Electronic Invoicing

What is an electronic invoice?

An electronic invoice is a commercial document in digital format that reflects a purchase or sale of goods or services. To understand what an electronic invoice is, it is important to be clear that it is a digital version of the paper invoice, so both have the same legal effects and must meet a series of requirements and mandatory data.

When we create an electronic invoice, we generate a digital file that, like any ordinary invoice or “regular invoice”, serves as legal proof of a purchase or sale and that we can share over the Internet.

What is an electronic invoice used for?

An electronic invoice, like any other invoice, serves to document that a purchase or sale has been carried out correctly, thus giving legal and tax validity to a commercial transaction. With an electronic invoice we can document this transaction digitally, since electronic invoices are generated and transmitted electronically, which allows professionals to streamline their processes.

The electronic invoice is especially useful when we need to prove a commercial transaction in a digital environment, such as an invoice addressed to a public administration, justifying an expense electronically or sharing our invoices with the tax authority through its online portal.

What does the law say about the use of electronic invoices?

There are different legal regulations covering the use of electronic invoices, a requirement that already existed for invoices addressed to the public sector, although it is with the latest legislative changes that its use will become mandatory in all transactions between professionals.

Main benefits of using electronic invoices

Electronic invoicing has revolutionized the way companies manage their commercial transactions. This method of issuing and receiving invoices in digital format has gained popularity around the world due to its numerous benefits for both companies and the environment.

• Efficiency and Agility in Processes. One of the main benefits of electronic invoicing is the efficiency it brings to business processes. Instead of relying on physical documents that must be printed, sent and filed, electronic invoices are generated, sent and stored quickly and easily through specialized platforms. This significantly reduces the time and resources devoted to document management.
• Cost Savings. Adopting electronic invoicing also brings considerable savings in operating costs. By eliminating the need for paper, ink and postal shipping, companies can reduce their expenses associated with printing and distributing physical invoices. In addition, digital storage eliminates the costs related to the physical space needed to file documents.
• Regulatory and Legal Compliance. Electronic invoicing is usually backed by legal and regulatory frameworks that guarantee its validity and authenticity. By adopting this method, companies can make sure they comply with current tax and commercial regulations, which avoids possible penalties or fines associated with errors in issuing invoices.
• Reduced Environmental Impact. The electronic invoice is a powerful tool for environmental sustainability. By drastically reducing paper consumption and the greenhouse gas emissions associated with the production and distribution of physical documents, companies that adopt electronic invoicing are contributing positively to environmental protection.
• Greater Security and Control. Electronic invoicing provides a higher level of security compared to physical invoices. Electronic documents can be protected with advanced security measures, such as encryption and authentication, which reduces the risk of tampering or loss of information.
• Easier Data Management and Analysis. Digitizing invoices allows easy integration with business management systems and accounting software. This simplifies the management of financial data, making it easier to generate reports and analyses that support strategic decision-making.
• Encourages Business Collaboration. Electronic invoicing promotes greater collaboration between companies by making it easier to send and receive documents quickly and securely. This speeds up business communication and strengthens relationships with business partners.

These are just a few examples of the advantages electronic invoicing brings to companies and professionals. If you are thinking about switching to digital invoices, be sure to read our article on the benefits of electronic invoicing.

What types of electronic invoices are there?

Unlike traditional invoice types, electronic invoices are somewhat simpler to classify. To properly understand what an electronic invoice is, you need to know the different electronic invoice formats we can use, such as the structured electronic invoice and the unstructured electronic invoice.

Structured electronic invoice

Unstructured electronic invoice

Unstructured electronic invoices are those that are not made up of structured data, but of a regular document. They are usually scanned paper invoices or invoices in PDF format.

They contain all the necessary data but are displayed in an image or flat document, so processing or transferring the data must be done manually or with OCR (optical character recognition) software.

Why are the electronic signature and the electronic invoice important?

Since November 30, 2022, the use of electronic invoicing became mandatory for taxpayers in Ecuador, who had to adopt this system and leave behind the use of traditional invoices.

For this reason, and to guarantee the security of the receipts generated under this modality, the Internal Revenue Service (SRI) chose the electronic signature as the ideal mechanism to back these tax documents.

Today, more and more SMEs, companies and self-employed professionals see this system as an opportunity to manage their receipts more easily by reducing errors and helping make their accounting more accurate.

Elements of an electronic invoice

Like ordinary invoices, an electronic invoice will only be legally and commercially valid if it contains the mandatory data and meets the invoicing requirements. For now, and until the new regulation is approved, most elements of an electronic invoice (except the electronic signature) are the same as those of an ordinary invoice:

• Numbering to identify each invoice with a sequential number. 
• Issue date marking the moment the document is issued. 
• Tax identification data of the issuer and the recipient of the invoice. 
• Item(s), to detail what is being sold or purchased. 
• Taxable base, to know the amount of the sale before taxes. 
• Tax rate (taxes), to pay taxes correctly. 
• Total amount, to keep the accounts clear. 

In which cases is it mandatory to use electronic invoices?

Whether electronic invoicing is mandatory depends on the type of customer, that is, the recipient we are invoicing. In this sense, it is worth noting that issuing an invoice to a public administration is not the same as invoicing a private-sector company or professional.

Each of the obligations relating to electronic invoices is governed by a different regulation. For example, electronic invoicing in transactions with the public administration has been mandatory for years. However, in transactions between self-employed professionals or companies, electronic invoicing is not yet mandatory.

How to verify the validity of an electronic receipt?

To confirm the authenticity of your receipts, there are different services that make this process quick and easy, such as the SRI en línea portal.

This free tool allows individuals and legal entities to look up the electronic receipts they have received and validate that they meet all legal requirements, including the type of receipt, the issuer's Registro Único de Contribuyente (RUC, Single Taxpayer Registry), authorization date, among others.