The implementation of e-invoicing in India has brought significant changes to the way businesses handle their tax compliance and more importantly, the accounting processes. E-invoicing under GST has the potential to streamline the entire accounts payable process and provide several benefits to the businesses. This article will discuss how e-invoicing under GST can help AP automation, improve efficiency, reduce errors, and ultimately, save time and money.
Overview of E-invoicing under GST
E-invoicing under GST is a digital invoicing mechanism for businesses to register their invoice with the government before sharing it with their counterparties. It is mandatory for certain categories of businesses and a class of transactions in India. This mechanism enables businesses to electronically generate and transmit invoices directly to the IRP portal. The IRP portal then validates the invoice and generates a unique invoice registration number (IRN), which is required for the invoice to be valid.
E-invoicing under GST has been introduced to improve compliance and reduce the risk of tax evasion. It aims to provide a more efficient and streamlined process for invoice generation and transmission, reducing the time and effort required to comply with GST regulations.
What is AP Automation?
The traditional Accounts Payable process involves a lot of manual work. This primarily is spread across invoice collection, processing, and payment to suppliers. This process is time-consuming, error-prone, and labor-intensive, which leads to delays, inefficiencies, and higher costs for businesses. Many a times, the physical invoices get lost in transit leading to filing delays and affect ITC claim.
Accounts Payable (AP) Automation refers to the use of technology to automate the process of managing and paying supplier invoices. AP automation involves the use of software and other tools to streamline the entire AP process by automating key tasks such as invoice capture, data entry, invoice approval, and payment processing.
E-invoicing and AP Automation
With the introduction of GST 5 years back, the invoice data became available to the companies via GSTR 1 and GSTR 2A and now also GSTR 2B. This helped in building AP automation products around GST data. Read here to know more.
However, the introduction of E-invoicing, moved this entire availability of invoice data to next level. The IRPs return invoice data in json format which can be read and understood by the ERPs. Hence, it becomes easier for ERP providers to build automations where buyer and suppliers systems can transmit data and trigger approvals. This can lead to hyper automation of Accounts Payable processes
Here are some ways in which e-invoicing under GST can help AP Automation:
- Automated Data Capture: E-invoicing allows for automatic data capture of the invoice information. This eliminates the need for manual data entry, which can be time-consuming and error-prone. With AP Automation, the captured data can be automatically processed, validated, and matched with purchase orders and receipts.
- Automated Data Transfer and Reduced Errors: E-invoicing under GST ensures that the invoice data is entered accurately in an automated manner, as the information is directly transferred from the supplier’s system to the buyer’s system. This reduces the chances of errors, which can otherwise lead to delays in the payment process.
- Faster Invoice Processing: E-invoicing can significantly reduce the time taken to process invoices. As electronic invoices are delivered directly to the buyer’s system, the need for physical documents to be transported is eliminated. This can speed up the entire invoice processing cycle.
Note: Also, now that ERP systems can also be directly connected to GSTN Authorized Invoice Registration Portals like IRIS IRP, users can also generate IRN within minutes and get the invoice printed/ made online in their required custom templates. Read Invoice Printing for more details.
- Smarter GST Reconciliation: When a supplier generates e-invoices, his data gets shared not just with the government but also with his vendors via GSTR 2B as he files his GSTR 1 timely. Due to this availability of data, the taxpayer need not necessarily send his invoice data to vendors, the process can be completely automated via their ERP systems. GST reconciliation becomes a smoother experience thanks to the automated data exchange.
- Compliance with GST Regulations: E-invoicing is mandatory for certain categories of taxpayers who have crossed the e-invoicing turnover limit. Gradually all businesses could get covered under e-invoicing. By dealing with suppliers who are under e-invoicing, there is a comfort of all GST complianceis done in timely and accurate fashion by the supplier. Thus, will get processed in AP automation quickly.
- Improved Supplier Relationships: E-invoicing under GST can help in improving the accuracy and efficiency of the invoice processing cycle. When integrated with AP Automation, it can lead to significant cost and time savings, and improved supplier relationships since there is complete data transparency and GST reconciliation becomes a smooth ride. Read our article on how E-invoicing can help ITC Claim – Positive Impact of E-invoicing on GST Reconciliation & ITC.
E-invoicing under GST provides a major opportunity for accounts payable automation. By digitizing the entire invoicing process, companies can streamline their accounts payable workflows, reduce errors, and save time and resources. E-invoicing also improves compliance and transparency, allowing businesses to easily track their transactions and ensure they are in compliance with GST regulations. Overall, e-invoicing is a powerful tool that can help companies transform their accounts payable operations and drive greater efficiency and cost savings. As businesses continue to adopt e-invoicing under GST, they will gain a competitive advantage in today’s rapidly evolving digital economy.