If you run a business, you are probably familiar with the basics of invoicing and know what to write on an invoice. But are e-invoices, PDF invoices or paper invoices the best option for you? There is more to consider than meets the eye.
Defining e-invoices, PDF invoice and paper invoice
Before comparing e-invoices, PDF invoices and paper invoices, we must define these terms, especially because there is a bit of confusion about what qualifies as an e-invoice.
- An e-invoice or an electronic invoice is an electronically authenticated file. Authentication can happen by two means: by adding an electronic signature to the invoice, or by transferring it through the Electronic Data Interchange (EDI) system. It is considered valid only in its original electronic format and can be forwarded only electronically.
- A PDF invoice is an invoice issued electronically (through a piece of invoicing software) but does not contain an electronic signature and is not forwarded through the EDI system. (The format may in fact vary depending on the invoicing software, but PDF is the most common.) Since it has no electronic authentication, it is considered valid only when printed, but you can still forward it electronically if your customer can print it.
- A paper invoice is an invoice in a printed or hand-written format. It is considered valid in hard copy, on paper, and it can be forwarded only physically.
To put it simply: legally speaking, there are just two categories, and everything that is not an authenticated e-invoice is treated as a paper invoice, including PDF invoices. Even though PDF invoices are created and can be forwarded in an electronic format, they must be archived on paper.
Deciding which invoicing method to pick
There are three factors to consider when deciding which invoicing method is the best for your business. Firstly, you should look at speed. A true paper invoice must get to your customer on paper, which may take several days depending on the means of transportation (unless the client is physically present, and you can hand them the invoice immediately). By contrast, an e-invoice will reach your customer immediately, while a PDF invoice will do so with the speed of an e-mail.
Secondly, there is the cost aspect. The two major electronic invoicing platforms used in Hungary both offer free plans (limited to PDF invoices) and several paid ones (with the option of issuing e-invoices) ranging from HUF 1,000 to HUF 3,000 per month. The main expense related to paper invoices will be postal fees, which can add up if you issue and mail invoices regularly. As a result, e-invoices and PDF invoices are the cheaper option unless you only issue invoices occasionally, in which case true paper invoices may prove cheaper than signing up for an electronic invoicing platform.
Lastly, you should consider archiving. In Hungary, you must archive invoices for 8 years, so you should think about how much physical or electronic storage space your invoices will take up in your office or on your hard drive. Invoices must be stored in a format that is considered valid by the tax authority, meaning that e-invoices must be stored electronically, and paper invoices must be stored in hard copy. Since unauthenticated PDF invoices are legally considered paper invoices, they must be printed for long term storage, even if you already have them electronically. Similarly, paper-based invoices that were scanned must be kept available in a paper format too.
Discuss the decision with your accountant
As you can probably tell by this point, picking the best invoicing method is a complex matter. You should always consider the nature of your business. E-invoices and PDF invoices are ideal for most companies, but paper invoices can be a better option in some cases. You can even use a mix of the three if needed: for example, if you mainly issue e-invoices, but one of your customers only accepts paper invoices.
If you are unsure about which invoicing method to choose, why not consult an expert? Our seasoned team will gladly help you. Click here for an overview of our services! You can ask for a consultation by calling our office on +36 1 215 0712, by e-mailing email@example.com or by filling in our contact form. If you would like to be notified about our future blog posts, like us on Facebook.