Coping with tax-mandated eInvoicing may be challenging for companies that work on an international scale, but in meeting those mandates there’s a silver lining of sorts that can lead to improved back-office processes and other increased efficiencies.
It’s a reality that spawned a strategic partnership between FourQ and Pagero announced Wednesday (Sept. 8) in a press release with the goal of streamlining global eInvoicing and intercompany automation needs.
The companies bring different strengths to the new partnership as FourQ is a leading provider of intercompany financial management software while Pagero is a compliant eInvoicing expert.
Together, they will help corporate finance teams manage eInvoicing on an international scale.
The two companies will integrate their solutions and, in the coming months, will offer an integrated, joint solution that delivers eInvoicing to comply with tax authorities around the globe while managing the complex nature of intercompany processes.
54 Countries, Different Strategies
Tax-mandated eInvoicing, eInvoicing made compulsory by indirect tax authorities around the world, has been spreading rapidly, said Pagero Vice President of Regulatory Affairs Nazar Paradivskyy.
He said the mandates currently exist in some form in about 54 countries but are expected to be added in 12 more next year, followed by another seven nations in 2023.
“There is great momentum from governments, driven by different reasons,” Paradivskyy said.
When eInvoicing was launched 16 years ago, it was driven by tax collection. Strangely, he said, there is some debate whether it was Chile or Mexico that debuted the mandate since both claim to have been first.
In time, other countries added tax-mandated eInvoicing for the same reason or because they saw other benefits in going digital. Amid the pandemic, record numbers of countries suddenly saw the benefit of reducing the need to physically touch paper.
“More and more tax authorities have been waking up,” said FourQ Vice President of Tax Development Dirk Van Unnik. “So, companies have been adding experts to deal with this.”
The requirements differ from country to country, with some mandating eInvoicing only from companies of certain sizes and industries or when doing business with the government. Some are voluntary, with the government offering incentives to companies that go digital. In one case, businesses providing goods and services to the government will be paid more quickly if they move to an eInvoicing system.
In any case, companies doing business in those countries must be prepared to cope with the challenge of tax compliance.
Coping With Changes
Compliance is another source of aggravation for businesses as regulations are constantly changing the rules and requirements. Still, Van Unnik said, many companies haven’t taken this challenge seriously and have developed solutions in house and then had to maintain them, or use several different country-specific solutions.
“We are working on one single solution and partnership,” Paradivskyy said. “It’s not siloed; it’s holistic. One single solution that allows companies operating in several countries tax and business efficiencies coming from digitally driven innovation.”
Real-Time Invoice Reporting
Some countries have implemented continuous transaction controls (CTC), real-time invoice reporting to tax authorities. In turn, tax reporting is changing.
Historically, tax reporting was done at the end of each month or quarter. With CTC, in most countries, it is now done in real time with no human intervention. So, with CTC, the aggregation step is likely to go away.
“Why aggregate or report what you have already given to authorities?” Van Unnik said. “This is just the start of a shift in the whole tax reporting world.”
CTC started with the invoice, but Van Unnik said, it is likely to encompass other supply chain documents in the future, such as payments.
“It’s coming, and it’s going to be big,” he predicted. “It’s going to be a landslide.”
Opportunities for Efficiencies
FourQ Chief Transformation Officer May Ma said the solution that will be provided by the new partnership includes intercompany financial management. Today, two-thirds of companies have solutions from multiple vendors. With a global approach, the solution from the new partners aims to automate 80% of intercompany processes, including managing tax, treasury, receipt and settlement.
“I’m very excited about the partnership,” Ma said. “It’s a perfect solution in which one plus one is greater than two.”
Beyond the technology, the partners will provide other forms of support to companies coping with these challenges.
“It’s not just technology, but people who can help you in planning and preparing for change,” Paradivskyy said.
“Our partnership is about a whole shift in financial processes,” Van Unnik added.
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