Introduction to e-invoicing
- Nick Patrikeos
Background
Industry 4.0 and e-invoicing
Contemporary manufacturing often involves large manufacturers dealing with a small number of risk-sharing partners who co-design and deliver key subsystems of the customized product. These partners sub-contract supply of key systems to their suppliers which results in a vast network of collaboration activities throughout the supply chains involving companies of all sizes. The “digitization” of production and logistics provides a number of significant, new advantages to modern supply chain management in so called Industry 4.0 concept. Industry 4.0 concept embraces Internet of Things, Internet of Services and Cyber-Physical Systems to bring the new design for modern manufacturing. Design features of Industry 4.0 are Interoperability, Virtualisation, Decentralisation, Real-Time Capability, Service Orientation, Modularity.
The rise of Industry 4.0 is driven by the need to support the rapid formation of partner collaborations, the ability to respond to fast changing market needs and the capacity to quickly respond to new business opportunities. SMEs in collaborative networks focus on their core competencies and try to find complementary partners to compensate the lack of competences and cooperate to fit to tender or to run new product development
The main motivation behind this project is to support small and medium-sized enterprises so that they can fully participate in Industry 4.0 emergent collaborations. Its main focus is in the area of business document exchanges between collaborating partners and in particular e-Invoicing. E-invoicing usage forms part of a company’s utilisation of electronic data interchange (or EDI), which also encompasses the automation of other key supply chain partner interactions. The most common forms of e-invoicing are divided into two categories: B2B (Business to Business) and B2G (business to government). There is another category B2C (Business to Consumers) but it is not widely used at present.
Regulations play an important role in the adoption of e-invoicing within one country or region. Such regulations mandate the use of certain standards to guarantee the security and integrity of business document exchanges and fight against tax evasion and fraud. For example, the EU Commission implemented in April 2014 new regulations relating to public procurement across Europe in the form of the e-invoicing Directive 2014/55/EU, which set out deadlines by which European government bodies must be able to receive structured electronic invoices from suppliers.
The introduction of e-invoicing legislation across Europe in particular has greatly boosted the number of companies wishing to be able to exchange structured electronic invoices. Currently the number of invoices sent across Europe annually is estimated to exceed 40 billion. Meanwhile, the annual growth rate for e-invoicing is around 10-20%.
e-Invoicing Standards
In 2014, the European Commission declared UBL 2.1 was officially eligible for referencing in tenders from public administrations (one of the first non-European standards to be so recognized). It is expected that the adoption of UBL as a standard message representation will increase as it defines a royalty-free library of standard XML business documents that not only supports invoicing but also all other aspects related to the digitization of the commercial and logistical processes for domestic and international supply chains (e.g. procurement, purchasing, transport, logistics, intermodal freight management).
In addition to data and messaging standards, there are multiple alternatives for communication methods like email or secure File Transfer Protocol (SFTP). Peppol is a set of artifacts and technical specifications which facilitates easy data exchange across disparate government systems and their suppliers. Many EU countries have adopted Peppol as a communication method including Belgium, Croatia, Cyprus, Denmark, Greece, Ireland, Latvia, Lithuania, Luxemburg, Malta, Norway, Poland, , Slovenia, Sweden and the UK. PEPPOL most recent usage statistics in can be accessed at PEPPOL statistics (ionite.net).
In Australia, all New South Wales state government agencies will have to use e-invoicing for goods and services valued at up to AUD 1 million from 2022. It is expected that this will be extended to SMEs in the longer-term so a solution that is flexible to use is needed. Existing solutions present difficulties when adopted by SMEs:
Cost
Flexibility
Vendor dependence
Therefore, SMEs need a cost-effective solution that is both open and flexible. This way, they can better leverage their existing assets, use components from different vendors and be in control of the evolution of their e-invoicing solutions.
Towards a SaaS e-invoicing ecosystem for Australia
What is Software-as-a-Service (SaaS) ?
Software as a Service (SaaS) is a concept which pushes software away from local computers into Web services. This means user no longer buy software to install locally but instead buy the right to use the software over the Internet. SaaS providers maintain the hardware, perform upgrades, backup your data (sometimes), and otherwise perform all of the “keep the lights on” services and activities required to keep the software running. [1]
The purpose of the project is to introduce students to the concept of SaaS by considering each team as a company which performs the following:
The company creates a software product (referred to as a service as it is accessible via a REST API) and hosts it on a cloud server.
Customers can subscribe to the service as soon as it is operational, giving feedback to the company
The company makes both major and minor updates to the software, and the customers automatically get those updates as part of their subscription.
We will only be concerned with the technical aspects of SaaS in this project (the building and deployment of the software product) rather than other aspects like charging etc.
All software services that will be built by the teams will be around creating a SaaS e-invoicing ecosystem for Australia.
[1] Software as a Service Vs. Software as a Product - Pragmatic Institute
Ecosystem description
An ecosytem of services consists of SaaS services that can be composed, configured and customised according to different contexts in accordance with Service-Oriented Architecture (SOA) and Business Process Modelling (BPM) principles. Each service is providing a particular functionality in the-invoicing services ecosystem, can potentially be provided by a different vendor, available via an API and available on a pay by use basis. Companies (and in particular SMEs) can create flexible, open and multi vendor solutions in the form of e-invoicing workflows which enforce business document exchange processes that are applicable in a certain context.
The categories of services in the ecosystem are listed in the following table:
SaaS Category | Description | Customization Points |
|---|---|---|
Invoice Creation | Creates a standardised einvoice from an existing information system | Supports different input formats:
|
Invoice Validation | Creates a report outlining any validation errors according to Australian rules | Supports the generation of validation reports in different formats:
|
Invoice Rendering | Creates a visual representation of the electronic invoice. Fails if the invoice is malformed. | Supports the generation of visual invoices in different formats:
Supports the generation of visual in different languages
|
Invoice Sending | Sends the electronic invoice to a number of recipients. Can fail if there is a communication error. | Supports the sending of electronic invoices using different protocols:
Supports the generation of communication reports in different formats:
|
Invoice Receiving | Receives an electronic invoice from a mailbox. | Supports the reception of electronic invoices using different protocols:
Supports the generation of communication reports in different formats:
|
Invoice Storage | Stores a standardised einvoice into an existing information system. Can fail if the invoice is malformed. | Supports different storage systems:
|
Standardised electronic invoices
A rising international standard for representing e-invoices is the UBL XML standard which has been adopted in Australia. UBL was originally introduced in 2003, as an open, extensible, and customizable XML document for business. In September 2008, European stakeholders in public and government created the Pan-European Public Procurement On-line (PEPPOL) project. With UBL formatted XML invoice, it is possible to record business transactions from supplier to transportation, and finally to buyer. In this context, we assume all standardised electronic invoices are in XML format. An example is shown in the diagram below:
There are slight variations between the different UBL invoices according to countries. In this context, we use the Australia’s UBL specifications available at:
We are only considering Commercial Invoice (type 380) so other types can be ignored.