing older types of invoices and the amount of information they contain: not only the payment amount, bank details, and the names of both payer and payee, but often also official details like registration numbers. Plus, of course, they need to account for (GST).

Traditionally, you’d have to take all of that data and manually input it into your system, before a payment could be processed. That’s time-consuming, and leaves the possibility of human error open.

So, what is an e-invoice? It’s an invoice that contains structured data instead: data that is in a particular format so that it can be processed automatically. The invoice arrives in a format that means that it’s immediately ready to be processed for payment, with no need for any details to be keyed in all over again.

That’s one of the main advantages of an e-invoice: it reduces the need for accountants to input information manually.

Two of the most common formats for e-invoices are EDI (electronic data interchange) and XML. ¹

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What are the main benefits of an e-invoice?

What is e-invoicing good for? Here are a few of the key benefits:

  • Speed. Once the system’s set up, it’ll take just moments to send or process e-invoices.
  • Accuracy. The data from the invoice will go directly into your system, reducing the risk of human error.
  • Cost. E-invoices will let you cut back on paper and postage.
  • Workflow. All of the above should simplify your workflow - allowing your staff to spend time on the bigger issues that will drive your business - providing the solutions that humans are still better at than machines.

Ultimately, e-invoicing should mean faster, easier and more accurate payments.

When it comes to doing business internationally, all of these advantages increase even further: international invoices often require more attention from accounting staff because of differing international standards and codes, and the whole process often takes longer. Via e-invoicing, a lot of these problems can disappear, so long as the invoice is correctly formatted.

Singapore has introduced a nationwide e-invoice system

E-invoices in Singapore have recently received a big boost. In January 2019, Singapore became the first Asian country to adopt the Pan European Public Procurement On-Line system (PEPPOL) for its own national system for e-invoicing. ²

This new system is designed for small and medium enterprises as well as larger corporations, and by using international standards the system is well suited to businesses who conduct work abroad.

You can consult the Infocomm Media Development Authority’s site for more information about the e-invoicing system in Singapore and discover how to get set up.

How do you send and pay electronic invoices? ³

First, here’s a look at how to get set up with e-invoicing in Singapore:

  1. To begin, you’ll need to connect to the PEPPOL network via an access point provider. You can choose from several of these, listed here (current providers table).
  2. The key thing then is to integrate your accounting system so that it can send and receive PEPPOL e-invoices. This will involve creating a way for you or your staff to input the required data.
  3. Once you are set up, you can make sure that all purchase order documents contain your PEPPOL business identity, and don’t forget to inform your clients and suppliers that you’re now ready for e-invoicing.

And secondly, for once you’re set up, here’s an overview of the process of sending and receiving an e-invoice.

  1. The sender enters the invoicing data (amount payable, receiver, bank details, etc) into the system. The data goes to the access point.
  2. An e-invoice is automatically generated, and sent to the receiver through the PEPPOL network. It comes to the receiver via their own access point.
  3. The details are automatically in the receiver’s system.

If it sounds simple, that’s because it is: although there’s complexity in the technology underlying e-invoicing, it’s all designed to make a system that is easy for people to use.

It’s worth getting your head around e-invoicing now, because chances are, they’ll only become more widespread in the future - especially now they’re being supported by the Singaporean government.

Sources used in the article:
  1. The most common formats used for e-invoices.
  2. Singapore, the first Asian country to adopt the Pan European Public Procurement On-Line system (PEPPOL).
  3. How do you send and pay e-invoices.

Sources checked on 28th of June 2018

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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