It has helped streamline invoice management, increased efficiency in accounts receivables management and has also reduced audit risks
The Indian e-invoicing vision & the adoption rate
Electronic invoicing or e-invoicing was introduced in India with a vision to bring transparency in invoicing and to curb the fake tax credit menace. E-Invoicing aims to transform the ways businesses interact with each other.
When an e-invoice is generated, it can auto-fill a few tables of the GSTR-1 for the supplier. E-invoicing has offered much more than these to the growth of Indian businesses.
For business-to-business (B2B) sales, all enterprises registered under the GST law with total annual revenue over ₹50 crore must generate e-invoices. The system adoption rate stands at 80 per cent of the applicable businesses that have more than ₹50 crore yearly turnover.
It will soon encompass enterprises with an annual turnover of more than ₹5 crore. However, the actual potential of e-invoicing will only be realised when all firms, including the small scale enterprises, join the ecosystem.
Realising benefits of moving from pen & paper to cloud for e-Invoicing
The e-invoicing system has helped streamline invoice management for many enterprises and increased teams’ efficiency in accounts receivables management. It has also reduced audit risks. It advocates straight-through processing to allow higher invoice processing and generation without manual intervention.
The high dependency on the pen and paper system for invoicing is coming down with the development of the e-invoicing ecosystem. Using a conventional invoicing system is subject to duplication and transcription errors, leading to false accounting and tax returns filing.
Moreover, the CBIC has clarified vide CGST Circular No. 160/2021 on September 20, 2021, that there is no need to carry physical invoices or notes for movement of goods where the taxpayer is subject to e-invoicing and invoice reference number is already generated on it.
E-invoicing has necessitated enterprises of all sizes to embrace digitisation. They must adopt ERP and tech-based solutions for billing to pass on data to the GST system smoothly. This will convert to the reduction of accounting and tax filing errors.
The e-invoicing system not only enables the generation of invoices electronically but also focuses on process automation that acts as a fuel for businesses to grow. The e-invoicing system works as a precautionary measure for such mishappenings.
Digitising the accounts payable processing and order-to-cash cycle
E-invoicing simplifies business processes such as accounts payables and receivables. The system builds efficiencies in the order-to-cash cycle. E-invoicing allows invoices and notes to be recorded on electronic systems and hence creates a tracking path.
When the enterprise integrates its ERP/accounting system with invoicing or billing system, the accounts payable process gets streamlined.
It avoids errors, otherwise prevalent with manual data entry or accounting and has the potential to automate payment reminders. Expediting payments act as a crucial incentive for businesses to implement e-invoicing.
It makes seamless payments possible for companies and can lead to effective working capital management. Certain intangible benefits cannot be ignored, such as improved transparency in operations and internal controls. A single entry of transaction details to raise the invoice should suffice.
The system or ERP solution must be capable of tracing the transaction through the process of order-to-cash, boosting the team’s efficiency and saving time. It creates an audit trail as well.
Electronic invoicing allows data to be stored on the system which, in turn, reduces manual work in GST reconciliation to a greater extent. The data can be imported to third party compliance solutions with a click of a button. The reconciliation process under GST had otherwise been complicated before introducing e-invoicing with businesses digitising slowly.
Moving all transactions to the digital platform allows data reconciliation between books and returns instantly. Automation in compliance favours less time and money spent. Accordingly, many enterprises that have implemented e-invoicing look forward to cutting down the compliance costs in the long run.
Taxpayers become confident about the data reported in returns and can also avoid interest and penalties. Therefore, e-invoicing can be referred to as a revolution among Indian businesses.
A better buyer-seller relationship established
The system has allowed the development of a better communication link between the seller and buyer. Any follow-ups can happen through digital automation, made possible with the e-invoicing mandate.
The government validates the e-invoice data. Hence, this additionally allows building trust with the buyer in ensuring genuine input tax credit claims are available for the claim to the buyers.
Growth opportunities for fintech
The introduction of the e-invoicing system paved the way for many ERP solution providers and fintech companies to prosper. The software service providers have constantly supported businesses all along with the setup and implementation journey of e-invoicing.
The GST Network aims to introduce more invoice registration portals (IRP) for validating and authenticating e-invoices at a large scale for all the B2B sales without any business disruptions.
The third-party solution providers are continuously working towards bringing innovative solutions for the convenience of taxpayers and businesses. More feature-rich utilities, especially for emerging companies, helps in the easy adoption of e-invoicing during the digitisation era.
The GST Network may soon unify e-invoicing, e-way bill and GST compliance in the future for businesses to reduce their compliance overheads. Hence, third party solution providers could accelerate this process, thus giving them market opportunities for growth.
Therefore, faster adoption of e-invoicing can positively impact the Indian economy in the long run as well. It will help our country reach new highs in the global race of ease in doing business.
(The author is Founder and CEO of ClearTax)