Online invoice 3.0 – is automation here?

Worth switching to data reporting based on electronic invoicing

As an expert of business automation, I was really looking forward to the introduction of online invoicing. In my experience, Hungarian businesses put a lot of effort into administrative tasks that could be taken care of with a small investment or even optimisation, thus decreasing their costs in the short term.

Automation for outgoing and incoming invoices

The administration of invoice processing is particularly important for all businesses. It is easy to implement automation for the handling of outgoing invoices. This is because these invoices are generated within the business: they are most often produced from an underlying document, for example a waybill and, with pre-set bookkeeping rules, even the bookkeeping can be performed automatically.

However, the processing of incoming invoices is time consuming without exception. Incoming invoices can arrive at the recipient in several forms, and through several channels, this varies almost by supplier. Thus it is impossible to develop a general processing procedure, instead of automation, invoices have to be processed manually. The introduction of electronic invoices in 2004 did not help this situation because the concept did not spread as was expected, and the data content was not standardised either. Systems digitising the invoice view and then processing it by way of text recognition and interpretation appeared as a promising new tool. Some even apply artificial intelligence during the processing, but nearly 5-10% of the invoices are still erroneous or remain unprocessed. Searching for an error often requires more energy than recording 5-10 new pieces of data. So in the case of an average business, the aggregate benefit is not significant.

Role of the online invoicing system in automation

The online invoice system of the Hungarian Tax and Customs Administration (NAV) gave new impetus to this business area, where automation has been planned for a long time anyway. The online invoice system standardised the data content of the invoice, i.e. it defined an XML format that can be processed by computer and must be applied upon the issuance of each invoice. The NAV made it possible for invoice recipients to download the XML files sent as part of the mandatory data reporting. From July 2020 data reporting is mandatory in Hungary for each invoice issued to domestic taxpayers, so from this date, businesses access all their incoming invoices through this interface.

What is missing to make automation complete? Currently, the XML file of the data reporting enables almost all data that appears on the invoice to be saved. At the same time, only the invoice data elements defined in Section 169 of the Hungarian VAT Act must be reported, the inclusion of other data is optional, and left for the invoice issuer to decide. Invoices issued through cash registers cannot be queried yet (online invoice data reporting is not applicable here) but the necessary development is already planned.

XML file as an invoice

One important development has been realised in online invoice 3.0, which will be launched in Hungary at the beginning of 2021. The system and the planned legislative environment will enable the data reporting XML file to function as an electronic invoice at the same time. This is only an option though, applying it is not mandatory. In the case of electronic invoices, the XML file is the invoice itself, which must include all data to the full. This is what should be presented in the event of a tax inspection, or archived, or sent to the customer (the legal responsibility for sending the invoice remains with the invoice issuer). The integrity of the data content is guaranteed by a hash code also sent to the NAV. Generating and using this is much simpler than the procedures required earlier with digital signatures and time stamps.

The XML file is hard to understand with the human eye, it is rather suitable for machine processing. So it is worthwhile preparing a legible and printable pdf file from the invoice, and making this available for the customer. The NAV is also initiating a development for this, and it is expected that the electronic invoices derived from all the data reporting will have a completely similar invoice print view. This will accelerate data processing by recipients, even for those not thinking about an automated system. It is important to note that in this case the PDF file, neither in its electronic nor in its printed format, counts as the invoice itself, it is just a representation of it. The invoice recipient can still decide not to accept electronic invoices, so it is worth keeping traditional invoicing for these situations.

Advantages of switching to electronic invoicing based on data reporting

As an invoice issuer, if your business partner does not object, it is worth switching to electronic invoicing based on data reporting. The data must definitely be reported with the required data content, which with a minimal development can also function as an electronic invoice.

As the invoice recipient, all the incoming invoice files can be processed together with the mandatory data content. In the case of partners providing electronic invoices or voluntarily reporting the whole data content, all the invoice data is available for full processing. The reconciliation of invoices, i.e. matching recorded invoices with those received through the NAV, can be introduced as a basic function, enabling missing invoices for example to be identified. The dates and amounts included in the invoices can be checked, and errors minimised as a result. Automation becomes possible by partially or fully recording the data of incoming invoices in the IT system. If the algorithms allow, the bookkeeping of invoices can be completed or prepared.

The future

Thanks to the possibilities inherent in data reporting, many new applications will certainly be prepared in the future. Having received NAV access, even external service providers can process the data of a company’s outgoing and incoming invoices. This allows the development of independent applications based on invoice data, including turnover reports, analyses, management decision support, fraud investigations, group consolidation, etc.

To sum up, by implementing the online invoice 3.0 system, business automation receives its long-awaited boost. The approach of the NAV in the project is exemplary since they not only set requirements but also provide major services for taxpayers. Naturally, as with all processes, things are not always smooth. Aligning the system and the continuous version controls is a serious challenge for software developers since the system has already seen three versions in just a short time.

Changing the IT systems and invoicing software programmes of companies to facilitate the online invoice 3.0 data reporting system and the new format may pose challenges for the IT technicians and finance experts of Hungarian companies, just like during the previous transitions. WTS Klient Business Automation will gladly help you with the transition and with developing the digital systems necessary to fulfil the new data reporting obligation.

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