With the implementation of e-invoicing under the Goods and Services Tax (GST) regime in India, businesses can now detect and prevent purchase invoice fraud more effectively. E-invoicing under GST, introduced in October 2020, is a digital process of issuing and receiving invoices that can help businesses automate many of the processes involved in invoice processing and identify fraudulent activities. In this article, we will discuss all about e-invoicing and purchase invoice fraud and how e-invoicing can help prevent purchase invoice fraud.
What is E-invoicing under GST?
E-invoicing is a paperless method of invoice management that includes sending your B2B invoices and export invoices to the official Invoice Registration Portal (IRP) authorized by the GSTN (like IRIS IRP) and obtaining a unique Invoice Reference Number (IRN). Invoices without an IRN are considered invalid. This means if your business has crossed the e-invoicing turnover limit, it is mandatory for you to generate e-invoices under GST.
What is Purchase Invoice Fraud?
Purchase invoice fraud is a type of financial fraud where a person or organization creates fake invoices or alters real invoices to obtain payment for goods or services that were never provided or were overpriced. This can be either done intentionally or it can happen due to oversight on part of sender/receiver of invoices. This type of fraud can be difficult to detect and can result in significant financial losses.
How E-Invoicing Helps in Identifying Purchase Invoice Frauds
E-Invoicing can potentially help to reduce the risk of purchase invoice fraud by automating many of the processes involved in invoice processing and making it easier to detect anomalies or inconsistencies. For example, e-invoicing systems can be set up to automatically check for duplicate or suspicious invoices, flag invoices that are out of line with normal spending patterns or verify that goods or services were actually received before payment is made. Additionally, e-invoicing can make it easier to track and trace invoices, which can help to detect fraudulent activities.
In this article, we will discuss all about e-invoicing and purchase invoice fraud and how e-invoicing can help prevent purchase invoice fraud.
1. Removes Paper Invoices:
One of the most significant benefits of e-invoicing under GST is that it eliminates the need for paper invoices. Even if the parties need an invoice copy in paper format, a government generated B2B QR Code is mandatory to be put on the invoice copy. This makes each invoice unique and verifiable. This reduces the risk of invoice counterfeiting and other forms of fraud.
2. Removes Duplicate Invoices:
Sometimes, taxpayers may receive duplicate invoices from their suppliers mistakenly or may be intentionally. All e-invoices under GST (as per current threshold) are mandatory to be registered on the Invoice Registration Portal (IRP) and carry a unique Invoice Reference Number (IRN), hence this enables businesses to validate the authenticity of invoices and detect any discrepancies. One way to authenticate e-invoices is use of IRIS Peridot.
On the supplier side, E-invoicing under GST helps to streamline the invoice generation process. Invoices can be automatically processed and recorded in a business's ERP and sent to buyer’s ERP, eliminating the need for manual data entry and reducing the risk of errors. This also leads to faster and more efficient payment processing. This can help prevent payment oversights by reducing the time between invoice creation and payment. You can read more about invoices under GST and invoice printing here.
3. Identify Fake Invoices:
One of the main benefits of e-invoicing is that it allows for real-time tracking and monitoring of invoices. This means that businesses can quickly and easily identify any discrepancies or issues with an invoice, such as duplicate payments or incorrect amounts. This is especially important when it comes to preventing purchase invoice fraud, as it allows businesses to quickly detect and respond to any suspicious activity.
4. Reduce Errors:
One of the major advantages of e-invoicing is that it reduces the chances of human errors and mishaps drastically. With E-invoicing, the information can be directly populated in the billing systems and all the data is maintained safely thus reducing errors. E-invoicing enables businesses to automate their invoice processing and reduce the risk of human error.
5. Reduce ITC Fraud:
E-invoicing details get auto-populated to prepare GST Returns and other e-way bill actions. It not only reduces the compliance burden but also ensures accurate ITC Claim as there is transparency throughout the process. Each invoice gets registered with the IRP and there is limited scope for mismatches.
6. Preventing technological frauds:
E-invoicing allows for the use of advanced security measures, such as digital signatures and encryption. E-invoicing systems use encryption and secure authentication methods to protect sensitive financial information from unauthorized access. And Digital signatures help businesses verify the identity of the person sending the invoice and ensure that the invoice has not been tampered with. This helps to ensure that sensitive financial information is protected from hackers and other malicious actors. Additionally, e-invoicing software solutions often include built-in fraud detection algorithms that can flag suspicious activity and alert businesses to potential fraud.
7. Interoperability helps reduce manual errors:
E-invoicing can not only provide a secure, digital trail of all invoices and payments but also streamlines pre-invoice generation process. Companies will not have to do back and forth with their suppliers and vendors as correcting and re-sending invoices via emails will be stopped resulting in smoother flow.
8. Preventing frauds with faster response time:
E-invoicing will improve collaboration and communication between businesses and their suppliers and customers, helping to build stronger relationships and increase trust and transparency. It will facilitate real-time tracking and monitoring of invoices and payments, allowing businesses to quickly detect and respond to any potential fraud.
In conclusion, e-invoicing is a powerful tool for preventing purchase invoice frauds. Its real-time tracking, advanced security features, and streamlined payment process make it an effective solution for businesses looking to improve their financial processes and reduce the risk of fraud. E-invoicing and payment fraud needs to be further discussed upon, especially by the tax community. By implementing the e-invoicing mandate, businesses can improve their financial visibility, increase efficiency, and ultimately, protect their bottom line.
IRIS IRP is the Govt. recognized Invoice Registration Portal (IRP) for businesses to prepare invoices
With IRIS IRP, we offer an end-to-end solution for e-invoice management and beyond
If you are a small business owner (MSME/SME): IRIS IRP helps you to jumpstart your e-invoicing using the offline excel utility tool i.e. MS Excel interface. You can send Invoice Data to IRP in bulk and generate e-invoices real-time! Also, get to generate e-invoices and e-way bills on a single platform.
If you are a large business owner: IRIS IRP E-invoicing is the best option for you - It is the fastest and easiest way to generate e-invoice. There are multiple options to generate IRN via IRIS IRP. You can integrate IRIS IRP APIs to get IRNs directly into your accounting system.
If you are a solution provider yourself: IRIS IRP calls all ERP providers and system integrators to design a seamless user journey for your customers using IRIS IRP to build a robust and error-proof e-invoice compliance. We offer Core and Enhanced APIs for e-invoice generation.