What is an XML invoice and what processing challenges are involved?

In finance, you have gone through many changes over the past few years, especially when it comes to incoming document processing. The vast majority of companies now receive (almost) no paper invoices. They handle the incoming invoice flow by mail – usually through a separate invoice mailbox. At the same time, the formats in which invoices come in have increased in diversity. A PDF file, a UBL invoice (“UBL” stands for “universal business language”) and, of course, an XML invoice: you receive documents in all shapes and sizes. E-invoicing is gaining prominence. As a result, you face new processing challenges. With electronic invoices on the rise, what do you need to consider in finance? And how do you meet the challenges? And what exactly is an XML invoice?

E-invoice, digital invoice, XML file: getting started with terminology

With all kinds of invoice-related terms coming your way, it’s no luxury to get them straight. So let’s clear up the misunderstandings first!

Many people mistakenly use “e-invoice” and “digital invoice” as synonyms. For processing an
e-invoice
basically does not require you to perform any manual operations. Indeed, this term represents a systematically constructed file that can be processed electronically from one computerized system into another. A digital invoice is something quite different – namely, a digital file that you cannot process automatically.

Standards are currently being defined from different angles. It makes sense, because if you standardize the exchange of invoices using XML and everyone adheres to the guidelines, the benefits will be even greater: you will save even more time and money together, and the error rate will decrease further.

If you receive a pure XML file, you can skip certain steps. If it is a purely digital document, then the recognition is already good. The problem is that this is not always the case. And even when you do receive a clean XML invoice, you face bottlenecks.

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From XML invoices to PDF files: the administrative realities of diversity

The dot on the horizon is that everyone sends and receives invoices in the same e-invoice format, so that everyone works with a type of XML file in which an agreed structure is defined.

However, we have not reached that point yet. A variety of e-invoices exist , such as UBL 1.0, UBL 2.0, SI-UBL (which the government uses) and DICO. In short, e-invoicing is characterized by diversity. And therefore, partial manual processing is often necessary anyway.

With all these different XML formats, setting up an organization-specific processing process is inevitable for many companies. After all, you ultimately want to process each (e-)invoice on the correct dimension, cost center and general ledger account in your ERP system. In addition, it is crucial that the right approvers approve the invoice on time.

On top of that, not every incoming invoice is an XML invoice. Electronic invoicing takes place mostly within industries. You also receive documents from suppliers operating in other sectors. They may not have embraced e-invoicing yet. Or they use other standards. This means that invoices do not come in in one standard format. In addition to various types of XML invoices, you receive invoices as PDF files, as email attachments and even as body text of emails.

All this makes setting up an efficient digital administration quite complex! Fortunately, it is possible. How? By processing all incoming invoices in the same way. To do this, you can use the four-step plan we describe below.

4-step plan: face the challenges!

Step 1: Look critically at your processing process

Because you want to process all purchase invoices as optimally as possible, it is necessary that they all go through a unified process. When you embrace e-invoicing, a lot changes in this process. Therefore, take a critical look at it. Can you skip certain steps? For example, is it still necessary to send invoices around for approval? You might decide to do away with the approval process. In that case, new questions arise. What do you do when an invoice does not match the purchase order? So which approver do you fall back on? By paying attention to each step of the process, you ensure the most efficient way of working – even when there are exceptions!

Step 2: Ensure uniform processing of all incoming invoices

For unified processing of all invoices in your administration, you need a total solution. After all, that’s how you maintain insight and oversight. So choose software that allows you to process all invoice formats, including the various XML variants common within e-invoicing – from INSBOU 3 (DICO) and SALES005 to UBL 2.0 and UBL 2.1. If you receive XML invoices in another format (specific to your company, industry or ERP system), find a software vendor that supports it.

Step 3: Reduce repetitive actions

Are you spending a lot of time breaking down cost invoices, recalculating VAT per line and processing purchase invoices with many lines? The right software will save you many hours and a lot of effort. If you use a solution that offers automatic rule recognition, the system sets up the XML rules to prepare the booking. Handy!

Step 4: Approve invoices in one system

Like all other invoice types, an electronic invoice must pass the appropriate approvers. Only if they give their timely approval can you make the payment smoothly and smoothly. Workflow software ensures that this process runs efficiently. This means that the entire processing of (e-)invoices is done in one system.