The EDI invoice: definition and operation

Electronic Data Interchange (EDI) is characterized by the transfer of documents (invoices, purchase orders, etc.) between business partners in a standard electronic format. This method of transmission tends to develop more and more. And it prefigures the generalization of the electronic invoicing which will become reality from 2024.

Thanks to its dematerialized operation, the EDI invoice does not require any manual operation from the edition to the processing of the invoice. But how does an EDI invoice work? What is it exactly? What are the advantages ?

What is an EDI invoice?

Definition of EDI billing

The EDI invoice facilitates the direct transmission of invoicing data between management systems. It uses a standardized and structured format, and ensures more complete security than paper invoices. In fact, EDI invoicing facilitates the application of the electronic invoicing project.

The operation of an EDI invoice is based on three fundamental principles:

• The invoice must be transmitted by an EDI message;
• The EDI message must have the legal value of an invoice;
• The EDI invoice does not imply the sending of an invoice in paper format.

This method of dematerializing invoices is therefore very effective, both for companies and for the tax authorities.

Is EDI invoicing mandatory?

At this time, the use of EDI invoices is not yet mandatory, but companies are required to prepare for the upcoming changes.

Since the beginning of 2020, French companies working with public sector clients are already required to send their invoices in electronic format. These invoices are sent through the Chorus Pro platform. However, not all transactions between companies are yet dematerialized.

However, this will change as of next year, with the entry into force of the reform which provides for the obligation to accept invoices in electronic format in exchanges between companies established in France and subject to VAT, as of July 1st 2024. The compulsory issue of electronic invoices should come into force gradually between 2024 and 2026.

EDI invoice and electronic invoice: what is the difference?

The EDI invoice corresponds to one of the methods of publishing and securing an invoice in electronic format.

However, in addition to electronic data interchange, the French government provides other solutions to issue a dematerialized invoice:

The electronic signature: it consists in signing a document in a digital way with an eIDAS and RGS compliant electronic certificate. The electronic signature can thus authenticate a document.

The Reliable Audit Trail (RAT): this method allows any digital file in PDF format to be considered as an e-invoice. However, a prerequisite is necessary: the invoice must be able to be authenticated by an audit trail that reliably traces the facts that led to the generation of the invoice (sale, delivery, order).

The Factur-X format: This is a hybrid or mixed format in which an invoice in PDF/A3 format has an electronic signature. An XML file containing invoice data must also be incorporated into the e-bill.

What elements must appear on an EDI invoice?

Mandatory invoicing information

More and more companies want to dematerialize their commercial documents. The emission of EDI invoices is becoming an advantage, but it remains framed by the law.

Article 289 of the General Tax Code governs the issuance of e-invoices. In order for an EDI message to be recognized as a legal invoice, the supplier and the customer must have a mutual commitment to exchange invoices and credit notes in EDI format.

Also, to be valid, the EDI message must meet certain requirements regarding mandatory billing information. These include the following guarantees:

1. Authenticity: the issuer of the e-bill must be identifiable;
2. Integrity: the EDI message must be legally archived for a period of 10 years;
3. Legibility: the information contained in the message must be rendered in a legible manner.

If the EDI message proves to be valid, it then obtains the value of an invoice opposable to the tax authorities in case of an audit.

The standards to be respected by an EDI invoice

In order for the company's invoicing data to be transmitted and integrated into the management and information systems, the EDI invoice message must comply with certain standards. These standards are defined and regularly updated by the competent organizations. They can be GS1 or GALIA, but the most commonly used EDI invoice formats are EDIFACT, UBL 2.0 and XML.

Electronic invoices can be sent from the sender to the receiver via secure Value Added Networks (VANs).

How are companies adapting to the use of EDI invoicing?

Electronic invoicing is increasingly used by companies. More specifically, EDI invoicing consists in making electronic data interchange the official method of sending invoices between a company and its suppliers or other business partners. Several EDI message formats can be used when sending commercial documents: PDF, XML, Factur-X, EDIFACT, Odette...

To meet the standards for sending electronic invoices, these e-bills must follow the following process:

• Edition of the invoice by the stock management program of the issuer: the invoice must contain all the necessary and obligatory information;
• Conversion of data into the agreed format by an EDI converter;
• Transmission of converted data ;
• After reception, adaptation of the data to the recipient's data structure;
• Processing of the EDI invoice by the recipient.

What are the advantages of EDI billing?

We know that electronic invoicing will be mandatory for all B2B transactions as of January 1, 2024. This obligation is accompanied by the transmission of invoicing data to the tax authorities: this makes it possible to draw up VAT revenue forecasts and pre-filled returns more efficiently.

As a result, electronic invoices will soon be the only invoices allowed.

Facilitate international exchanges thanks to the EDI format

The EDI format is based on exchanges that are made between different programming languages. It can therefore be read and transmitted by the sender and the receiver by all transport protocols, which greatly facilitates international exchanges.

The EDI invoice, a gain in security

When an invoice is processed manually and not digitally, it is more likely to be subject to common errors: data entry errors, duplicates, payment errors, etc. Thanks to the use of the EDI format, invoice entry is automated. As a result, any errors are more quickly identified and corrected. The EDI invoice thus provides more security during the processing of invoices, but also for their transmission.

EDI invoicing for considerable time savings

Thanks to EDI, the processing time of each document becomes automated, which represents a real time saving for companies. Indeed, the data that is collected from the inventory management application of each trading partner can be called up via EDI. It is then sent and processed by the recipient's management system in just a few seconds. This is an efficient automation of a time-consuming task.

The financial gain of the EDI method

The processing of a single invoice in paper format represents a cost of 14 euros for a company. Indeed, the cost of envelopes, stamps, postage and reception of each invoice represents an additional cost that can be avoided thanks to the dematerialization of invoices.

In short, in addition to being compliant with the obligation of dematerialization of invoices that will come into effect in 2024, the EDI invoice is economical, efficient and more secure for companies.