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There’s no getting away from the fact that e-invoicingElectronic invoicing - widely referred to as e-invoicing - is the exchange of a digital document between a supplier and a buyer. E-invoices are issued, transmitted and received in a structured data format that enabled automatic and electronic processing. They contain data in a machine-readable format so that an AP system can read an invoice without manual data entry, leading to faster and more efficient invoicing. is the hottest topic in town right now amongst tax professionals.
Whether it’s yet another country mandating its use or new requirements being announced, the issue is never far from the headlines – leaving tax, finance and IT leaders with plenty to consider and strategic decisions to make.
Since I discussed SAP’s native solution for e-invoicing, Document and Reporting Compliance (DRC), in this article back in November 2023, the e-invoicing industry has continued to evolve at a rapid pace and SAP is promoting its flagship e-invoicing product stronger than ever before.
Whether you’re moving to SAP for the first time or migrating to S/4HANA it’s likely you’ll have been offered DRC. You may even already have access to it as part of a bundled licence as part of a switch to S/4HANA.
I’m fortunate enough to speak to SAP users from some of the world’s largest organisations on a daily basis and there is one question I’m hearing over and over: Is DRC always the best way to process e-invoices and ultimately ensure compliance, either inside or outside SAP?
There’s no denying DRC is a powerful tool and there are countless advantages of using it to meet e-invoicing requirements.
But I’d never suggest simply subscribing to DRC without due consideration of the alternatives. Every business is different and yours is likely to have specific requirements and objectives.
So before moving ahead with your e-invoicing roadmap, it’s worth weighing up DRC against other third-party solutions that can integrate with SAP and, in rare cases, the option of developing in-house.
Here are my pros and cons of each approach:
Smooth integration with your existing SAP systems.
DRC is incredibly easy to work with and fits seamlessly into any business with a SAP ERPEnterprise resource planning (ERP) is a type of software that organisations use to manage main business processes.. You won’t require extensive in-house experience of education to operate it, saving you budget on things like training and user workshops that you may require with a third-party tool.
SAP ensures DRC remains up to date, helping users to comply with local e-invoicing regulations in jurisdictions around the world.
Even if a country you need isn’t available in DRC, you can build on top of the standard framework to create a custom tool.
Easy to enhance using BADI (a standard SAP enhancement technique). This could be particularly useful if your country setup in SAP is not up to date.
In some bundled licence agreements, SAP is now offering DRC for free as an add-on.
Cost of support can be lower as you only need a contract with a single provider.
Typically more expensive in terms of upfront cost than non-native solutions.
Doesn’t cover every country in the world – although the vast majority are included.
Although the look and feel of DRC will seem familiar to SAP users, it doesn’t follow a standardised global template so additional configuration will be required.
Individual customisations can be difficult.
Will cover every country in the world.
Can become the focal point of your e-invoicing setup. If you have multiple systems in place, they can be mapped to a server and you’ll be able to view all your data on one display within your third-party solution.
Often cheaper than a DRC licence (albeit this may not be the case if DRC is part of a bundle).
Offers unrivalled flexibility. If you select DRC, you’ll have to follow SAP’s approach to functionality and technical development, whereas a third-party tool is easier to configure to your bespoke specifications.
Legal changes can be implemented faster than anywhere else.
Typically requires fewer in-house resources as the solution is not an add-on, it sits on top of your current processes so can be easily managed with the help of an external support team.
It’s an extra integration, which adds time, cost and complexity to any project.
Some third-party solutions can be difficult to integrate – and I know of at least one leading tool that isn’t even able to connect with SAP.
The structure of data can be different in a third-party solution. While SAP and other global ERPs such as Oracle have standard fields (bill to, ship to etc.), third-party systems can differ, resulting in data mapping issues and potential maintenance requirements.
Ongoing costs – in terms of maintenance and enhancements – can be more expensive than utilising DRC.
Can be cost-effective for businesses that process only a very small number of e-invoices each month.
High degree of flexibility and agility in development and testing.
Resource-intensive – developing your own tool can drain time and budget quickly.
Impossible to replicate the functionality, processing power and range of features of DRC or leading third-party solutions.
Enhanced risk.
What else must you consider?
It’s not all about assessing the strengths and weaknesses of each option on the market and cross referencing against your wish list.
A crucial factor in any e-invoicing setup is how your e-invoicing solution integrates with other core systems – whether that’s your ERP, third-party tax tool or other finance and accounting software.
I’ve recently been speaking to a huge brand in the food industry and discovered it has to integrate every new country it needs to process e-invoices in with its third-party solution. If five new countries roll out e-invoicing, it means the company has to make and manage five new integrations; using vast resources every time.
Other products have a single APIApplication Programming Interface. APIs are an accessible way to extract and share data within and across organisations. connector that allow you to connect once, the software will define what data it needs and each subsequent country rollout becomes more succinct.
DRC typically requires users to load every country separately into SAP, although as this can be built on a standard framework it is faster and simpler than managing multiple integrations with a third-party tool.
It’s important you understand not only the implementation timeline and budget, but also what each piece of technology means in future when you come to add new countries to your e-invoicing platform.
Additionally, remember every business is different. Before committing to any specific solution, ask yourself:
- How many systems are you billing from?
- Have you got multiple ERPs?
- How many e-invoices do you process per month?
- How many jurisdictions are you required to comply with e-invoicing mandates in?
- Are there any countries you’re worried about complying in?
- Do you have any industry or company-specific nuances to consider?
The answers to these questions (and more) should help you to home in on the right e-invoicing solution.
Analysing the options and making a decision
There’s no doubt that e-invoicing mandates are important to tax professionals in the current climate and seeking a powerful, reliable and dynamic solution to handle the matter in multiple jurisdictions is on the agenda of many global organisations.
If your business is large enough to have SAP in place, you’ll almost certainly already have access to technology that is capable of processing e-invoices. But is it the right solution? And can it be scaled to grow with your company and as more countries mandate e-invoicing in the coming years?
In cases where DRC is available – either in a bundled licence or as a paid add-on – I would always advocate using it.
It’s incredibly easy to work with, connects seamlessly with the other facets of your SAP ERP and its coverage includes the e-invoicing mandates from the majority of countries you’re likely to be trading in.
By using DRC you’ll find e-invoicing is similar to sales order creation – and you wouldn’t use a separate system to manage that!
However, don’t write off the idea of using a third-party tool. For starters, there is cost to consider – and nobody ever said that SAP comes cheap! Third-party solutions also offer exceptional functionality and immense coverage.
Plus, there is still a misconception among tax professionals that you must use only one system for everything. I believe this view is outdated and many global companies are now choosing to integrate multiple systems; leveraging one for overall visibility.
Only in rare circumstances would I recommend developing an e-invoicing tool in-house.
Take the Dominican Republic. This is one of the few countries in the world not covered by either DRC or any of the major third-party solutions. If your organisation does most of its business in the Dominican Republic, it could be worth building a bespoke tool with your in-house team or by working with a local team. But cases like this are few and far between.
Unless your business is relatively small and facing a local scenario such as the one I’ve outlined above, you’ll be weighing up DRC versus a third-party tool.
Both options promise substantial business advantages; so be sure to involve unbiased, external experts in your decision-making process to ensure the optimum outcome.
How we can help
By not offering our own specialist e-invoicing solution, we are able to work with clients in a completely impartial way to prepare their systems to comply with upcoming mandates.
We do this by instead deploying a range of products and services to cleanse, complete and refine your master data; after all, master data is the fuel that will power both your tax and e-invoicing solutions.
We also work with global businesses to help them to understand future legislation and to analyse their current systems and their suitability before
By working with us as part of your e-invoicing project, we promise you will enjoy and gain access to:
1) A holistic approach
We navigate the full e-invoicing implementation spectrum; not merely mapping fields, but considering the end-to-end process and system implications.
2) Mandate expertise
While we don’t provide legal support, we can assist in better understanding the mandate from a legal, technical and structural perspective.
3) Process and technology analysis
We analyse invoice generating processes, system update processes and potential integrations. We can also represent the tax team in discussions with other internal stakeholders.
4) Expertise beyond the technical implementation
Our collaboration extends to working closely with clients’ tax departments, leveraging our expertise to strike the right balance between compliance, cost, and effort.
5) Flexible solutions
For clients operating on a single SAP instance, SAP DRC might be the recommended solution. In contrast, more complex landscapes with multiple systems might benefit more from a third-party solution, such as our configuration of the leading Pagero tool. We will guide you in the right direction based on extensive research, understanding and experience.
