eInvoice in Finland

Heli Salmi, M. Sc. (Econ)

Coordinator, Expert Services

heli.salmi@elma.net

www.elma.net

Elma Electronic Trading

• SP-operator specialized in B2B e-Commerce

– Electronic Commerce Service Provider

• Founded in 1991

– Founded by a group of 27 Finnish companies within industry and trade

• Presently

– A leading operator within e-Commerce in Nordic region and one of the top players in Europe

– On the cutting edge of product development– Rapidly growing IT-company with a strong tendency

towards internationalization

Elma’s clientele

• In excess of 150 ”TOP 500” rated Nordic companies• Trade: Arrow Nordic Components, AGA• Industry: ABB, Aspocomp, Uponor Group• Transport: Schenker BTL, Finnlines

• Public Authorities

• Thousands of SME’s mainly in Finland

• Thousands of e-commerce connections on international level

• Tens of thousands business transactions within a day’s time

What is eInvoice?

• Modern, reliable and paperless way of invoicing

• Invoice data from invoicer’s system to invoicee’s system

• Based on Internet techniques

• The invoice is visualised for electronic handling (checking and

possible approvals) processes

• Covers both B-to-B and B-to-C invoicing

Supply Chain Management vs. Procurement Invoices

Purchase OrderProcessing

Purchase Ledger

Order

Order response

Delivery

Invoice Invoice

Agreement

Electronic Billing and Payment Definition (IDC, 2001)

‘Electronic billing and payment refers to the electronic presentation of financial statements, bills, invoices and related information sent by a company to its customers or a third-party, and corresponding payment for goods or services.

The information in the bill or monthly financial statement can also be located from the biller’s own or a third-party organization Web site and thus end users will be able to view and pay the bill over the Internet.

Consolidator/Bill Service Provider. A consolidator consolidates bills from organizations and other consolidators and then delivers them to consumers, businesses or others for bill presentment. The consolidator also converts the billing data into the requested form and archives it. The consolidator can deliver data to different authorities such as tax authorities as well.’

Table 3Finnish Bills Forecast, 2000-2005 (Million)

Finland 2000 2001 2002 2003 2004 2005 2000-2005

CAGR

Paper-based bills 300 301 285 272 243 211 -7%

B2C 180 180 171 167 155 142 -5%

B2B 120 121 115 105 88 70 -10%

Electronic bills 4.3 26 45 79 117

B2C 1.8 13 19 32 47

B2B 2.5 13 26 47 70

E-bills Share 1.4% 8.2% 14.1% 24.5% 35.6%

B2C 1.0% 7.0% 10.0% 17.0% 25.0%

B2B 2.0% 10.0% 20.0% 35.0% 50.0%

Total 300 305 311 317 322 328 2 %

B2C 180 181.8 184 185 187 189 1%

B2B 120 123.6 127 131 135 139 3%

Key Assumptions:· The figures in the table show bills volume and electronic bills share.· EDI-based bills are excluded from the table. IDC estimates that the EDI-based bill volume was

about 100 million in Finland in 2000.· Total bill volume growth will continue at approximately 2% per year.· The shares are based on the assumption that the EC’s proposal for an e-invoicing Directive will not

happen as planned (do not require electronic signature).Messages in the Data:· The Finnish market is the most advanced because many different e-billing systems for small

companies, which can be used with a Web browser, are already available. In Finland a group ofcompanies (the Nordic e-invoicing consortium) have already agreed on the principles of e-billingand payment.

· IDC estimates that the Finnish B2B e-billing market will achieve 20% penetration by 2003 and thenthe domino effect will kick in.

Source: IDC, 2001

Electronic Invoicing in Finland

• Long EFT (Electronic Funds Transfer) history

-> 99% of payments in B-to-B are electronic

• Advanced NetBanking solutions, over 2 million users in Internet

banks

• EDI (Electronic Data Interchange) over 15 years (with national

standards over 30 years)

• New techniques - XML (eXtensible Markup Language)

Other prerequisites

• Modern legislation

’The information on a voucher can be used in accounting in a

way that only the link information (e.g. the server) of the storage

is sent to the accounts of the company. The link can be used in

collecting the image and the data of the voucher.’ Accounting

Advisory Board, Ministry of Trade and Industry, General quides

on methods in electronic acconting (Translation HS).

• Rationalisation requirements also in accounting

• Importance of customer service

• Image factors, a modern company uses modern systems in

invoicing

WHY eInvoice?

• There are around 120 B2B invoices and 180 million B2C

invoices in Finland

• Part of invoices are electronic, EDIFACT

• Cost of handling one invoice - both the issuer’s and recipient’s

cost 16 EUR

• Cost savings around 80%

The consortium

Elma

Invoicing channels

Invoicing company

Elma eCom Connection Data format

conversions and channeling

1) ElmaEDI

2) Elma eInvoice

3) ElmaInvoice

b) Cooperation partners• Proha • ProCountor.Com• Novo

c) Bank batch transfer connections

• Sampo• Nordea• OKO Bank

d) Net banks • Sampo• Nordea• OKO Bank

Printing services • Capella• Atkos• Novo

Direct connections

Data repositoryMedium-sized businesses

Invoice recipients

Small businesses and consumers

Partners’ clients

Large businesses

Elma eCom Connection

Large businesses

a) Direct connections

Security is important

• The usability requirements for the system is high (like banking

services)

• Errorless, functioning well

• In cooperation with the banks the level required by the bank!

• MAC, SSL, SSH, VPN

Sender

VPN

data.einvoicedata.eInvoice-xml

data.xmldata.hmtldata.pdfdata.tiffdata.epldata.edi

data.inhouse

Bank

Internet bank

Customer

Purchase ledger

Payment transfer system

Customer

SSL, MD5

PATU (MAC)

VPN

XML, PDF

XML, HTML

TCP/IP

TCP/IP

TCP/IP

Direct payment, PDF

Printing operator

Elma

EPL

TCP/IP

eInvoice

EDI

Customer

PATU (MAC)

Council Directive 2001/115/EC

of 20 December 2001 amending Directive 77/388/EEC with a view to

simplifying, modernising and harmonising the conditions laid down

for invoicing in respect of value added tax

• Data content of an invoice

• Invoices issued pursuant to point (a) may be sent either on paper

or, subject to an acceptance by the customer, by electronic means

• Plus other regulations e.g. storage of invoices

Council Directive 2001/115/EC

Invoices sent by electronic means shall be accepted by Member States provided that the authenticity of the origin and integrity of the contents are guaranteed:

• by means of an advanced electronic signature within the meaning

of Article

• or by means of electronic data interchange (EDI) as defined in

Commission Recommendation 1994/820/EC

• Invoices may, however, be sent by other electronic means subject

to acceptance by the Member State(s) concerned.

Commission Recommendation 1994/820/EC

Article 2 Definitions

2.1. For the purpose of the Agreement, the following terms are defined as follows;

2.2. EDI Electronic data interchange is the electronic transfer, from computer to computer, of commercial and administrative data using an agreed standard to structure an EDI message.

2.3. EDI message: An EDI message consists of a set of segments, structured using an agreed standard, prepared in a computer readable format and capable of being automatically and unambiguously processed.

2.4. UN/Edifact: As defined by the UN/ECE (1), the United Nations rules for electronic data interchange … (continues)

2.5. Acknowledgement of receipt: The acknowledgement of receipt of an EDI message is the procedure by which, on receipt of the EDI message, the syntax and semantics are checked, and a corresponding acknowledgement is sent by the

receiver.

Something new in Finland

• Electronic signatures through banks (2002)

• Electronic signatures using a mobile phone (spring 2003?)

PRESS RELEASE

June 10, 2002

The State Treasury and Elma Pilot Electronic Invoicing

The Finnish State goes over to electronic invoicing

The State’s 118 offices, ministries, research institutes and

universities are transferring to electronic invoicing. Some 20

organisations are already launching development projects for

this in 2002. Finland is the first European country to progress

this far with electronic State financial administration.

Attachments….

• Improving the invoice data -> no attachments

• Including the attachments in the invoice

• Some special cases where a paper invoice is required -> printout of

the invoice

Other transactions

• Reminders/Collecting - traditional ways, no integration needed

• Late payment interest invoice - like any other invoice

• Information/Marketing(?) - links from the invoice to:

– agreements

– customer service

– new products

– statistics

– graphics

Advantages to the invoice issuer

• Outsourcing of invoicing (sending)

• All channels available, only one connection needed

• Value added services from the invoice data

• Electronic archives

• Customer service

• A modern way of doing things

Advantages to the recipient

• No manual typing

=> cost savings, no errors

• Automated bookings for general ledger

• Invoices in the repository

=> no lost papers, invoice can look on the screen just

alike a paper invoice

• Automated controls/services

=> value added services from invoice data

www.elmaeinvoice.com/index.html

www.einvoiceconsortium.com

www.e.finland.fi