3 Global Invoicing Trends to Watch
To compete as a global business and avoid compliance headaches, it's imperative to keep on top of global invoicing trends. Today, these include rapidly changing regulatory frameworks, emerging policies to address pandemic priorities, and evolving reporting requirements that make it challenging for even the most astute AP leader to keep a handle on this complex and dynamic economic ecosystem of policies and regulations.
In our invoicing trends roundup, we're highlighting some of the most important changes to invoicing regulations and exploring their impact on your business.
1. VAT changes
First on our list of global invoicing trends? The ongoing changes to value-added tax (VAT) rates worldwide. Consider the European Union (EU): While VATs have remained largely stable over the past few years, the significant economic impact of COVID-19 restrictions has prompted action from governments across the Union.
For example, Ireland reduced its standard VAT rate from 23% to 21% from October 2020 until February 28, 2021. Norway extended its rate cut from 12% to 6% for hospitality, tourism, and public transport until December 2020, and Germany's standard VAT was reduced from 19% to 16% until December 2020.
VAT reductions are part of larger economic recovery packages across the EU but are subject to rapid change. For example, Norway extended its rate cut several times, and differing VAT rates apply to different industries in different EU member nations, making VAT monitoring and management a critical part of Business Spend Management (BSM). In addition, rates may change with little warning as national legislatures decide to end or extend rate cuts or implement new VAT values for specific industries.
2. e-invoice mandates
Another trend seeing rapid uptake worldwide is electronic invoices mandates. China is currently in the early stages of diversifying its e-invoice landscape by implementing pilots in over 30 provinces as of January 21, 2021. Also in January, the State Administration of Taxation of China published Regulations on Optimizing the Business Environment, giving the Special VAT e-invoice the same legal effect as the paper invoice, and introducing several changes to the current invoicing processes.
Meanwhile, in Europe and the Middle East, Italy was the first to implement mandatory domestic B2B e-invoice processes as of January 1, 2019. France, Poland, and the Kingdom of Saudi Arabia (KSA) have since announced similar mandates. Most recently, last month, the German Free Democratic Party (FDP) requested that the German Bundestag implement a nationwide e-invoicing system based on the Italian SdI (Sistema di Interscambio) model. This request is aimed at reducing the large-scale VAT fraud in the country and simplifying the overall invoicing process.
For enterprises, ongoing e-invoice operations demand tools capable of managing general electronic expectations at scale and evaluating specific data inputs as they relate to national requirements.
3. A QR code renaissance
Last on our list of top global invoicing trends is the QR code renaissance. In the late 2000s, quick response (QR) codes were ubiquitous as part of marketing campaigns and social media efforts. Bolstered by the rapid uptake of smartphones, these small-scale, two-dimensional barcodes quickly rose to prominence. They then fell largely into disuse as companies found better ways to connect with customers. However, in part due to the COVID-19 pandemic, these codes are making a comeback. For example, many restaurants are using them as digital menu gateways to reduce the risk of virus transmission. They are also being used more on physical invoices to improve data capture and processing.
A prime example of this reimagined QR code use is in India where companies with turnover greater than Rs 500 crore (roughly $70 million USD) must now have a QR code shown on the face of all legal invoices by March 31, 2021.
And India isn't the only country moving toward mandatory QR codes. In 2019, Portugal and Sweden both implemented similar approaches to help streamline payment processing and data collection. However, this presents a challenge for many enterprises, especially if they're still using legacy invoicing tools and technologies that aren't designed to create and capture QR data. As a result, it's critical for companies to deploy spend management solutions capable of both meeting current needs and adapting to new invoice challenges.
The above examples — VAT changes, e-invoice adoption, and QR implementation — speak to a common concern: compliance.
In each case, compliance is critical to ensure both data and reporting accuracy. Failure to align processes with regulatory expectations could lead to lost revenue as companies are compelled to spend time and effort updating their reporting process and significant fines if invoicing operations don't align with compliance obligations. However, it is worth noting that compliance cannot be outsourced to third-party providers. While companies are well-served leveraging next-generation tools and technologies to better manage global invoicing obligations, the ultimate responsibility for ensuring corporate compliance can't be shifted to technology partners.
In practice, this means companies must carefully vet potential providers before deploying invoice management solutions and must prioritize tools that streamline operations, which, in turn, allows staff to ensure compliance obligations are met. Consider VAT: With rates changing quickly and extensions possible at any time thanks to evolving pandemic pressure, it's worth deploying best-of-breed solutions to track VAT variations and apply current values automatically. This practice then provides finance and accounting teams more time and space to ensure they're meeting compliance obligations, as well as the documentation necessary to demonstrate this to regulators.
Taking Action with Business Spend Management
For multinational enterprises, successful navigation of this new normal requires both a tactical and technological approach to emerging trends. In practice, this means keeping track of new trends worldwide, understanding their impact on key business processes, and deploying solutions such as Business Spend Management platforms to help solve invoicing challenges at scale.
Armed with the knowledge of global invoicing trends and their potential impact, enterprises must now take action. The challenge? The rapid uptake of digital initiatives combined with continually evolving compliance legislation means that companies are falling behind in most cases — before they even get started.
Agile and adaptive BSM platforms can help bridge the gap between global invoicing trends and geo-specific operations. By providing automatic updates of tax rates and invoice content requirements, the right BSM solution lets enterprises focus their attention on what matters — sustained business growth — while simultaneously staying on pace with global invoicing trends.