Germany's Growth Opportunities Act: A Case Study

On January 1, 2025, Germany will begin a significant shift toward mandatory e-invoicing as part of the Growth Opportunities Act, which was approved by the Federal Council on March 22, 2024. This initiative aims to enhance Germany’s global competitiveness by modernizing the economy, improving efficiency, encouraging investments, and driving growth.

Germany’s journey towards mandatory e-invoicing starts with the elimination of the need for recipient consent to receive e-invoices that comply with the European Norm: this means that if a supplier issues an invoice that is compliant with EN16931, the buyer is required to accept it. The buyer cannot refuse the invoice or request an alternative format. To keep the barriers to move to e-invoicing as low as possible, the Government has decided not to prescribe a specific invoice format and to leave the submission method of the e-invoice completely open and advocating that suppliers attach their e-invoices to an email.

By January 2027, all invoices must be issued, transmitted, and received in a structured electronic format, requiring suppliers to create and send e-invoices to their buyers.

Germany's approach includes a 'hybrid' e-invoicing model, similar to the French Y-Model. This combines a central e-invoicing platform overseen by the BZSt (Federal Central Tax Office) with the decentralized exchange of e-invoices via service providers.

The rollout will occur in phases, starting with larger enterprises (those with an annual turnover exceeding EUR 800,000) and later extending to small and medium-sized enterprises (SMEs).

Global Implications of E-Invoicing Mandates

Germany's move toward mandatory e-invoicing is part of a broader global trend. Countries worldwide are adopting similar measures to enhance tax compliance, reduce fraud, and streamline business operations. These initiatives reflect a shift towards digital economies, impacting businesses engaged in international trade.

Obligatory e-invoicing comes with significant challenges, especially, but not exclusively, for businesses that operate in multiple countries. See below for a brief list of the issues that come with clearance mandates… note these are just the worst ones, there are more.

• Scope differences: in some countries, the requirements only apply to domiciled companies; in other countries, registered entities are also in scope. Or you may find that in some countries, business-to-consumer transactions are in scope, or export and import transactions, while in other countries, the scope is purely domestic
• Invoice formats: different countries use different formats and require different information in invoices. And even in a single country, phased rollouts force businesses into having to maintain various invoice types and formats, often with different invoice content requirements causing significant AP and IT challenges
• Invoice submission and reception: the clearance model a country chooses to use, comes with a bespoke set of invoice submission and reception requirements: via a central government platform, Peppol, locally certified providers. Or, conversely, there are no requirements and email is promoted, causing significant AP challenges
• Archiving requirements: an area that deserves more attention. Local archiving requirements are sometimes more challenging than the e-invoicing requirements themselves
• Bad invoice data. What is good for government isn’t necessarily good for business. An invoice may be 100% compliant, it may have passed all government clearance and still fail your AP process and lead to invoice exceptions.

These challenges create a unique puzzle of tension between business objectives and government requirements.

Preparing for the Changes: Tools and Strategies

Compliance with government-mandated invoice clearance and efficiency improvements in invoice automation are closely related but very distinct processes, with their own very distinct challenges, and with differing objectives.

And while they are closely related, mandatory invoice clearance and e-invoicing should not be confused. they mean quite different things and have hugely different impacts on businesses.

Government mandates primarily focus on regulatory compliance and tax transparency, while businesses aim for operational efficiency and cost reduction. As such, Government invoice clearance does not drive efficiencies from automation. Despite this typical misalignment, it is crucial not to treat these initiatives as separate. Both significantly impact business performance and, when harmonized, can offer substantial benefits.

Business Benefits of E-Invoicing

1. Increased Efficiency: Automated invoice processing reduces manual handling, minimizing errors and speeding up transaction cycles.
2. Cost Savings: Electronic invoicing cuts down on paper, printing, and postage costs. It also lowers administrative costs related to manual data entry and error correction.
3. Improved Cash Flow Management: Faster invoice processing and approval can lead to quicker payments, enhancing cash flow and financial predictability.
4. Enhanced Accuracy and Compliance: Automation ensures that invoices meet regulatory requirements, reducing the risk of penalties and audits.
5. Greater Transparency and Control: Digital invoicing provides real-time visibility into invoice status and metrics, enabling better financial planning and decision-making.
6. Sustainability: Reducing paper usage supports environmental goals, contributing to corporate social responsibility initiatives.
7. Better Supplier Relationships: Timely and accurate payments improve supplier relationships, potentially leading to better terms and collaboration opportunities
8. How can businesses realise these benefits while being confronted with the complexities of 1 or even multiple government clearance mandates? How can businesses take advantage of clearance mandates to create the efficiencies and agility that helps them stay competitive?

Steps for Global Businesses to Prepare

As countries like Germany transition to mandatory e-invoicing, global businesses must adapt to meet diverse regulatory requirements. Here are 3 key steps to prepare:

Understand Regional Requirements:

• Familiarize yourself with e-invoicing mandates in different countries to ensure compliance.

Formulate a strategy:

• Once you know where and when your business will be dealing with mandatory e-invoicing, you define a proactive strategy that aligns local initiatives into a consistent approach avoids duplication of cost and business disruptions. The best strategies do not wait until the mandates are enforced, instead, they focus on enabling supply chains for e-invoicing ahead of the obligations

Leverage Advanced Providers that support your strategy:

• Use providers that Invest in technologies that streamline compliance and enhance invoice automation across multiple jurisdictions. In other words: providers that deliver one solution, for any invoice, in any format, anywhere!
• Select providers that develop adaptable technologies that can evolve with changing legislative landscapes and support multiple invoice formats and submission methods.
• Use providers that are not just focussed on compliant e-invoicing, but which ensure high invoice data quality before posting to your ERP to minimize exceptions and improve processing efficiency.

Conclusion

The global transition to mandatory e-invoicing presents both challenges and opportunities for businesses. By focusing on versatile, future-proof solutions that support multi-country transactions and ensure high-quality data input, companies can achieve compliance and optimize their AP processes. This strategic approach will not only meet regulatory demands but also drive operational efficiency, reduce costs, and improve overall financial management.

Note: Always ensure your solutions provider is current with the latest regulatory changes to maintain compliance and operational efficiency.

Find out more about Tungsten InvoiceAgility

It combines the global reach of the Tungsten e-Invoice Network with the seamless integration of Tungsten AP Essentials technology to handle physical invoices. This powerful combination empowers AP teams to accept digital or paper invoices from any supplier, anywhere, including countries with strict e-invoice regulations.