The public sector is one of the largest investors in Germany. It is estimated that around 50% of companies have business relations with at least one public institution. For this reason, the e-bill law will not only affect public administration, but will also affect many companies from November 2018 forward. We will explain to you what it is all about and what you should be aware of.
The origin of the e-bill law goes back to a decision of the European Union in 2014. The EU Directive 2014/55/EU obliges public authorities within the European Union to accept electronic invoices in the future. This Directive must be implemented into national law by the individual Member States. As is so often the case with EU legislation, the deadline is a long time away, but time is running out now. In Germany, the electronic invoicing law was already passed on December 1, 2016, and the electronic invoicing ordinance based on it in September 2017.
The European directive is intended to promote paperless administration, increase efficiency in the authorities and, not least, protect the environment. However, the European Union directive only obliges public institutions to accept an electronic invoice. It leaves it to the national governments to define these obligations for the billers (companies) as well. However, the Grand Coalition in Germany has decided to do just that. Electronic invoices will soon become mandatory for suppliers of federal authorities.
The dream of the paperless office
This is why the law is so urgent, since so far around 80% of invoices are not sent in a machine-readable format. Many companies will therefore have some catching up to do in the coming months. However, the advantages of an electronic invoice are very interesting from the company’s point of view. Digital dispatch reduces the costs from the procurement process, increases transparency for employees and decision-makers and considerably reduces invoice processing times.
Electronic invoices are defined as invoices in a structured electronic format that can be issued, transmitted and received digitally. This facilitates automatic processing and integration into existing merchandise management and accounting systems. The word “structured” data is important.
Many companies also regard their invoices sent by e-mail as digital. In the broadest sense, this is true, but an invoice in PDF format is not sufficient in the sense of the new laws. A PDF document is comparable to an image. People can quickly recognize values such as price, date, and quantity, but this does not apply to a machine. Computers do not know how to process pure PDF invoices. This also means that automatic and electronic processing is not possible.
Creating a uniform standard
So what do you mean when you talk about a digital invoice? In practice, there are numerous formats for document exchange. The directive has therefore not fixed itself on a concrete format, but has transferred this task to the European standardisation commission CEN (the equivalent of the German DIN Institute). It is to develop a semantic data model for the most important elements (price, date, quantity, etc.) of an electronic invoice.
The CEN Commission has now also published two syntaxes that are accepted for electronic invoicing in communication with authorities. The authorities will have to accept both the UN/CEFACT Cross Industry Invoice XML standard and the UBL standard (Universal Business Language).
In Germany, the standard is called XRechnung. However, companies are not bound by XRechnung as long as they adhere to the syntax defined by CEN. The components of the invoice are more important than the XRechnung standard itself. The following information must be included in an electronic format:
- Terms of payment
- Bank details
- E-mail address / DE-Mail of the biller
- ID number
- Supplier and order number (if known)
An administrative portal is to be set up for the transmission of electronic invoices to the public procurement authorities. To verify the authenticity of the sender it is therefore necessary to register on the portal with a user account. E-bills can be introduced there in various ways:
- Online form: Direct input of invoice data. Difficult when you have many invoices, but suitable for very small companies.
- File upload: Electronic invoices can be uploaded directly.
- DE-Mail/E-Mail: If an encrypted connection is possible.
However, it will be easier for many companies to set up their own solution. This is of course also taken into account by the European contracting authorities and is already standard practice for many SMEs. Companies can send electronic invoices to public institutions via their own gateway, like many companies practise it already in the b2b business. The introduction of the new e-legislation is therefore an appropriate time to digitise accounting. The advantages for companies are enormous. Studies assume a cost reduction of up to 70% in the procurement process. E-bill promises one of the easiest ways to increase efficiency in the company.
Introduction in Germany
The implementation and application of the EU directive in Germany is carried out in several steps. For the supreme federal authorities (e.g. the Federal Chancellery and the federal ministries), the deadline for implementation already ends in a few months, on 27 November 2018. The Directive allows Member States to postpone by one year the deadline for many other institutions, such as sub-central contracting authorities, sectoral contracting authorities and concession providers. For them, the obligation will only come into force on 27 November 2019. However, these first two steps are all about mandatory acceptance by the authorities. One year later, from 27 November 2020, the federal billers (suppliers) will also be obliged to issue an electronic invoice. From this point on, suppliers can no longer pay with a PDF invoice or invoices sent by post.
Although there are exceptions to this rule, these are minimal: mainly direct orders (up to a contract value of EUR 1’000.00) are still exempt from the obligation after 2020. In addition, defence and security-specific orders with secret invoice data and procurement abroad are excluded from the new regulation. That means every other company must soon comply with the new directive. If you would like to know more, we are more than happy to help you.