Article

Digital vs. Electronic Invoices

31 January 2025

Do you know the difference?

In today’s business environment, the terms "digital invoices" and "electronic invoices" are often used interchangeably. However, it is essential to understand the difference between the two so that businesses can better comprehend, improve and increase the efficiency of their financial processes.

Digital Invoices

A digital invoice generally refers to any invoice created, sent, or stored in a digital format. This can include invoices generated using word processing programs or accounting software and saved as PDF files. Although these invoices are digital, they often require manual handling, such as data entry or printing at some stage. A digital invoice could be, for example, a PDF document sent by email to a customer, who then needs to manually enter the information into their accounting system. While this method reduces paper usage, it doesn’t eliminate the inefficient manual processes and is prone to human error.

Electronic Invoice or e-Invoice

An electronic invoice, or e-invoice, is an invoice issued, sent, and processed in a structured electronic format that allows systems to automatically process it without human intervention. Electronic invoices are often created in formats like XML or EDI, which enable seamless integration between the sender’s and receiver’s accounting systems. This automation minimizes errors, speeds up processing, and enhances operational efficiency and cost savings.

Key differences

  1. Format and Structure: Digital invoices often lack a standardized structure, which can lead to inconsistencies in data collection and processing. Electronic invoices, on the other hand, follow standardized formats ensuring consistency and compatibility between systems.
  2. Processing Methods: Digital invoices typically require manual data processing, increasing the likelihood of errors and extending processing times. Electronic invoices enable automated data transfers, reducing the need for manual labor and saving both time and money.
  3. Efficiency and Costs: While digital invoices reduce paper usage, they limit efficient processes due to manual handling. Electronic invoices streamline the entire invoicing process, resulting in savings and improved financial management.

Benefits of using e-Invoicing

  1. Cost Savings: Using electronic invoices saves time and reduces errors, leading to more effective accounting and operational efficiency.
  2. Increased Security: Automated data processing reduces errors and ensures accuracy and timely payments. It’s also important to use service providers with ISO 27001 security certification to ensure data security.
  3. Environmental Impact: Electronic invoicing promotes sustainability by reducing paper usage and carbon footprint.

Conclusion

Both digital and electronic invoices represent significant steps toward modernizing accounting and invoicing processes. However, electronic invoices provide a more comprehensive solution with full automation and system integration. The market will continue to shift toward this transformation, and adopting electronic invoicing processes can give companies a competitive edge by enhancing efficiency, cost-effectiveness, and accuracy beyond what digital invoices offer.


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