The article is based on Heeros' May 2024 webinar "Survival guide to the international e-invoicing jungle".
In simple terms, Peppol is a cross-border invoice and procurement messaging network. Peppol stands for "Pan-European Public Procurement Online".
Initially, from 2008 to 2012, Peppol was a project funded by the EU, resulting in the Peppol framework. The non-profit OpenPeppol was established to manage Peppol in 2012.
The goal has been to simplify international trade by removing barriers created by various systems, protocols, and file formats. For instance, in Finland, we use both Finvoice and TEAPPS for invoicing, while there are numerous others outside Finland's borders.
Peppol enables streamlining international trade through consistent regulations, standards, and specifications. These define billing and procurement messages and practices.
Peppol is currently used in 37 different countries, outside of Europe, including Japan, Singapore, and Australia. Companies operating in Europe should be aware that, for instance, Belgium's 2026 e-invoicing mandate will be based on Peppol.
To join the Peppol network, you can register through a certified Peppol service provider. In Peppol terminology, Service providers are now used instead of the previously used term, Access points.
Heeros's partner OpenText is a Service Provider. When joining Heeros, the customer receives their own Peppol identifier, which allows messages to be transmitted between parties with the assistance of these service providers (Service Provider).
In the so-called four-corner model, the sender of the invoice creates the invoice in accordance with Peppol data content requirements in their invoicing software, and the invoice is sent to the sender's service provider, which is a Peppol-certified operator. This service provider checks the recipient's location and the recipient service provider's technical capabilities and transmits the invoice over the Peppol network. Finally, the recipient's service provider delivers the invoice to the recipient.
In Finland, we are essentially accustomed to a similar operating model as described above in Peppol's four-corner model, as different e-invoice operators in Finland are able to transmit invoices among each other, thus these e-invoice operator internal networks have already been opened to other operators. Therefore, the connections support a many-to-many delivery, making it possible to reach all end customers in another operator's network through a single connection. This has enabled widespread adoption of e-invoicing in Finland.
Elsewhere in Europe, interoperability between e-invoicing operators has not been as widely adopted, with a few exceptions. For example, in Central Europe, so-called point-to-point connections have been widely used, enabling messages between two parties, but these connections do not easily scale to a large number of end users. This has meant that in many countries, e-invoicing has not been widely adopted and typically has been limited to large companies with the highest invoice volumes.
Peppol can provide relief in this situation. If the sender of the invoice wants to send an invoice from Finland to another EU country, it is possible through the Peppol network if both the sender and the recipient have joined Peppol, and both of their e-invoice operators are Peppol-certified service providers.
The number of companies registering with Peppoli is constantly increasing, and the growth is expected to continue strong in the coming years in Europe.
A mandate is essentially an official order to do something. An e-invoicing mandate means that all invoicing within the mandate's scope must be done electronically, i.e., as e-invoices.
The history of e-invoice mandates can be traced back to Latin America, where Brazil became the first country to make e-invoicing mandatory starting in 2008, with Mexico following in 2011. In Europe, mandates arrived in 2019 when Italy became the first European country to make e-invoicing mandatory.
E-invoicing mandates are driven by the countries' desire to collect taxes more efficiently, combat underground economy activities, and detect potential misuse faster. This is achieved simply by requiring companies not to accept invoices from another domestic company without registering the invoice in the tax authority's system.
On the other hand, a prerequisite for this is that the format and validations of the e-invoice are strictly defined, thus the data content of the invoices is largely standardized. The delivery and/or retrieval of invoices from the tax authorities' system is also technically defined, and is often done only by approved service providers.
E-invoicing mandates are currently very relevant because many European countries are making e-invoicing mandatory within the next 2-3 years. If a Finnish company operates in these countries, the company needs to build support for mandates if it wants to continue its operations, for example in Germany, France, and Spain.
There are no indications yet of mandatory e-invoicing in the near future in Finland, although it would not be surprising if the authorities' stance on this matter were to change. This e-invoicing mandate would bring many new tools, for example, to the tax authorities. Now that there has been talk of the tax authorities needing to cut costs, mandatory e-invoicing and the real-time visibility it provides to the economy and companies' operations could indeed help in this.
There are various types of e-invoicing mandates. Each country has almost always created its own country-specific practices and requirements. This, of course, tends to increase complexity and consequently pain for internationally operating companies.
In Hungary invoices must be reported to the tax authorities either directly by the company itself or with the assistance of a third party, and this must happen in real-time immediately after the invoice is created in the billing system. The delivery of the invoice between the parties is not dependent on reporting and can also take place directly between the buyer and the seller or their service providers, and it does not have to be an e-invoice but can also be a PDF or paper. In this case, the model cannot really be considered an e-invoice mandate, but it is a mandate for reporting invoice data, although its real-time nature tightens the reporting to billing more than, for example, monthly reporting.
The Italian model, which the upcoming Polish model is largely based on, follows the model of centralized intermediation, where invoices are also transmitted between the parties through the tax authority's environment. Typically, this is done through a service provider, but the tax authority also offers a free service. Before the invoice is accepted into the tax authority's system, it is carefully validated, and after approval, it can be retrieved by the buyer or the buyer's service provider from the tax authority's system.
The third model is the so-called decentralized model, where service providers take on part of the responsibility of the authorities and handle the validation and reporting of invoice data towards the tax authorities. This imposes strict requirements on service providers. Service providers handle the transmission of invoices from the operator to the other party, for example, through the Peppol network or existing direct connections. France's upcoming e-invoicing mandate is an example of a decentralized model, but it is also possible to report and retrieve invoices directly from the authorities' environment.
More and more European countries are implementing or planning e-invoicing mandates. In these countries, e-invoicing and/or invoice data reporting are becoming business-critical for companies operating there. Changes may require quick responses and significant adjustments, especially if the level of digitization in the company is still low.
If a company operates in countries where a mandate is coming within 1-2 years, it is important to start assessing the situation and preparing now. Mandates entail additional work and costs for companies in the short term, but they can also be seen as an opportunity to increase the company's level of automation and thereby streamline its operations.
In addition to e-invoicing mandates and Peppol, there will also be ViDA in the future, which stands for VAT in Digital Age. ViDA is a new EU-wide regulatory framework that, when enacted, will facilitate the emergence of e-invoicing mandates. At the same time, it aims to harmonize existing e-invoicing mandates so that they operate in a more consistent manner.
Could it be assumed, then, that with ViDA there would come a European e-invoicing mandate or model, perhaps based on Peppol? It seems to be heading in that direction, but the definition process of ViDA is still ongoing. It is already clear that the schedule for ViDA is shifting from the original timeframe of 2028 to the years 2030-2032.
The answer is that directly it doesn't. However, it enables significant benefits in conjunction with the increasing online invoicing.
Open banking has been around in various forms for a while, with the EU's Payment Services Directive (PSD2) being perhaps the most well-known example. Since 2019, banks in the EU area have been required to enable the sharing of customers' account information (AISP - account information service provider) with other actors with the customer's authorization. Making payments through interfaces (PISP - payment initiation service) is also part of the EU directive.
Open banking is comparable to the invoicing side of Peppol, which helps to open traditionally closed environments and brings modern banking services to small and medium-sized businesses across Europe.
In practice, open banking enables higher automation in financial management through standardized bank interfaces. In practice, it involves, for example, bringing account information into the customer's sales ledger and subsequently allocating payments to invoices. Especially outside Finland, this is typically still a manual process for small and medium-sized businesses. Therefore, open banking allows for automation and efficiency in handling international sales ledgers as well.
At Heeros, we have approached this jungle of mandates and changes through functionalities and flexibility enhancing services from invoice to pay (I2P) and invoice to cash (I2C).
With Heeros' Sales invoices and Purchase invoices solutions, companies can start e-invoicing including Peppol today. Together with our partner OpenText, we can assist our customers with upcoming e-invoice mandates. At the same time, we help our customers to harmonize and streamline financial management processes also beyond the borders of Finland.
When a separate service package for invoicing to payment and invoicing to cash is used in financial management, it is possible to improve the capabilities of the ERP system and various accounting systems without long and costly projects.