Glossary
What is e-invoicing?
E-invoicing is the exchange of invoices in a structured digital format between systems. Learn how it differs from a PDF, how it works, and a simple example.
Updated · By PayToMe Editorial
E-invoicing is the creation, sending and receiving of invoices as structured digital data, so that the buyer’s and seller’s software can read and process them without manual re-typing. It is more than emailing a PDF.
How it works
A normal PDF invoice looks fine to a person, but software cannot reliably read it. An e-invoice carries the same information in labeled fields, such as seller, buyer, invoice number, date, line items, tax and total. Formats such as XML are often used for this, and the sender and receiver agree on a common standard.
The usual flow is:
- Create. The seller’s system builds the invoice data from an order or a job.
- Send. It is delivered through a network, a service provider or directly to the buyer’s system.
- Validate. The data is checked for required fields and correct totals.
- Process. The buyer’s system matches it to a purchase order and queues it for payment.
The benefits are fewer typing errors, faster approval and easier record keeping. Governments in several regions have also used e-invoicing to help with tax reporting, especially for VAT. Requirements vary by country and change over time, so rely on your tax authority’s current guidance rather than a general summary.
An e-invoice is a different thing from a commercial invoice, which is a customs document for cross-border shipping, although a commercial invoice can also be sent electronically.
Example
A supplier invoices a business for two items.
Practical points
- Ask your customers whether they require a specific format or network.
- Keep the totals exact: quantity times price, plus tax, with consistent rounding. Try the sales tax calculator to check the tax math.
- Keep copies of what you sent for your records.
PayToMe is in public beta and works with clear digital invoices today, through the free invoice generator and in the app, and does not claim support for any country’s e-invoicing mandate. You can sign in to PayToMe.
Related terms
- VAT: a consumption tax that often drives e-invoicing rules.
- Purchase order: the order an e-invoice is matched against.
- Commercial invoice: a customs document for international shipments.
- VAT number: the tax ID required on many invoices outside the US.