What Are the Differences Between e-Invoice and PDF Invoice?

The most significant distinction between a PDF invoice and an e-invoice is in terms of structure, functionality, and compliance. A PDF invoice is an electronic image of the paper bill, but an e-invoice is an accounting system-processable computer-processing data file, which can be processed automatically through accounting systems.

With EU legislation increasingly laying down requirements for machine-readable forms of tax audit and control, it is crucial for businesses that must remain compliant and current to know the difference between e-invoice vs PDF invoice. 

What is an e-invoice?

A structured e-invoice is an e-invoice that is created, issued and processed in a machine-readable way based on a mutually agreed standard (for example, XML, UBL, Peppol BIS), as opposed to PDFs or paper invoices that are scanned and human-readable. Structured e-invoices allow for an invoice to be processed end-to-end as information is machine-readable and requires no human interference. 

Structured e-invoices have standard fields for data such as invoice number, VAT amount, payment due date and buyer and seller data, which is encoded in a format that could be executed to read directly submitted to ERP and accounting systems. They are accurate, more quickly processed and easy to comply with other regulatory and legal requirements such as e-reporting and e-archiving.

Structured e-invoices are already a precondition for B2G trading in most of the EU, and the future viability of the ViDA model is reliant on structured e-invoices. Besides future-proofing your business processes, they are necessary for cross-border trading and real-time VAT reporting in the EU.

What Is a PDF Invoice?

A PDF invoice is an electronic document that is a computer copy of a paper invoice, and is usually generated from a word processing or accounting application. While it can be sent and received electronically and is a read-only document, it has no machine-readable component and typically can be sent and worked with without the use of manual keying and OCR software by the tax or accounting system.

As distinct from e-invoices, a PDF invoice cannot be considered formal electronic invoicing under EU legislation because it does not have any embedded data fields for verification and interoperability. For this reason, and in accordance with likely regulatory requirements, PDF invoices cannot be used as electronic invoices.

What Is a Paper Invoice?

A paper invoice is a physical document in a paper format that is manually sent by a seller to a buyer with the printed details about the ordered goods or services, inclusive of quantity and terms of payment. Paper invoices must be handled manually, stored, and archived, presenting a risk of human error, loss, and administrative delay. 

While it is still acceptable as evidence in a court of law, the use of paper invoices is less efficient, automated, and less traceable than using an electronic invoice. As governments and businesses move towards organised digital invoicing, we are witnessing not only rapid adoption of e-invoicing systems for design, process, and compliance, but we are also witnessing many paper invoices go out of use completely.

Key Differences Between E-Invoice and PDF/Paper Invoice

The key difference between an e-invoice and a PDF or paper invoice lies in how the data is structured, transmitted, and processed within financial and tax systems.

Advantages of using e-invoices over PDF or Paper invoices

E-invoice usage compared to PDF or paper invoices has various operational, legal, and cost benefits, especially for regulated sectors such as the EU. Listed below are the main benefits:

• Automatic processing: Computers can process e-invoices and be directly processed into accounting or ERP systems. Manual entry is avoided, and there is an error and saving of time in accounts payable and accounts receivable functions.
• Regulatory compliance: Structured format e-invoices meet requirements specified by EU law and national regulators. They involve real-time reporting obligations (e.g. for ViDA) and have embedded audit trails, enabling users to achieve simple VAT compliance.
• Quicker payments: Structured invoices streamline invoice approval processes. Since they minimise processing times, businesses can be paid quicker, enhancing liquidity and cash flow.
• Savings expense: e-invoices save on printing, postage, scanning, and warehousing space in paper form. They also reduce administrative expenses incurred in processing PDF and paper invoices.
• Fewer mistakes: Automation minimises the possibility of duplicate posting, calculation errors, or missing records. This means cleaner bookkeeping and better financial reporting.

Does emailing a PDF count as e-invoicing?

No, emailing a PDF does not constitute e-invoicing. A PDF invoice is nothing but an electronic version of the invoice that is basically just an image of the invoice. While the invoice is sent electronically, it is not sent in a structured, machine-readable format that qualifies for e-invoicing. Even though the invoice is sent electronically via email, it will still need manual entry (or scanned) input into the accounting systems, thus there is no automation to be gained here. 

On the other hand, an e-invoice is created and exchanged in a structured format (XML, UBL, etc). In addition, e-invoicing represents electronic invoices that can be used as input into financial systems without the need for re-keying or simply scanning. Only structured invoices meet the strict legal requirements as defined in European law (specifically, Peppol or ViDA frameworks).

Conclusion

An e-invoice in a structured format uses a defined format for electronic processing regardless of the form of delivery. While PDF and paper invoices serve as static, human-readable invoices, structured e-invoices provide for real-time processing by automated accounting systems to be less error-prone, as well as be able to add automation in cross-functional systems. 

Moreover, the shift to structured e-invoices not only meets the evolving EU regulatory framework like ViDA today, but it also increases transparency, improves cash flow and expedites cross-border transactions.