How businesses with over Rs 100 crore turnover can prepare for e-invoicing

Getting businesses to move to a dynamic system of invoice generation and reporting, integrated with GST return filing, revolutionizes the way business accounting and reporting has been done in the past. Besides promoting machine readability and the interoperability of invoices, it makes way for data disbursement to the business’ customers, auto-filling of data on the government’s tax portals, impedes tax evasion techniques, facilitates real-time reporting and eliminates the need for data reconciliation.

The first phase of e-invoicing covered businesses with an Rs 500+ crore turnover. Many of these organizations would have customized ERP systems, stronger in-house IT teams and also require deeper system integrations. A deeper integration would further automate and connect their business processes helping them streamline reporting and accounting.

The implementation of e-invoicing will also benefit businesses with more than Rs 100 crore turnover as it will automate several reporting processes. GST returns will get auto-populated from the e-invoice data. The duplication of data between GST returns and e-way bills can be avoided. The recipients of suppliers can get a real-time invoices and input credit data available. Hence, the next phase of e-invoicing will be advantageous to these businesses as well when it comes under e-invoicing from 1st January 2021 onwards.

For businesses to generate their e-invoices, the government has introduced an Excel-based tool, besides setting up a portal called the Invoice Registration Portal or IRP. Businesses can directly integrate their ERP systems with IRP. There are more methods proposed, such as a mobile app and a system for direct data entry in the future. However, as of now, these features have been put on hold.

When we talk about system integration, the two most common approaches are API-based (using Application Programming Interface) and SFTP-based (using SSH File Transfer Protocol). The first approach involves the generation and cancellation of e-invoices in real-time, while the latter uses a delayed approach, by first transferring e-invoice data to an SFTP folder and thereafter to the IRP.

Selecting an appropriate mode of e-invoice generation is absolutely key, and the smoothness of the entire e-invoicing process depends on this factor. The parameters an organisation should evaluate are:

a. The Volume of transactions involved - This data is vital to decide on whether your organisation can use the Excel tool provided by the government or opt for an e-invoice system integration. Any organisation dealing with thousands of invoices per annum should definitely choose an ERP integration to avoid the chances of manual error, save the time of course, and reduce compliance costs in the long run.

b. Level of organisational security - If your organisation is rigid on security measures, does not have an in-house IT team and does not desire deep configurations made to the existing ERP, but still handles a large number of invoices, then choosing an integration like SFTP would be beneficial as it requires minimal configurational changes to be made.

c. Costs involved - Budget plays an important role while choosing a system integration. API-based integrations are more expensive but involve less manual labour in the long run. SFTP is relatively cheaper. If your organisation is low on budget, then choosing an external tool can be an option too, but high manual intervention brings high chances of errors as well.

d. Risk factors - As previously mentioned, the risk factors are higher when the levels of human intervention are high. External tools come with a higher risk as it involves manual effort in exporting the data and generating the e-invoices as compared to a system integration.

e. Level of automation desired - If your business prefers to function automatically, then an API-integration is ideal. It also depends on how complex a billing/ERP system your organisation uses, as the more complex the system, the more automated the integration approach should be.

E-invoicing integration can be carried out directly or through a GST Suvidha Provider (GSP). The advantage of using a GSP is that the GSP will take care of the requirements to be followed during implementation, including the sandbox testing and adhering to other IT security standards and regulatory requirements.

While choosing a vendor/GSP to integrate e-invoicing in your organisation, you should consider certain factors such as the costs involved - are they one-time or recurring? Can your vendor integrate your existing ERP systems? Will your vendor provide training to your staff? Will your vendor dynamically upgrade and maintain your systems? Etc.

Last but not least, e-invoicing integration takes four to six weeks to implement. Hence, it is high time to get started with the actual integration process to avoid paying a penalty for non-generation of e-invoices post 1st January.

Once the integration has been done, the sandbox testing will need to be carried out before the e-invoice system is finally ready for generating e-invoices. Staff training is equally important for the smooth execution of processes, once the systems are in place. Frequent review of performance is also necessary to check for bugs in the system and avoid glitches from occurring. It will also help avoid data and process errors and prevent expensive mistakes from being committed.

With one month to go, businesses falling under the ambit of phase two of e-invoicing should start preparing their organisations to soon adapt to India’s latest reform.