For years, businesses have treated an invoice primarily as a document.

Under SARS’s proposed Digital VAT Model, that concept is changing.

The future invoice is not simply something that gets printed, emailed or stored as a PDF. It is intended to become structured transactional data that can move automatically between the supplier, customer, accounting systems and the tax administration.

That has major implications for ERP and accounting systems.

A PDF is not necessarily an e-Invoice

One of the most important distinctions in SARS’s Consultation Paper is that an e-Invoice is not merely a PDF, scanned image or emailed document.

A true e-Invoice must contain standardised, machine-readable data that allows it to be validated and processed automatically.

This means businesses should start asking a different question of their accounting software.

Not simply:

“Can my system email invoices?”

But:

“Can my system produce and process structured invoice data according to the emerging standards?”

ERP systems will become part of the VAT compliance environment

The proposed Digital VAT Model is designed to integrate VAT compliance with ordinary business systems.

A supplier will issue an e-Invoice from its accounting software. That invoice will move through an accredited Access Point, where it can be validated and cleared before being passed through the interoperability network to the recipient and SARS’s designated Access Point.

For businesses, this means the accounting system is no longer simply an internal bookkeeping tool.

It becomes part of the information chain supporting VAT compliance.

What should your system be capable of?

Businesses should start discussing whether their systems can:

• generate structured electronic invoices;
• receive structured invoices;
• process invoices automatically;
• integrate with ERP and accounting systems;
• validate required data;
• exchange information securely with service providers;
• record the VAT treatment of purchases;
• handle credit and debit notes; and
• retain appropriate electronic records.

SARS acknowledges that some vendors may need software updates, enhancements or potentially replacement systems. It also recognises that smaller businesses may need simpler service-provider solutions.

Don’t wait until mandatory implementation

Although the proposed mandatory rollout is still years away, system changes should not be treated as a last-minute compliance project.

ERP implementations can take months.

Data cleansing takes time.

Staff training takes time.

And changing invoicing processes can affect sales, procurement, accounts payable, accounts receivable and financial reporting.

The businesses that leave preparation until a mandatory deadline may find themselves trying to solve a technology problem and a tax-compliance problem simultaneously.

Start with a system health check

A sensible first step is a basic e-Invoicing readiness review.

Ask:

• Can we issue structured invoices?
• Can we receive them?
• How clean is our customer and supplier master data?
• Can our VAT codes be mapped consistently?
• Can our system integrate with an external service provider?
• Can we automatically capture the VAT treatment of purchases?

What happens when an invoice fails validation?

These questions are particularly important because SARS envisages validation taking place much closer to the transaction itself.

Under the proposed model, an invoice that fails validation could be rejected and returned to the supplier for correction and resubmission.

This is more than an IT upgrade

The biggest mistake would be to treat e-Invoicing as something for the IT department to handle alone.

The transition affects:

• Finance
• Tax
• IT
• Procurement
• Sales
• Accounts payable
• Accounts receivable
• Internal audit
• Management

SARS specifically anticipates taxpayers establishing project teams that bridge IT, finance and compliance functions.

The opportunity

There is a positive side to the transition.

Automated invoice processing can reduce manual capturing, improve data quality and reduce reconciliation work.

Instead of finance teams spending large amounts of time checking whether transactional information agrees with VAT returns, their role can increasingly shift towards monitoring data quality and dealing with exceptions.

That is ultimately the promise of VAT modernisation: less routine compliance work and more intelligent oversight.

The time to review your systems isn’t when the legislation finally becomes mandatory – it is now.

Disclaimer

The Digital VAT Model remains a proposed framework and is subject to consultation, legislative development and further guidance from SARS.