There are many good reasons to move from paper invoice archiving to electronic invoice archiving, such as reducing the space and resources needed to store invoices, maximizing data security and integrity and having an immediate, online access to any invoice you need. The results are improved efficiency and significant cost savings for most companies.
Here’s another good reason: to easily comply with requirements of local tax authorities. In the European Union, for example, all companies are required to archive invoices for regulatory and tax evidencing purposes, according to the Directive 2010/45 EU. This helps governments nip tax fraud in the bud and ensures they collect all the tax revenue they are entitled to. Invoices are key legal documents in this process, and therefore strictly regulated.
Challenges in multinational companies
For multinational companies, keeping up with rules and regulations everywhere they do business is a burden, whether doing business on paper or electronically. Simply having a generic archive isn’t enough – there are strict rules about how that archiving should happen, depending on the country. And to complicate things further, the requirements in different countries keep changing regularly.
When operating in multiple countries, many organizations see their invoice archives scattered across subsidiaries, departments and service providers. Many times, subsidiaries decide for themselves what records to keep and how those are shared by other parts of the organization. But, even though each archiving decision may be based on a sound business case, it creates major challenges on a company level to maintain consistent compliance, audit and access across your business entities.
There’s no way around it, complying to Value-Added Tax (VAT) rules is not simple, and even large corporations with great resources have been known to have compliance issues. But, non-compliance is not a option: you are risking the tax authorities catching up with you, being held accountable for missed VAT and suffering penalties.
3 Questions to Include in Your Electronic Invoice Archiving RFP
The solution is to have a cloud-based electronic invoice archiving solution that not only helps you navigate the day-to-day complexities of doing business in different countries with different governments, but that also updates automatically as laws and regulations change.
When considering possible invoice archiving solutions, below are 3 important questions you must ask each solution provider:
1. What are your data integrity capabilities
The overall intent of data integrity is to ensure data is recorded exactly as it appears and upon later retrieval, ensure the data is the same as it was when it was originally recorded. The questions you should ask any electronic archiving solution provider are:
To ensure data integrity, archived documents should be digitally signed and timestamped. A trusted digital timestamp gives you reliable confirmation that the content of your documents existed on a given date and has not changed since that time. To further prevent any alteration or deletion of archived records, it is advisable to store documents in more than one place – preferably in unalterable WORM storage (write once, read many) and online storage, with back-ups.
2. What is your retention period policy?
Retention period identifies the duration of time for which the invoice information should be maintained or "retained." The durations vary greatly between countries, with most countries expecting businesses to retain the information for five years or longer. If you are working in a multinational company with operations in different countries, it can be daunting to keep up with everchanging local rules and regulations. The questions to ask are:
The solution should automatically support invoice archiving for the duration required by local VAT/GST laws. If using the solution in multiple countries, you should be able to pre-define the applicable retention periods per country and have invoices automatically flow into the right folders and locations to meet regulatory demands. After the retention period, your archived documents should be automatically deleted to also ensure compliance with applicable privacy laws such as the upcoming GDPR regulation.
3. How will I access my invoices once they are stored?
It can be a challenge for companies operating in multiple locations to keep up with all paperwork and electronic files that come to the office every day. And before you know it, you’ve got a mountain of paper and no way to find the documents you or the auditors need. The question to ask:
An electronic, cloud-based archiving solution helps you to organize all invoices in one central location, where access rights can be determined on an individual and folder basis. You can access all invoice data at any time, making it faster, more reliable and easier to search and retrieve documents when you need them.
The maturity of electronic invoice archiving
No one is forcing you to adopt electronic archiving. As with any business decision, it’s a matter of understanding the current issues and evaluating the possible benefits. In case of electronic invoice archiving, economic and efficiency benefits are simply too great to overlook – companies across all spectrums of industry can save space, time, resources and costs.
Tax authorities feel comfortable with the traditional file cabinets full of paper, but that’s an outdated and expensive way for companies to do business. With the right electronic archiving solution, you can get all the primary process benefits while also lowering compliance risk. This will simplify the complexity of global business for you, so you can focus on what you do best: running your business!