A digest of the European Union e-invoicing directive and how Moody’s can help

The European Union e-invoicing directive (2014/55/EU) is a piece of regulation that mandates the use of electronic invoicing (e-invoicing) for public procurement across all member states while also encouraging the adoption of e-invoicing standards in a Business-to-Business (B2B) setting.

e-Invoicing is designed to streamline invoicing processes, making them faster and more efficient. It is expected to enhance efficiency, drive cost savings, and simplify cross-border transactions. Businesses can, for example, expect potential cost savings due to reduced paper usage, lower processing costs, and faster payment cycles. Broader adoption in a B2B setting could also enhance interoperability across the private sector.

Compliance with the directive will require systems and processes to be updated to meet its requirements. Member states have already begun the process of consulting and implementation, with the phased rollout beginning in 2024 and continuing until 2028.

The directive is expected to help facilitate smoother cross-border invoicing procedures, which is particularly beneficial for businesses engaged in international trade. It also aims to prevent fragmentation within the internal market, promoting a more integrated and digitized single market.

The directive requires invoices to be issued, sent, and received in a structured data format to ensure consistency and interoperability across the EU. This standardization aims to reduce trade barriers caused by different national legal requirements and technical standards.

Implementation of B2B e-invoicing has begun in several EU countries, creating a path for others to follow.

• Belgium – B2B e-invoicing will be mandatory from January 1, 2026.
• France – B2B mandates are starting with large and medium-sized companies in September 2026, followed by small businesses in September 2027.
• Germany – On January 1, 2025, e-invoicing became the standard method for B2B transactions compliant with EN 16931 standards in Germany. Companies with an annual turnover of more than €800,000 need to be compliant by January 1, 2027, and all companies in Germany by January 1, 2028.
• Italy – e-Invoicing has been mandatory for B2B transactions since January 2019, using the Sistema di Interscambio (SdI) platform and the FatturaPA XML format.
• Poland plans to implement mandatory B2B e-invoicing in 2025.
• Portugal – Currently, businesses with a turnover exceeding €50,000 must comply with SAF-T requirements for B2B e-invoicing.
• Romania – On January 1, 2024, Romania mandated e-invoicing for all VAT-registered B2B transactions via the RO e-Factura platform.
• Spain – While Business-to-Government (B2G) e-invoicing has been mandatory since 2015 in Spain, gradual implementation of mandatory B2B e-invoicing was passed by Law 18/2022 and, pending a ministerial order regulating technical specifications, enactment is expected in 2027.

e-Invoicing has the potential to transform how companies manage their invoicing processes, leading to greater efficiency and data accuracy. However, it requires careful planning and execution across several dimensions, including people, processes, technology, and data.

People

Effective change management is important for the smooth adoption of e-invoicing, helping minimize resistance and increase engagement. This can involve clear communication and support throughout the transition, as well as training and skills development. Employees will need to be trained in new e-invoicing systems and processes, including understanding how to use the technology and comply with regulatory requirements. Successful implementation will also require coordination between various departments such as finance, IT, and procurement.

Processes

Companies will need to carefully adapt their invoicing processes to meet the regulatory requirements. Meeting the standards will include ensuring invoice templates are correctly formatted, with the correct data and entity verified, and submitted to the appropriate platforms.

Technology

One of the initial technical considerations for businesses will be whether their IT infrastructure can support the change in transaction volumes that will be needed for the adoption of e-invoicing. Businesses will also need to consider how to integrate e-invoicing solutions with existing Enterprise Resource Planning (ERP) and accounting systems to support seamless data flow and reduce the risk of discrepancies.

Another key factor is cybersecurity, as cybersecurity measures will be needed to protect sensitive invoicing data from possible threats.

Data

Data governance is the foundational block for successful adoption for any new technology, and the same is true of e-invoicing. The requirement is to have invoices in a structured data format. Businesses will need to operate entity resolution to make sure invoices are correct. Accurate and consistent data will be crucial for compliance and operational efficiency to improve data quality and reduce errors.

Effective data management practices will be essential to handling the large volumes of data generated by e-invoicing, which includes storage, retrieval, and analysis, as well as data security.

E-invoicing data from a client's accounting system can act as one data delivery channel that integrates seamlessly with other data sources within the client's broader data ecosystem. This integration supports a more comprehensive view of financial transactions to enhance decision-making and operational efficiency.

Maintaining and matching e-invoicing data with other stored internal data can be vital for driving consistency and accuracy, to avoid discrepancies and foster more reliable financial reporting.

While offering potential for efficiency and cost savings, e-invoicing is also vulnerable to various criminal activities.

Trade-based money laundering:

• False invoicing: Criminals may use false invoices to disguise the proceeds of crime and move value through trade transactions.
• Under-invoicing and over-invoicing: These techniques involve misrepresenting the value of goods or services to launder money.

Fraud:

• Invoice fraud: Fraudsters may create fake invoices or duplicate legitimate ones to deceive businesses into making payments.
• Identity theft: Criminals can impersonate legitimate vendors to submit fraudulent invoices.
• Employee fraud: Employees with access to invoicing systems might manipulate invoices for personal gain.

Cybercrime:

• Phishing and malware: Cybercriminals may use phishing emails or malware to gain access to invoicing systems and manipulate or steal data.

Tax evasion:

• Manipulating invoice data: Businesses or individuals may alter invoice details to evade taxes or import duties.

Moody's offers third-party risk management solutions that can help companies verify the suppliers and other entities they are working with; conducting due diligence to assess potential risks throughout the lifecycle of a relationship.

Moody's data and matching processes can play a crucial role in entity resolution against Tax-IDs and VAT numbers, for instance, to identify and link entities across data sources. Our data and workflow solutions that underpin Master Data Management (MDM) offer a structured approach to integrate real-time company reference data and entity enrichment information, so organizations can achieve greater transparency, accuracy, and data governance.

Our solutions also include automated workflows and advanced analytics to screen, verify, and monitor entities anywhere in the world. By leveraging Moody’s extensive data estate and integrating compliance checks, we can help customers uncover hidden risks associated with crimes such as money laundering, fraud, beneficial ownership, and connections to adverse media stories.

As well as helping businesses with entity verification and resolution, a proactive approach to risk management can help mitigate threats like trade-based money laundering, cybercrime, and various types of fraud that could be associated with e-invoicing.

For more information on Moody’s data, analytics, and workflow automation solutions that help streamline complex risk and compliance processes, please get in touch with the team any time.