Here is my third post comparing the EU and US e-Invoicing markets (read the first one, which gives a broad sweep of the differences and the second on the underlying cost structures). Without question, the biggest variation in the two markets stems from the different regulatory environments, particularly as they relate to VAT.
While in the US, there are compliance requirements for e-Invoicing projects, for the most part, the regulations in the US are very straightforward compared to those in Europe. At the state level, sales tax is seldom an issue since the states have accepted EDI and other forms of electronic invoice submission for years, and, at the Federal level, the US is the only developed nation in the world that doesn’t have VAT.
In Europe, much of the discussion revolves around VAT and how companies satisfy the relevant documentation requirements in an electronic transaction. For companies implementing in-house EDI initiatives, ensuring that the requirements of each country are met can be a very time-consuming and costly process, and, for the typical organization, not a trivial undertaking.
So, what are the implications on the market for third-party e-invoicing services? First, European companies typically spend a lot more time (than their US counterparts) getting projects approved by their tax departments. Second, the providers of these services are required to invest a small fortune adapting their systems to be compliant in each country. And, while this can be a formidable challenge for some providers (and potential customers should do their due diligence), VAT compliance does add a significant value proposition to these services in Europe (relative to alternatives), which simply doesn’t exist in the US.
I believe this is the reason why e-invoicing has received more attention in Europe than in the US as a separate, standalone category (although this is changing). I also believe this explains the varying use of alternatives in the two markets and why e-Invoicing solutions assume different flavors in the two markets – two topics I will cover in my subsequent posts!