Month: December 2020

What is the Clearance model in the electronic invoice?

Posted on by Laura CONREAUX

Regulations around electronic invoices are rapidly changing. Whilst all countries adopt the electronic invoice, not all have the same model of financial control. In France we are governed by the Post Audit model, but with Article 56 of the Finance Act 2020 presented on 27 September 2019, France is moving towards a Clearance model.

Post-Audit or Clearance model for e-invoicing?

To control VAT in B2B (Business-to-Business) circumstances, and in the fight against fraud, there are two control models to consider:

The Post-Audit model

Currently used in France and in most European countries (with the exception of Italy and soon Greece). Business partners issue, receive, and archive paper and electronic invoices. Businesses are required by regulation to ensure the authenticity, integrity and legibility of these invoices. The tax administration operates VAT and anti-fraud checks on company records and archived invoices.

The Clearance model

This is a tripartite model between seller, buyer, and administration. Prior to the issue of each invoice, the supplier of a good or service must receive approval from administration before charging the buyer. Thus, the issue of each invoice is declared and authorized by the tax authorities. The invoice is registered with the tax authorities immediately, and “approval received” is mentioned on the invoice. Administration is aware of the amounts of VAT being collected. This model is already used in many Latin American countries, Russia, and China.

clearance model

Section 153 of the Finance Act 2020 and the Clearance model

The Finance Act 2020 states that:

“Invoices for transactions between value-added tax are issued electronically and the data in them is forwarded to administration for operations purposes, including modernizing the collection and control of value-added tax.”

“The government is submitting to Parliament, before 1 September 2020, a report on the conditions for implementation, at the earliest from 1 January 2023 and no later than 1 January 2025, of the obligation to bill electronically in business relations. This report identifies and evaluates the most appropriate technical, legal, and operational solutions, including the transmission of data directly to the tax administration, taking into account the operational constraints of stakeholders. It assesses, for each of the options under consideration, the expected gains in value-added tax recovery and the expected benefits for businesses.”

Towards a change in the way invoices are transmitted …

By making the electronic invoice (e-invoicing) mandatory for all inter-company exchanges, the government is considering as its next step the transmission of the electronic invoice directly to the tax administration. This will give the tax administration access to all billing data, and the full and perfect visibility of VAT being collected in real time.

Big changes soon to come for the electronic bill?

The electronic invoice will become a legal requirement over the period 2023–2025 for all B2B transactions. In addition, the continuous control of transactions is already under consideration.

Establishing this system is a matter of setting up a “monitored mode” or a Clearance model. The core idea is that the tax administration intervenes between the seller and the buyer in order to carry out tax and VAT checks. In a Clearance model the administration has two ways to collect VAT:

Split Payment:

The principle of Split Payment is based on the provider opening a special bank account to receive the collected VAT. Upon receipt of payment of the invoice (without VAT]) net amount reaches regular bank account of the seller and VAT amount is transferred to a special VAT bank account. This special VAT account supervised by the tax administration can only receive VAT and refund operations. Poland and Italy have chosen this mode of operation.

E-reporting:

The principle of e-reporting is that suppliers and buyers report their transactions on a government platform via e-books, and continue to file their VAT returns on the basis of their accounting ledgers. If a discrepancy arises between e-reporting and VAT returns, the company can correct the discrepancy or justify it. This mode has been chosen in Greece with the myDATA (My Digital Accounting and Tax Application) platform.

Model clearance: the Italian example

Italy, Europe’s leading country for VAT fraud, began implementing a Clearance model in early 2019. Today, the scheme affects 3.6 million Italian companies. The Clearance model also includes B2G billing.

The Italian Clearance model relies on an exchange server called SDI (Sistema di Interscambio), between the invoice transmitter and the receiver. This SDI records invoices, transmits, and archives them. In return, it produces follow-up information on the invoice processing end. And the system manages the delivery code required on each invoice by law, and inserts the VAT numbers of both parties.

Implementation of the Clearance model leaves some questions unanswered …

The future implementation of a Clearance model is a near certainty internationally. This shift towards greater transparency is the current trend. Companies will provide their local tax administration with real-time social, accounting and financial data. In exchange, the tax administration will facilitate their administrative tasks by offering VAT pre-reporting services.

But before that, key points remain to be clarified:

  • Its limits:
    • Billing types: B2G, B2B and B2C?
    • Bills issued abroad: Eurozone, or out with the Eurozone?
  • Should the timetable for implementation be according to company size?
  • Which electronic invoice formats will be accepted: EDI Tax, structured files, signed or simple PDFs, Factur-X for online payments?
  • The type of platform that will be used:
    • A platform like the SDI in Italy?
    • An extension of Chorus Pro to the private sphere?
    • Third-party platforms communicating with the tax administration’s information system?

What are the consequences for businesses?

After the adoption of electronic invoices, the issues surrounding a move to a Clearance model present significant changes for companies.

The fact that the tax authority interferes between the issuer of the invoice and the receiver, and whether or not to approve the invoice, is a major regulatory and technological constraint, which will impose new steps on the billing services of companies: follow-up of applications for approval, and mentions of approval on the invoice, for example.

A model of operation with similar regulatory and technical constraints already exists. These are customs clearance operations, where operators submit requests for customs authorizations for services. For this reason, customs services offer a portal accessible to all and major operators (import-export companies, large companies) go through platforms approved by the customs office.

A new IaaS (Invoice as a Service) service?

This suggests that in the near future, IaaS platforms will offer companies a set of services around invoicing: billing, factoring, VAT management, etc.

For more than 30 years we have supported our clients in the implementation of their electronic billing and paperless taxation. Today the “everything paperless” trend involves big changes for companies. In order to anticipate and prepare for these developments, Tenor participates in various working groups (FNFE and GALIA and GS1).

If you liked this article, also read the one on the Factur-X. If you are wondering about paperless tax invoicing and paperless solutions, please contact our experts!

EDI a vital tool for the retail sector

Posted on by Laura CONREAUX

The mass distribution of EDI (computerized data exchange) has been one of the major advances of the retail sector, who are pioneers in terms of EDI. For more than 30 years, paper documents have been replaced in this industry by electronic exchanges to control costs and streamline the supply chain.

Discover in this article how the retail industry is using computerized data exchange and what its challenges are for tomorrow.

The peculiarities of the retail sector

The constraints of the retail sector

Large and specialty supermarkets have a unique supply-chain structure where inventory management and rapid sales are both important requirements. Similarly, the management of a multitude of references, the volume of transactions, in-store availability, the management of uncertain demand, and the obligation to trace food and perishable goods, are constraints requiring efficiency and flexibility in the business process and large EDI distribution.

In retail, the slightest delay or snag in the supply chain directly affects the level of service to the end customer.

A pioneering sector in EDI

The retail sector was one of the first to automate document exchange, such as orders and customer invoices – for example, through purchasing centers. These practices have encouraged the emergence of EDI large-scale distribution.

Subsequently, the automation of the receipt of electronic shipping notices was the industry’s solution to relieve congestion on warehouse receiving docks as a result of the increased frequency of deliveries.

The implementation of large-scale EDI workflows has saved time and improved inventory status. As a result, the company’s responsiveness to the unexpected has greatly improved.

For trade to go smoothly, one of the most important issues in this industry is Global Data Synchronization (GDS).

Each supplier provides a reference file for its goods, relating to product information on products, classifications, authorizations, prices, and promotions.

EDI scenarios exploited in the retail sector

A classic EDI scenario

The classic EDI scenario involves the sending of purchase orders (ORDERS EDIFACT) and the receipt of corresponding delivery vouchers (DESADV EDIFACT) and invoices (INVOIC EDIFACT), between the supermarket and its suppliers.

In Europe, the EDIFACT standard is most commonly used in large-scale industries. GS1is responsible for managing the overall implementation of bar codes in standardized messages.

In the case of cross-docking, the supplier must deliver products to a single warehouse grouped in separate batches which are and destined for different end points. Allotted orders and shipping notices are then utilized.

NOTE: Allotted orders are also sent electronically in the EDI ORDERS format (and DESADV messages for corresponding shipping notices).

DESADV messages are key for food traceability. It makes it possible to reconcile each pallet with batch numbers and use-by dates to get them where they need to go in a timely fashion.

NOTE: With regard to electronic billing, which is widespread in this sector, paperless tax is possible thanks to a suitable computer system that meets the needs of processing and archiving large volumes of documents, at a lower cost.

A focus on the shared management of EDI retail supplies

SSM (Shared Supply Management) is a method of organization in which logistics providers are jointly involved in supply management.

SSM enables a collaborative approach to supply-chain management with reduced inventory levels, supply times, and the total cost of the supply chain.

Two types of SSM are:

  • VMI (Vendor Managed Inventory): the manufacturer is solely responsible for supply-chain replenishment based on the sales data provided to it. This is the main mode of supply, in particular, in the retail sector;
  • CMI (Co-Managed Inventory): the supplier proposes the replenishment of supplies to the distributor according to previously established rules, and the distributor’s approval is required before any final delivery.

NOTE: EDI messages used in SSM are stock inventories (INVRPT) and sales data (SLSRPT). Based on this information, the supplier offers a delivery via an ORDER proposal and receives an ORDER confirmation in return.

What is the future of EDI in retail?

Changing consumer habits

The decline of superstores, the development of e-commerce, the explosion of convenience stores, home delivery, health crises, food waste, and transparency demand … are signs that the retail industry is constantly forced to reinvent itself, especially on the Web/Internet.

To meet these new challenges, it is important that businesses have access to comprehensive, reliable, and up-to-date product information when it is needed.

According to the EDI retail solution, this means enriching the information gathered from the sales of consumer products and making them more qualitative.

Establishing a reliable, efficient, and responsive supply chain

Throughout all the future changes that await them, retail companies will need to be able to rely on a reliable and flexible supply chain. This naturally leads to the establishment of communication protocols and closer partnerships between suppliers and distributors.

Automatically recovering suppliers’ inventory statements and communicating with them via Internet and Web solutions are avenues for future developments.

EDI is mainly used by industry players, and is approaching its maximum development level. Faced with the increased complexity of supply chains and the need for real-time data transmission, it may be time to take a new step and turn to a promising field: block chain.

The goal of retail players and their suppliers is to provide the right product to their end customers: to the right place, at the right time, and at the right price. This would not be possible without computerized and efficient B2B exchange – which are also key to meeting the challenges of the future.

An expert on EDI in the automotive market, Tenor is also a major player in EDI in retail. If you are interested in the topic, check out this excellent article on EDIFACT. Please contact our teams about your project.

Contact us on 04 81 91 79 99

What is Master Data Management?

Posted on by Laura CONREAUX

Master Data Management (MDM), is a set of tools and methods for managing a company’s data pertaining to its business needs, such as sales, marketing, and operational strategies. The function of a MDM is to ensure the integrity of a company’s data repository, so that all services can access accurate, relevant, and up-to-date data at all times, from a single point of access.

Today, all businesses have access to large volumes of disparate and dispersed data sets and information. These are either generated by internal software or external sources, such as Big Data.

Companies realize that they need to control, sort, and evaluate all this information to be able to exploit it with confidence.

According to experts, the implementation of a MDM is an economic and strategic advantage:

  • A survey by Gartner reveals that organizations poor data quality is responsible for an average loss of $15 million per year,
  • An IBM report to ABERDEEN Group, a company specializing in international market research, states: “Companies that use Master Data Management (MDM) are twice as satisfied with the quality of the data and the speed of delivery.”

In this article, we’ll see how Master Data Management simplifies business data management through the following topics:

What is a company’s reference data?

In computer science, data is classified as basic coded information: a customer ID, a postcode, an order number, an order date, etc.

A definition of reference data for Master Data Management

This reference data varies depending on the user, or the need for it. For an operator, for instance,it involves structuring business information: a customer account for a sales manager, an accounting account for a chief accountant, and so on.

For a business project manager, reference data is the information shared across several business processes. For example, a customer account is accessed by sales, marketing, and accounting services.

In the caseof an IT project manager, reference data is the data set used in various software solutions, such as Customer Relationship Management (CRM), Commercial Management, and Accounting.

The three main types of baseline data are:

  • Master data, which contains key business objects: customer, supplier, commodity, employee, etc.
  • Consecutive data that complements the master data: a customer’s address (street, zip code, country, etc.); the features of a commodity (color, dimensions, photograph, etc.).
  • Value tables or billings: VAT rates, currency codes, country identifiers, postcodes, etc.

Within the company, all this data must meet established quality criteria, such as uniqueness, accuracy, completeness, compliance, consistency and integrity. But the data must also respond to operational issues. That is to say: to be up-to-date, easy to access, relevant, and understandable. Data records must also comply with security rules of the country in which the enterprise is based. In fact, they must be accessible only through authorized services and personnel. The company must also implement the logging of access and changes.

An example: Customer data

Let’s consider customer data, which is shared and used by CRM, Business Management and Accounting.

These three systems retain and use common information–such as, names and addresses–which complements the client entity. They also hold and update business information specific to their functions:

  • CRM: exchange dates with the sales department, the name of the account’s salesman,
  • Business Management: purchase history, pricing conditions,
  • Accounting: financial accounts, outstanding payments, date of last payment.

The difficulty with this constantly changing information is to retain an accurate record of customers’ situations at all times:

  • Who is responsible for updating customers’ addresses?
  • How can we replicate an address change reliably, and in real time so that all departments have access to the updated record?
  • How can we maintain the accuracy of common information between potentially different applications in different departments?
  • Under what conditions do CRM[EP3]  and Accounting Management have access to the clients’ outstanding payments?

The functions of Master Data Management?

Master Data Management is a set of tools, methods, and also rules and best practices that allow a company to manage its data.

A MDM has all the means to create a repository for the company’s structuring data. The scope of a MDM’s intervention is, therefore, enormous, as the MDM will centralize all functions:

  • Data acquisition: direct entry, internal sources (application processing, connected objects, IOT), and external sources (databanks),
  • Data validation according to common syntax rules, business management rules, and consistency rules,
  • Quality treatments, such as research and removal of duplicate information, ISO standards, etc.,
  • Identification of the data through a single client ID,
  • Data security (a change of address which does not involve a third party[EP5] ),
  • Data description: metadata updates,
  • Transcodification: reorganization of the data between applications.

Depending on the type of data within the system, these functions will be performed directly by a MDM tool, an application that owns [EP6] the data, and grants access to users:

  • A list of municipalities is imported from the The National Institute of Statistics and Economic Studies (INSEE) database and made available to applications that need it,
  • Customers are created in the CRM and disseminated to Commercial Management and Accounting services,
  • Any outstanding payments are updated in Accounting and also accessible by authorized personnel within the company.

Master Data Management will also be responsible for ensuring compliance with data management and retention times in accordance with existing data protection and financial regulations, such as the RGPD (General Data Protection Regulation) for personal data and for accounting and financial data, IFRS (International Financial Reporting Standards).

Why implement a Master Data Management tool?

Centralized management of reference data is good for the company.

In the absence of the centralized management of reference data, the company retains separate data archives. This is problematic because the data is likely to be in different formats, not always synchronized, and introduces the risk of false, inaccurate, and inconsistent data which costs the company time and money.

The principles of setting up a MDM:

  • A unique and identified data source,
  • The dissemination and provision of accurate data to data “consuming” applications (ERP, CRM, WMS, BI, and so forth).

The benefits of a MDM for your business:

  • Operating gains from having access to quality data,
  • Time savings to access accurate data,
  • A complete overview of the company’s data set,
  • Greater ease in implementing Business Intelligence analytics tools.

Master Data Management and Big Data?

The implementation of Master Data Management will also allow the company to exploit Big Data to its benefit.

Today with improved technology, enormous volumes of accessible data (Big Data) are of growing importance. This structured and unstructured data comes from the Web, Open Data (freely available to everyone), IOTs, etc.

However, Big Data is not in usable condition by the company, because it’s too numerous, most of it is redundant, available in multiple formats, and of unknown origin.

The idea, therefore, is to use an ETL (Extract Information Load) which consolidates the information contained in a “Data Lake” into a destination system that can be used as reference data. For example, the hashtag #MDM if the company wants to process and analyze posts on social media about MDM.

This information is processed, qualified by removing duplicates, inconsistencies are dealt with, the data is made understandable and interpretable, and can then be linked to company reference data to be used by marketing and sales departments, track customer behavior, measure brand awareness, make predictions, etc.

The EAI, a tool for sharing and exchanging reference data

The deployment of an Enterprise Application Integration (EAI) will allow the dissemination of reference data to be organized by linking applications within an organization together.

One of the main goals of an EAI is that all connected applications share the same data source. For each piece of data a data application source is defined. The EAI then disseminates the data via the EAI bus which allows different systems to communicate through a shared set of interfaces to the applications that request it.

Data transport and transformation provided by the EAI (ETL):

  • Transformed into a pivotal format,
  • Transported between different applications that provide/input the data and the applications that consume it.

The EAI will thus make it possible to define a single-entry point for the reference data.

The EAI also implements a “virtual repository” of reference data that is shared with all connected business applications.

Connection of the EAI bus to other tools/applications

So that users can share information, through this EAI bus it is also possible to connect:

  • The company’s websites,
  • Middleware, Web services for mobile applications,
  • The Data Lake (a repository of data stored in its natural/raw format)

The implementation of an EAI in a company is therefore an important step in the implementation of a MDM project. It will both identify data, and set up the processing and loading stages. But what are the benefits for the company?

What are the immediate benefits of EAI for the company?

Setting up an EAI in an information system is tactical and strategic for the company. These benefits are characterized below.

Tactical benefits:

  • Obtain quality baseline data quickly,
  • Speed up data delivery to consumer applications,
  • Delete point-to-point interfaces and batches of data updates in different applications,
  • Simplify the architecture of the existing Information System (IS), and end spaghetti syndrome with EAI flows.

Strategic benefits:

  • Gain greater agility to evolve the company’s IS,
  • Simplify the integration of new applications,
  • Facilitate access to external data sources (Open Data, Big Data),
  • Enable the consolidation of subsidiaries and acquisitions.

In short, Master Data Management (MDM) offers many advantages. Beyond centralizing and updating data through the company’s data repository, the MDM ensures the uniqueness of the data that is collected, and eliminates the risk of duplicated data in your IS.

For more than thirty years, Tenor has been supporting its customers in managing their data flow through specially crafted EDI solutions and software, EAI, and dematerialization. If you liked this article feel free to check out the one on the definition of the EAI available on the Tenor Blog.