A research on E-invoice: Benefits, challenges and strategies to overcome in Vietnam

139 International Conference on Finance, Accounting and Auditing (ICFAA 2018) November 23rd, 2018 Hanoi City, Vietnam A Research on E-Invoice: Benefits, Challenges and Strategies to Overcome in Vietnam Nguyen Phuong Thaoa, Dang Thi Tra Gianga aNational Economics University Submission day: 30/10/2018 Review day: 10/11/2018 Acceptance day: 15/11/2018 Abstract E-invoice is an emerging issue not only over the world but also in Vietnam. Since e-invoice implementation is about to be compulsory in Vietnam for all organizations in 2020, it is necessary to identify the benefits, challenges and strategies to overcome these challenges of adopting e- invoice in Vietnam. The study investigated a number of benefits, such as reducing processing time, decreasing operation cost, improving efficiency of human resource, high confidential and accurate information, optimizing the utility of other IT application. However, there are also internal and external factors that have hindered the implementation of e-invoice. Some suggestions to overcome these obstacles were presented in this paper. Keywords: E-invoice, Benefits, Challenges, Strategies JEL codes: M41 1. Introduction In the time of industry revolution 4.0, information technology has archived an important milestone in transferring information systems. IT has changed firms’ activities in some areas such as automatic processes to meet the requirements of flexibility, quality, cost- saving and effectiveness. The automatic processes in firms include electronic orders, electronic order confirmation and electronic payment procedures (Morrell & 140 Ezingeard,2002). E-invoice, therefore, is introduced to enhancing efficiency of firms’ operation since it transmits information automatically in machine-readable form. E-invoice is required in many countries around the world such as the US, UK, Finland, Australia, Spain, etc. since it’s benefits are apparently. In Vietnam, the emergence of e-invoice was apparent since Vietnamese government issued decree no. 51/2010/NĐ-CP which officially referred to the adoption of e-invoice. Therefore, it is an emerging issue which in need of researches. So far, studies about e-invoice in Vietnam have not been carried thoroughly. This paper aims to discover the adoption of e-invoice worldwide and in Vietnam. Additionally, the benefits and challenges of adopting e-invoice in Vietnam are also analyzed and identify strategies to overcome these challenges. 2. Literature review and theoretical framework for e-invoice Electronic invoicing is defined as the electronic tranmission of invoice data in a structure and standard format, allowing the automated processing of the invoice at the buyer site (Penttinen 2008). These invoice data could be issued in Electronic data interchange (EDI), XML format or other internet-based web forms. There are some national and international standards that companies could choose to adopt. This study will briefly draw up the overview of available framework in Vietnam and on worldwide . 2.1. Adoption of e-invoice worldwide Accredited Standards Committee X12, an American National Standards Institute (ANSI) , today known as the ANSI X12 Committee, is the first institution which standardizes EDI process in oder to serve across industry groups (automotive, chemical, communication,etc.). For example, utility companies and uniform providers could adopt the ASC X12 810 standard, while telephone companies could use electronic invoice which complies with the ASC X12 811 standard. In 1983 five standards were published by X12. The ANSI X12 committee has subsequently published standards for more than 20 documents including purchase order, remittance advice, invoice, and request for quote. (Hill, Ferguson,1989 ). Electronic data Interchange for Administration, Commerce and Transport (EDIFACT) is the international EDI standard developed under the United Nations. In 1984 the American National Standard Institue (ANSI X12) commitee joined with Europe’s Trade Data Interchange (TDI) to form the Joint EDI Committee (JEDI) and develop common standard: EDIFACT standard. The standard defines 15 different types of electronic documents: purchase order, promotion announcement, price change, invoice, etc. The set of rules for formatting a specific electronic document is called as transaction set (Hill, Ferguson, 1989). However, according to United States Patent (2000), these electronic invoices contain the same information as do paper invoices, but the information is electronically transmitted via a network from the Vendor's computer System to a remote computer in a Standardized format. 141 This means that an automated invoice system will not require manual invervention by the buyer. An true electronic invoice would fully automates the invoice capture and receipt process so the buyer does not need to perform any data entry. The content of normal eclectronic invoice consists of basic information, including : Title invoice, Invoice number, Name and address, Invoice date , currency, quantity and type of product, total amount to be paid, the amount of payable or deductible VAT and any discounts or rebates. The standard also allows organisations to adopt type of format’s electronic invoice with compliance or without compliance. For the electronic invoice without compliance, the invoice adhere to local specified guidlines for invoice content , which could be applied for oversea trading. In 2010, a legislation adopted at European Union level was passed in the form of Directive 2010/45/EU. This document aims to promote the usage of e-invoice by allowing organisations freedom of choice between paper and electronic invoice by removing existing burdens and barriers. 2.2. Adoption of e-invoice in Vietnam To catch up with development of electronic technology, the latest regulation, Decree No.119/2018/ND-CP, was issued on 12/9/2018 by Vietnamese government about adoption of electronic invoice in Vietnam, which replaces Decree No. 51/2010/ND-CP. Remarkable subjects relate to : format and content of e-invoice, type of business forced to use e-invoice, validity of decree, issue of invoice, etc... In order to improve the understanding new legislation, authors will sum up several outstanding rules. Firstly, the Deadline’s business organisations for application e-invoice will be in 01/11/2020. Moreover, Decree will have validity during this period , from 1/11/2018 to 31/10/2020. This document also defines the types of e-invoice based on tax purposes that includes: VAT e-invoice, sale e-invoice, and other electronic note. The point in time of issue e-invoice is the date in which the seller has transferred to the buyer the ownership of goods or completed providing services. 3. Analysis of reality 3.1. Benefits of implementing e-invoice in Vietnam There are various studies conducted about benefits of e-invoice in business firms over the world. According to the European Commission (2009), e-invoice should be formed in well-known formats such as PDF, XML, EDIFACT, HTML, DOC, XLS, JPED or TXT, therefore it is easy for firms to use and transfer information. In Vietnam, this characteristic of e-invoice reduces time to handle business transactions, such as: processing stages were reduced by 70%, billing cycle was shortened by 90% (Nguyen Thi Thu Trang and Nong Thi Kim Dung, 2018) since e-invoicing eliminated time of manual billing. Any transactions 142 would be posted directly and automatically into electronic format of invoice which helps saving time for both suppliers and customers by reducing processing period. Secondly, operating cost is saved by employing e-invoice. One of organizations’ purposes in applying e-invoice is reducing administrative cost (Poel. Et.al, 2016). According to a survey of Vietnam General Department of Taxation, the highest cost of self-printed invoice and cost of pre-printed invoice were approximately 2.500 VND/invoice and 2.000 VND/invoice respectively, whereas the cost of adopting e-invoice in EVN was only 292 VND/invoice (VFT, 2018). This reality is a result of reducing cost of generating, printing, sending, preserving and archiving invoices when organizations employ e-invoice instead of paper invoice. This aspect of e-invoice also helps saving environment by reducing carbon foot- print when eliminating the existence of paper invoice. The third benefit of e-invoice is improving efficiency of human resources (Hernandez- Ortega, 2012). As e-invoice saving time of administrative tasks, employees and managers are allowed to devote themselves better to higher value-added and creative activities. The next benefit that could be referred is the high confidential and accurate aspects of e-invoice. It can be explained as e-invoicing process obtains information in real time automatically, which is hard to be affected, easy to verify and provides information about transactions accurately. There are numerous counterfeit invoices which affect enterprises’ prestige in Vietnam. This situation could be reduced since e-invoice is more confidential than paper invoice. Another benefit of e-invoice is the optimizing of IT application systems in Vietnam. A number of IT applications are enhanced their utilizing by using e-invoice such as e- commercial, e-government, online tax, internet banking, etc. 3.2. Challenges of implementing e-invoice in Vietnam There are a number of barriers to adopting e-invoice in Vietnamese companies. Factors that affect the implementation of e-invoice can be classified as internal and external factors. Internal factors are those barriers that originated from the company itself, whereas external factors are further hindrance from outsiders. Through interviews of 12 managers of Vietnamese business firms that have not adopted e-invoice yet, internal and external barriers to e-invoice implementation were recognized as follows: Internal factors: • Technical obstacles: Sufficient IT infrastructure and competences requirements such as new software, system integration and data transitions are necessary condition to fully adopt e-invoice. These obstacles are a burden of small business firms who having outdated or self-developed systems to process e-invoice. • Cost of developing e-invoicing system: most interviewers claimed that it is extra cost to the firm in order to implement e-invoicing systems. Small companies need to acquire appropriate IT infrastructure and software which incur implying and initial costs. The required expense could be high for those whose IT systems have been not sufficient yet. 143 External factors: • Customers’ reluctance to receive e-invoice: Although the benefits of e-invoice is numerous and apparently, e-invoice adoption would be efficiency only if trading partners are willing and capable to exchange e-invoice back and forth. In fact, a number of customers have been not willing to receive another form of invoice but paper one because they have inadequate knowledge about e-invoice, threatened by the validity, reliability and security of e-invoice. • Lack of e-invoice implementation providers: it takes less expense and time for organizations to implementing e-invoicing systems via software providers rather than developing the systems themselves. However, there are only 15 firms that provides e- invoice processing software in Vietnam such as some joint-venture companies with VNPT, VDC, etc. (Nguyen Thi Thu Trang, Nong thi Kim Dung, 2018). This number is inadequate for providing services for 561.064 firms (GSO, 2018) in Vietnam. • Limited instructions from the government: e-invoicing is about to be mandatory for all Vietnamese enterprises in 2020, however, there are only Decree No.119/2018/ND-CP and Decree No. 51/2010/ND-CP which is replaced by Decree 119 instructing organizations to implement e-invoicing system. It is high demand of companies for specific policy instruction in implementation of e-invoice. 4. Recommendations and suggestions Though e-invoicing systems bring a number of benefits to organizations, there are also obstacles that hinder the implementation of e-invoice. There are some suggestions to promote the adoption of e-invoice in Vietnam as follows: • Financial and technology assistance: The burden of initial investment cost in e- invoicing systems and IT issues can be reduced if financial and technology assistance are promoted, such as the co-operation between authorities and others developed IT corporations in establishing a standard platform for e-invoicing system. Moreover, any intensive encouragement of government to promote e-invoice would make a huge change in implementation of e-invoice, for example: reduce fees, support the developing of e-invoice service providers, etc. • Raise public awareness of the reliability, confidence and others benefits of e- invoicing system. Since the reluctance of customers is one of the challenges for firms to adopting e-invoice, it is necessary to keep customers well informed about e-invoice characteristics and benefits. Some suggested actions could be as holding conferences about e-invoice, attaching information about e-invoicing system to paper invoices. • Build advanced guideline on implementation of e-invoice by the government. 144 5. Conclusions The paper investigated the implementation of e-invoice, its benefits and challenges in Vietnam. There were numerous advantages of adopting e-invoice instead of paper invoice, such as reducing processing time, decreasing operation cost, improving efficiency of human resource, high confidential and accurate information, optimizing the utility of other IT application. Nevertheless, existed obstacles such as technical burden, initial cost of applying, the reluctance of customers, lack of service providers and limited legal guidance hinder Vietnamese firms from implementing e-invoice. The study suggested some solutions to overcome these challenges such as: increasing financial and technical assistance, spreading the utility and benefits of e-invoicing system and building specific guideline for adopting e- invoice. 6. References Morrel,M. & Ezingeard,J-N.(2002), Revisiting adoption factors, Logisties information management, vol.15, issue 1, pp.46-57 Nguyen Thi Thu Trang, Nong Thi Kim Dung (2018), Some issues about e-invoice, Financial Journal, viewed 30 October 2018, [ doi/trao-doi-binh-luan/mot-so-van-de-ve-hoa-don-dien-tu-136968.html] Poel, K., Marneffe, W., Vanlaer, W. 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