Global eInvoicing Compliance - Your Questions Answered
Audience members at our recent eInvoicing webinars raised some interesting questions in the Q&A session, here’s a selection of the most commonly asked below:
Q. What processes or rules should be put in place to ensure that suppliers select the appropriate tax rates on invoices and then marry them to the appropriate tax codes in JAGGAER ONE and the ERP system?
A. There are two parallel approaches to this in JAGGAER ONE. The first is a built-in capability in its advanced workflow function. There is a process rules engine within JAGGAER ONE which means that so long as it has the information on their goods and services up front, JAGGAER ONE eInvoicing can apply the relevant tax codes at various levels and ensure that these are enforced, i.e. the system will not let a supplier enter the tax code.
Alternatively, some JAGGAER customers prefer to allow the supplier to enter the tax code and they validate it manually, although the rules-based approach is becoming more common. The tax rules engine can handle a high level of complexity including the ability to put two or more different tax codes and tax rates on a single invoice.
“…so long as the invoices have the information on their goods and services up front, JAGGAER ONE eInvoicing can apply the relevant tax codes at various levels and ensure that these are enforced.”
If you have highly complex invoices, with perhaps three to five different tax rates applying to individual line items, you should use the JAGGAER ONE integration with Thomson Reuters ONESOURCE corporate tax software, which will completely overrule anything your suppliers suggest, ensuring full compliance. The advantage here is that tax rates change frequently nowadays but Thomson Reuters is always on top of those changes.
In terms of integration with your ERP system, you would work with JAGGAER to provide the tax rules of the system, which JAGGAER would then implement. If on the other hand you are using ONESOURCE you should do the same with Thomson Reuters.
Q. Do you imagine that regulations will continue to increase in areas that don’t currently have them? Do you see a time when the US market will require eInvoicing as well?
We have seen some excellent research from PWC and other agencies who are seeing a huge increase in the number of countries not just introducing eInvoicing regulations but, in the case of countries that already have them, changing and adapting them. That means keeping on top of it all is a real challenge. For example, last year India announced that it was moving to a VAT-style consumption tax system across the country, overriding regional legislation. But now India has announced that it will introduce a clearance system similar to the Latin American model. Italy had an eInvoicing system in place following the post-audit model, which it is now changing to a clearance system – so change after change!
And of course, the number of countries adopting eInvoicing regulations is increasing. As to when the United States will join them, that is still unclear and largely a political question.
In fact, the USA had already announced a switch to mandatory business-to-government eInvoicing. This is a topic in its own right but mandatory eInvoicing for government contracts and public procurement directives are driving change around the world. About four years ago the Office of Management and Budget announced that it wanted to introduce a mandatory eInvoicing mechanism for business-to-government invoices, so anyone trading with government agencies, schools, hospitals and so on would have to issue electronic invoices; however, this was dropped with the change of administration, or at least, it has not really moved forward. But if it is taken up again that will really push things on the business-to-business side.
However, what would really accelerate the process in the United States is the introduction of the VAT system. It is one of the few remaining major economies that has not yet adopted it. This will not happen under the current administration, but it could be on the agenda of an incoming Democratic government.
Q. How do you get the internal buy-in from other departments to support your efforts to implement eInvoicing?
A. Communication with all affected employees is key. You have to explain all of the benefits – they do not just apply to accounts payable. These include eliminating the risk of a paper invoice going missing, eliminating manual work, speeding up processing time, cost-effectiveness and reaping the financial and non-financial rewards (e.g. reputational benefits) of paying invoices on time. eInvoicing puts procurement teams and all other stakeholders in a better negotiating position.
Q. With which companies does JAGGAER partner to ensure regional compliance with VAT and other regulations?
A. JAGGAER partners with a couple of the big companies in this space. They include Sovos TrustWeaver, primarily for digital signatures and archiving, Thompson Reuters ONESOURCE for tax calculations and PricewaterhouseCoopers for compliance and verification in many of the regions where JAGGAER has customers and mapping local requirements to our solutions. PWC is an integral part of this process and validates our solution to ensure full regulatory compliance.
Q. Do you see the industry continuing to move towards mandatory eInvoicing or do you think we have reached a plateau? Or could the trend even reverse?
A. We don’t see the trend being reversed. One major reason why so many countries are making eInvoicing mandatory, not just in the public sector but across business as well, is that many have moved to VAT regimes, where VAT compliance is critical. Another factor is the environmental benefit of getting rid of paper-based invoicing. But perhaps most important of all is that across all industry sectors, more and more companies are seeing the benefits of eInvoicing: greater efficiency, better control of the data, better visibility over cash flow, better terms with suppliers etc. For all these reasons, the trend seems likely to continue.