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The cost of I2P non-compliance – Taking the right action: Part 3

In part one of this series, we talked to Ruud van Hilten of Tungsten Network about the issues of invoicing non-compliance; in part two we sought his guidance on the priorities business leaders should be thinking about. In part three we ask him about what organizations need to do to take action to avoid non-compliance and all its consequences.

Many large organizations will have a dedicated tax team and an IT department that will help them comply, but as we explained in part one the complexities of compliance are many. Most SMEs, however, won’t have a large tax office or a dedicated IT department that allows them to connect to government portals, and can jeopardize their revenue or cashflow by spending a lot of time on it. Yet they still need to find a way to be compliant. Many struggle to do this. The answer is usually to outsource to a third party, as we explained in part two, one which they must assume is aware of all the many and complex local requirements.

What you need from your compliance partner

“First of all,” explained van Hilten, “you need to find a provider that understands exactly how different government systems and mandates work, their requirements and the consequences of not meeting them. You need a specialist that is very well versed in transmitting trading documents, like invoices, and has expertise in archiving these documents properly — as with all government mandates, there is usually a requirement to store documents compliantly as well as create them. It’s an area that is subject to significant legislation.”

So what does this mean? It means you need to find a partner that does e-invoicing for a living, and for whom it’s not a side-product.

“At Tungsten,” he said, “this is the core of our business: the organization, system and network are all built around, and built for, providing compliant e-invoicing as a service.

“Your partner must be able to ensure all mandatory fields in your invoices are accurately populated and complete; these fields are often different for different countries. It is not good enough to look at mandatory fields only from an indirect tax perspective like VAT, there are often requirements for fields from other tax areas like income tax in India or corporate tax in Germany and France.”

Tungsten, for example, generates legally compliant e-invoices on behalf of suppliers across 54 countries.

“Ideally, you also need someone that works with suppliers to generate invoices on their behalf,” he continued, “taking that workload and responsibility upon themselves to ensure compliance. This is more than just creating the data for a file.”

The Tungsten Network operates under what it calls a ‘delegation of authority’ which states they are empowered by the supplier to create their invoices for them.

“Your partner should definitely be able to validate the invoice data a supplier sends. It should make sure all components are accurate and compliant, from the invoice number to the validation of the sender; check whether it is an invoice or a credit note; make sure the invoice matches the requirements of the buyer and map prices to thresholds and appropriate approvals.”

Where any check falls short, Tungsten will attempt to make an invoice compliant. Where it cannot, it will reject the invoice back to the supplier, but within seconds rather than weeks. This means a supplier can resubmit quickly, eliminating the need for a credit note and having less impact on cashflow.

“What we do,” said van Hilten, “is create extra value for the customer, not just by validating the compliance of an invoice for the supplier, but by driving digitization for the buyer while giving the government what it requires. It’s a much more efficient process.”

How they create extra value 

In such a vast and complex world of multi-government compliance requirements, firms offering e-invoicing services must stay ahead. “At Tungsten Network we stay on top of compliance through our team of tax experts,” he explained. “Unlike many other providers, we also collaborate closely with the specialist teams of one of the best consultancies in the world, PwC, to understand compliance demands, foresee changes and define best practices for every country in the world.

“As well as fulfilling legislation requirements, validating and archiving these legal documents, we provide full visibility of where an invoice is at any given time. All in all we drive a lot more value to both parties. Because of that, customers find that the benefits associated with outsourcing to a partner far outweigh the cost of non-compliance.

“The fact that Tungsten is networked creates advantages that others cannot. A supplier signing into the network can submit an invoice to any one of the buyers, and only needs to connect once. And any buyer connected to the network can receive invoices from its thousands of suppliers. So it’s a ‘connect-once, send-and-receive-many’ platform, and that creates huge efficiencies.”

“When you consider the ongoing cost of constant change, what governments come up with and what buyers require you to do, Tungsten estimates that it can be 70% cheaper to outsource than to do it in-house.”

So in summary, for invoice compliance:

  1. Use a third-party provider – regardless of who that is.
  2. Choose a real specialist with diversified service levels – one that the largest companies on the planet, as well as some of the smaller ones, have put their trust in.
  3. Find a provider that has tax experts in-house and collaborates with other experts to be on the front foot of legislation.
  4. Identify an expert that has the ability to turn a validation project into a business value project through the added efficiencies of a network ecosystem.
  5. Make sure that network is safe and secure, and can ease the accounts payable process with higher visibility, greater insights and speed.

“As your business grows,” van Hilten concluded, “compliance obligations grow too. It’s more and more important to have a reliable and scalable means of managing your responsibilities. Luckily, responsibility can be outsourced alongside your legal obligations.”

This Brand Studio article was written with Tungsten Network.