In 2015, the US Office of Management and Budget (OMB) mandated that all federal agencies issue electronic invoices for goods and services by the end of 2018. The idea was to reduce costs associated with printing, handling, and processing paper invoices.
Did you know that the US is one of the last countries to adopt e-invoicing? Even though it's been around for a while, many businesses are still not using it since it is not yet mandatory. Like many other countries, the United States has specific requirements for e-invoicing.
If you're looking to start invoicing electronically in the USA, it's important to be aware of these requirements and ensure your software is compliant.
This blog post will outline the main e-invoice requirements in the USA and explain what you need to do to ensure compliance. Let's get started!
E-invoicing rules and regulations in the USA
To comply with the 2015 government mandate, agencies must use an e-invoicing system that can generate, send, receive, and archive invoices electronically. The rules and regulations for electronic invoicing in the US include:
Format (XML-based Universal Business Language (UBL)
It is required that e-invoices in the US use the XML-based Universal Business Language (UBL). This standard format allows businesses and agencies to exchange electronic invoices easily.
Signature and authentication requirements
For the e-invoicing system to be compliant, it must use a digital signature and authentication mechanism. This ensures that the documents are sent securely and cannot be altered without detection.
Retention requirements
Users must retain invoices electronically for a minimum of 7 years.
Issuing requirements
When sending invoices, agencies must either generate a unique identification number or include the Invoice Reference Number (IRN) in the subject line of the invoice. Additional requirements will include the use of a post-payment notice and a commercial letter of credit.
Receiving requirements
To receive e-invoices, agencies must provide their suppliers with a valid email address and/or identify a web-based system where the supplier can upload invoices.
Who must comply with e-invoicing regulations in the USA?
To comply with the e-invoicing regulations in the US, all agencies and government departments must use an electronic invoicing system. This includes the Department of Defense (DoD), the Department of Energy (DoE), and the General Services Administration (GSA).
However, businesses and individuals don't need to start using e-invoicing. However, many businesses choose to do so as a cost-reduction measure and to increase efficiency.
E-invoicing market pilot in the USA
The Business Payments Coalition (BPC), a group of more than 600 organizations in the US, is currently piloting an e-invoicing solution in the US. In conjunction with the Federal Reserve, the BPC is gathering information on e-invoicing to establish a roadmap for the adoption of e-invoicing.
The project includes establishing a B2B e-invoicing system in the USA. The pilot will run up to 2022 to ensure that, by 2023, there will be an operational B2B system in the States.
Several electronic invoicing service providers, including Storecove, have joined BCP to create a standard solution for the US market.
The electronic invoicing model is based on a four-corner network model, in which Access Points (APs) are used to connect businesses and government agencies. The aim is to create a network of APs that can connect businesses of all sizes and with government agencies.
This will allow businesses to send and receive e-invoices without special software or hardware. In addition, the system will be interoperable with other e-invoicing systems around the world.
5 Benefits of e-invoicing for businesses in the USA
There are many benefits of e-invoicing, both for businesses and the government. They include:
1. Cost savings
E-invoicing can help businesses save money on paper, printing, and postage costs. In 2015 when OBM introduced the mandate, it estimated savings ranging between $150 million and $200 million annually.
In addition, it can reduce the time spent on invoice processing and improve accuracy, which can help businesses avoid late payments.
2. Increased efficiency
E-invoicing can help businesses become more efficient by automating processes and reducing the time spent on administrative tasks.
3. Improved cash flow
E-invoicing can help businesses improve their cash flow by decreasing the time to pay and collect invoices. This can help reduce the risk of late payment penalties and interest charges.
4. Reduction in invoice fraud
Fraud cases related to paper invoices are more common than those related to electronic invoices. This is because it is easier to alter paper documents and harder to track them. E-invoicing can help reduce fraud by providing a secure and tamper-proof system.
5. Improved data collection
E-invoicing can help businesses collect valuable data that they can use to improve decision-making, manage costs, and identify growth opportunities. Invoices contain a wealth of information, such as supplier details, purchase prices, and product codes.
E-invoicing allows businesses to automate processes, improve efficiency and reduce costs, which can help them gain a competitive advantage in the market.
How to send and receive compliant e-invoices in the USA
The current electronic invoicing process in the USA includes over 40 standards identified and listed by BPC in 2017. It has made it challenging for many businesses in the US to adopt e-invoicing, with only 25% of invoices being sent electronically.
The expected invoicing system that will involve an access point provider will be easier to use in the following steps:
1. Find a reliable Access Point provider
You will need to choose a reliable Access Point provider to receive compliant e-invoices. Some of the most reputable providers include Storecove, which is now part of BCP in the pilot project. They provide a complete e-invoicing solution for businesses and government agencies in the USA and interoperability with other e-invoicing networks worldwide.
2. Register on the network
Once you have chosen a provider, you will need to register on the network and provide your business details. This will typically include your company name and address and your contact details.
3. Connect to the network
After you have registered on the network, you must connect your accounting or billing software with the Access Point provider. This will allow you to send and receive compliant e-invoices directly from your system.
4. Start sending and receiving e-invoices
Once you are connected to the network, you can start sending and receiving e-invoices with other vendors or suppliers registered on the network. This will help improve efficiency and reduce costs for your business.
How the USA ensures e-invoicing compliance
The US government regulates electronic invoicing through the E-Invoicing Mandate for Federal Agencies, which the OMB issued in 2015. This mandate required all federal agencies to start issuing electronic invoices for goods and services by 2018. The mandate's purpose is to reduce the costs associated with printing, handling, and processing paper invoices.
Conclusion
E-invoicing is a powerful tool for businesses in the USA and worldwide. It can help improve efficiency, reduce fraud, and improve cash flow. BCP's pilot project with Storecove and other AP providers will enable businesses to meet the e-invoicing requirements of the US government easily.
If you are a business owner in the USA, we encourage you to sign up for Storecove's e-invoicing solution today. Our platform is reliable, secure, and simple to use and can help you stay compliant with the upcoming e-invoicing requirements in the USA.
More information about E-Invoice Requirements in the USA?
Call us on: +31 (0) 20 261 17 91 or send an e-mail to: helpdesk@storecove.nl.
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