There is no company without invoices. Traditional paper invoices have recently been joined by electronic invoices, which are increasingly used by companies all over the world. In this article we will explore the duality between paper and electronic invoices. What are their advantages and disadvantages? Which is the better option?
Table of Contents
1. Paper or electronic invoicing?
The digital revolution has transformed the way companies handle financial documents. The paper invoice, the undisputed protagonist for decades, is beginning to lose importance and is being replaced by the electronic invoice due to its numerous advantages.
The choice between paper and electronic invoices depends on your needs and preferences, as well as the legal requirements and tax regulations in your country. Other elements, such as your customers’ preferences, operational efficiency and approach to sustainability, also play an important role. Often, companies choose a combination of both formats to meet the needs of different customers and still comply with legal regulations.
2. What is an invoice?
An invoice is a commercial document used to officially record a transaction of purchase or sale of goods or services between two parties: the seller and the buyer.
This transaction can take place between businesses (B2B), between businesses and the public administration (B2G) or between a business and a final consumer (B2C). The invoice is a key element in the accounting and financial management of any company.
Invoices are legal documents that support the transaction and serve as proof of purchase or sale. In addition, they are essential for business accounting and tax reporting. Companies usually keep copies of their invoices as part of their financial documentation and must retain them for a certain period of time, in accordance with local tax regulations.
2.1 Invoice details
Regardless of whether it is a paper or electronic invoice, this document must contain a number of mandatory details in order to be legally valid. These details may vary depending on the legislation of each country, but usually include the following information:
- Issuer details: the details of the seller or service provider, including name, address, tax identification number (NIF or CIF) and other contact details.
- Consigneedetails: the details of the buyer or customer, including name, address and tax identification number (if a company).
- Issue and duedate: the date on which the invoice is issued and the date on which payment is due or the due date for payment.
- Invoice number: a unique number identifying the invoice, which is usually consecutive and facilitates the traceability and organisation of transactions.
- Description of goods or services: clear and precise details of the goods or services sold, including quantities, unit prices and totals.
- Taxes: Applicable taxes, such as Value Added Tax (VAT) or other local taxes, together with the corresponding amounts.
- Total payable: the total amount payable by the buyer, including the cost of the goods or services and taxes.
- Paymentterms: the terms of payment, including the payment methods accepted and the agreed deadlines.
- Bank details: if specified, the seller’s bank details to enable the buyer to make payment.
2.2 Invoice types
There are several types of invoice, and the electronic invoice is one of these types, characterised by the fact that it is issued and received in digital format through a programme approved by the Tax Agency, following certain parameters.
The most common types are ordinary invoices, simplified invoices, corrective invoices and proforma invoices. The ordinary or full invoice (it can be in paper or electronic format) is the most commonly used for sales or service transactions that are not subject to any legal requirement.
The simplified invoice is usually used in transactions of a smaller amount or when a full invoice is not required. The corrective invoice is a special type of invoice used to correct errors or omissions in an invoice already issued.
Finally, the pro forma invoice is an informative document, with no fiscal or accounting value, which is used as a quotation or offer to carry out a commercial transaction.
3. Electronic invoices
An e-invoice is an invoice issued and received in electronic format that complies with certain regulations and legal requirements. An e-invoice may be a simplified or complete invoice, but it is presented in digital format and not on paper.
3.1 Advantages of electronic invoicing
The digitalisation of invoices offers a series of advantages that make it the most attractive option for many companies today. Adopting electronic invoicing significantly improves financial management and contributes to a more efficient and sustainable business environment.
Here are the main advantages of using electronic invoicing:
- Efficiency and speed: digital invoices can be generated, sent and received instantly, speeding up the invoicing process and reducing payment times. This improves the company’s liquidity and helps avoid late payments.
- Cost savings: Digital invoicing eliminates the need to print, send and archive paper documents. This reduces the costs associated with printing, paper, postage and physical storage of invoices.
- Sustainability: By eliminating the use of paper and the need for physical transport, digital invoices are an environmentally friendly option. They help reduce paper consumption and the carbon footprint associated with transporting documents.
- Reduced errors: Digital invoices are often generated automatically from transaction data, which greatly reduces the possibility of human error in calculations or typing. This can help avoid disputes and delays in payments.
- Ease of storage and access: Digital invoices can be stored in an organised way in electronic systems, making them easy to search and retrieve in the future. This is particularly useful for audits or tax compliance.
- Security: digital invoices are usually equipped with advanced security measures, such as electronic signatures, to guarantee their authenticity and integrity. In addition, backup copies can be made in several locations to prevent data loss.
- Facilitates reconciliation: Companies can integrate financial management systems with e-invoicing for more efficient account reconciliation and a real-time view of the financial situation.
- Remote access: digital invoices can be accessed from anywhere with an internet connection, allowing for more flexible and efficient financial management, even when working remotely or travelling.
- Regulatory compliance: In many countries, the adoption of e-invoicing meets legal and tax requirements. It can facilitate regulatory compliance and simplify tax reporting.
- Improved customer relations: The speed and efficiency of sending invoices can improve customer satisfaction, which in turn can increase loyalty and repeat business.
3.2 Disadvantages of e-invoicing
Despite the many advantages of e-invoicing, it can also have some limitations that are important to bear in mind:
- Technology requirements: the implementation of e-invoicing systems and software may require an initial investment in technology. Smaller companies may find this investment expensive.
- Internet connection: Sending and receiving electronic invoices requires Internet access. Although this is becoming less of an issue, some areas with poor connectivity may have difficulty implementing e-invoicing.
- ITsecurity: e-invoicing is subject to IT security risks. However, companies offering this service must provide measures to protect their data and systems in order to be accredited as a secure solution.
- Staff training: Implementing e-invoicing systems may require training staff to understand how to use them correctly. This may require time and resources.
- Technology dependency: in the event of technical problems or service interruptions, the ability to issue or receive e-invoices may be compromised, affecting business operations.
- Customer adaptation: Some customers may prefer paper invoices or may not be ready to receive e-invoices. Convincing customers to adopt e-invoicing can be a challenge in some cases.
Despite these limitations, e-invoicing remains a very attractive option for many businesses due to its many advantages in terms of efficiency, sustainability and agility. Ultimately, the choice between e-invoicing and paper invoicing will depend on the specific needs and circumstances of each company, as well as the legal requirements in force.
4. Paper invoicing
Although digital invoices are the preferred option today, paper invoices still have their advocates. Here are some reasons why some businesses cling to traditional invoices:
- Compatibility: some companies have not yet implemented digital systems, so paper invoices are more compatible with existing processes.
- Legal requirements: in some places, regulations may require the use of paper invoices for certain transactions.
4.2 Disadvantages of paper invoices
Compared to electronic invoicing, the paper version has some disadvantages, which explains why many companies are opting for digitisation of accounting processes. Some of the most significant disadvantages of paper invoices are as follows:
- Higher costs: producing paper invoices involves additional expenses, such as the purchase of paper, printer ink, postage and physical storage costs. This can lead to higher operational costs for businesses.
- Poor agility: Creating, printing and sending paper invoices can be time-consuming, which can slow down the invoicing process and cash flow. In contrast, digital invoices can be sent instantly.
- Risk of loss or damage: Paper invoices are vulnerable to physical loss or damage, such as fire, flooding or deterioration due to weather conditions. This can result in the loss of important financial information.
- Management and organisational difficulties: storing and retrieving paper invoices can be complicated and time-consuming, especially for businesses managing large volumes of documents. In contrast, digital invoices can be easily stored and retrieved in electronic systems.
- Less environmentally friendly: The production and disposal of paper can have a negative environmental impact. Paper invoices contribute to the consumption of natural resources and the felling of trees.
- Accessibility limitations: Paper invoices cannot be accessed remotely, which can make financial management difficult for companies with employees working remotely or from multiple locations.
- Increased susceptibility to human error: Paper invoices may contain typographical errors, miscalculations or missing information due to human intervention in the creation and management process.
- Reduced security: paper invoices may be more vulnerable to unauthorised access or theft, compared to digital invoices that can be protected with electronic security measures such as encryption.
- Lack of traceability: tracking and monitoring transactions can be more complicated with paper invoices, as they do not provide an electronic record of activity, as digital invoices do.
5. Benefits of automating invoice management in your company
Using expense management software such as Tickelia brings a substantial improvement to a company’s invoice management by automating and simplifying many aspects of the process. With Tickelia, all employees can report their expenses in a very simple way. Simply photograph any receipt with a mobile phone and the OCR/ICR/QR system reads all the necessary fields and generates the record. This digital document meets the requirements of the Internal Revenue Service and is fully valid, so the paper receipt can be eliminated.
Tickelia securely archives and stores all business expense documentation, which can be quickly consulted, reconciled and cleared. In addition, the solution enables the use of smart payment methods, such as Tickelia Visa cards, which help to improve control of business expenses. The use of these virtual cards can be customised with restrictions and limits to ensure compliance with the company’s spending policy.
In short, expense management software such as Tickelia simplifies and optimises a company’s invoice management process, resulting in greater efficiency, accuracy and control in financial management. This is especially beneficial for companies that regularly manage a large volume of invoices and expenses.
Request your free demo now and discover what Tickelia can do for your company.