Using UNe Docs to facilitate the transition to

Using UNe. Docs to facilitate the transition to electronic, paperless, invoicing Geneva, October 2004 1

Summary Electronic, paperless, invoicing can deliver significant savings, facilitate international trade and foster development by reducing the weight of the grey economy Electronic invoicing is now permitted in the EU, but practical adoption is limited due to the lack of a common standard that can be implemented gradually by both large and small suppliers UNe. Docs, backed by the UNECE, is a document exchange solution designed to overcome this problem 2

Agenda Electronic invoicing The UNe. Docs solution Electronic signatures Annex - UNe. Docs documentation 3

E-invoicing – why the UN cares The invoice is the most important document exchanged between commercial partners. 25 billion paper invoices a year are billed in the US and Europe alone Use of the electronic invoice (typically based on the UN/EDIFACT standard) is still limited and confined to large companies Handling a paper invoice costs about 25 euros between seller and buyer. The European Union estimates that European businesses could save € 50 bn by moving to e-invoicing (FT, 26 May 2004) E-invoicing means no more paper, no more manual handling, no more manual data input, no more file cabinets, better tax controls, and simpler administrative requirements for the tax payer E-invoicing can deliver significant savings, facilitate international trade and foster development by reducing the weight of the grey economy 4

EDI is deployed slowly, on a “one-to-one” basis*, … * Source: Aberdeen Group, June 2004 - The Invoice Reconciliation and Payment Benchmark Report. 5

…companies still receive most invoices by mail*… * Source: Aberdeen Group, June 2004 - The Invoice Reconciliation and Payment Benchmark Report. 6

…and input, route and approve them manually* * Source: Aberdeen Group, June 2004 - The Invoice Reconciliation and Payment Benchmark Report. 7

Electronic invoicing can improve data visibility, …* * Source: Aberdeen Group, June 2004 - The Invoice Reconciliation and Payment Benchmark Report. 8

…automate invoice handling… Invoice header: - eliminate duplicate payments Line items: - automate routing and reconciliation Amount due: - manage cash flow effectively 9

…and bring other benefits* * Source: Aberdeen Group, June 2004 - The Invoice Reconciliation and Payment Benchmark Report. 10

The EU 115/2001 Directive on e-invoicing Enforced in Member States by 1/1/2004 Harmonizes the format of the invoice: “invoice” is a document with “invoice” written on top that contains the nine data elements (buyer, seller, invoice number, VAT number, …) required by the law Member States may not require paper invoices to be signed Electronic (i. e. paperless) invoicing is allowed provided the invoice is transmitted in EDI or is accompanied by an electronic signature An “advanced electronic signature” is required to guarantee “authenticity of origin and integrity of contents” Member States may further require it to be “based on a qualified certificate and created with a secure-signature-creation device” The electronic signature is a “seal” to prevent fiscal fraud 11

The current obstacles EDI standard is expensive and difficult to use for SMEs. It is “ 100% electronic” and does not allow gradual implementation There is no accepted XML invoice standard: XML is an “alphabet”, not a “language” XML “words” (the so-called “tags”) don’t have a predefined semantic meaning Small suppliers that emit just a handful of invoices per day need simple software to generate invoices in electronic format Manually attaching electronic signatures one document at a time is very unpractical for companies that emit many invoices Despite the savings, e-invoicing roll-out is slow due to lack of standards and a reluctance of SMEs to invest in complex systems 12

Electronic business standards – why the UN cares The United Nations promotes trade for its potential to foster economic development and eradicate poverty UNECE develops, maintains and leads the implementation of trade -related recommendations, standards and tools This activity is carried out through UN/CEFACT (the United Nations Centre for Trade Facilitation and Electronic Business) which is open to the participation of businesses and governments UN/EDIFACT and the UN Layout Key/ISO 6422 (on which the EU Single Administrative Document, and the IATA airway bill are based) are standards for international trade developed by UNECE’s involvement assures that the standard will be open and technology neutral, and will cater to the needs of large and small companies, of developed and developing countries alike 13

Agenda Electronic invoicing The UNe. Docs solution Electronic signatures Annex - UNe. Docs documentation 14

The UNe. Docs solution Designed with the objective of letting SMEs participate in advanced supply chains Built upon the UN Layout Key Based on UNTDED/ISO 7372 (United Nations Trade Data Elements Directory) and UN/CEFACT core components UNe. Docs documents incorporate UN/CEFACT trade facilitation recommendations and best business practices Key documents for trade (invoice, custom declaration, shipping instruction, forwarding instruction, …) already implemented A simple and low cost approach to the exchange of document-based data 15

UNe. Docs – the basics UNe. Docs documents can be opened with any Internet browser UNe. Docs documents can be generated in paper, PDF or XML format using Adobe Reader UNe. Docs document templates can be personalized [and UNe. Docs documents can be generated] using Microsoft Office Infopath, Adobe products or open source XML editors Electronic signatures can be attached to UNe. Docs documents Companies that generate significant volumes of invoices using software applications, can install software interfaces to generate the documents in UNe. Docs XML format UNe. Docs is an open and technology-neutral solution 16

Core advantages of UNe. Docs is a powerful migration tool from a paper to a paper-less environment, with the option of “falling back” to paper at any time UNe. Docs simplifies the compatibility issues associated with electronic data interchange, by associating a standard XML code to each type of document UNe. Docs can be easily implemented by SMEs and large companies alike Designed for implementation 17

Using UNe. Docs The UNe. Docs invoice document is designed for international trade To be used in the EU, it must incorporate three data elements required by the 115/2001 Directive The standard will thereafter be maintained through an international process linked to ISO that ensures that industry-specific requirements are inserted without risk of duplication UNe. Docs is already fully functional, with a short “time to market” 18

Data elements required by EU 115/2001 Data element 1. Invoice date of issue 2. Invoice number 3. Suppliers' VAT number 4. Suppliers' and customer's full name and address 5. Description of the quantity and nature of goods supplied or services rendered 6. Date of completion of the supply of goods or rendering of services 7. Break-down of VAT amount payable, unit price of the goods or services exclusive of VAT, discounts or rebates unless included in the unit price 8. VAT rate applied 9. VAT amount payable Already in UNe. Docs ü ü ü must be added ü The UNe. Docs invoice document is already close to EU requirements 19

Making UNe. Docs an international standard The EU has appointed a work group in CEN (European Committee for Standardization) to develop the electronic invoice standard The CEN work group refers to UN/CEFACT core components as essential elements of its task, and key figures of CEN are members of UN/CEFACT An universal object as the invoice must be standardized at a global level The invoice standard must be consistent with UMM (UN/CEFACT Modeling Methodology), that will enable companies to exchange data throughout the entire supply chain cycle ISO and UN/CEFACT intend to set-up a work group to develop UNe. Docs into an international standard 20

Problems addressed by UNe. Docs EDI standard is expensive and difficult to use for SMEs. It is “ 100% electronic” and does not allow gradual implementation ü There is no accepted XML invoice standard: XML is an “alphabet”, not a “language” XML “words” (the so-called “tags”) don’t have a predefined semantic meaning ü Small suppliers that emit just a handful of invoices per day need simple software to generate invoices in electronic format ü Manually attaching electronic signatures one document at a time is very unpractical for companies that emit many invoices 21

Agenda Electronic invoicing The UNe. Docs solution Electronic signatures Annex - UNe. Docs documentation 22

The problem with electronic signatures Cross-border applications must meet the most stringent EU requirements (“advanced electronic signature based on a qualified certificate”) Electronic signatures – though not “new” – are still rarely used (“hardly anyone actually uses them”, The Economist, 18 September 2004), especially in “high volume” applications The market offers software and hardware solutions that directly interface with the invoice-generation application and automatically attach the electronic signature to each document Legal, business and technology issues must be understood and properly addressed 23

The EU 93/1999 Directive Establishes a legal framework to facilitate the use of electronic signatures, and contribute to their legal recognition: - An “electronic signature” is data in electronic form, associated with other electronic data and used as a method of authentication - An “advanced electronic signature” guarantees the authenticity and the integrity of contents of the document, not sender’s identity - A “qualified certificate” is provided by a “certification-serviceprovider” and guarantees the identity of the sender - “Certification-service-providers” and “secure-signature-creationdevices” must fulfil pre-defined requirements. Member States cannot subject the provision of certification services to prior authorization Defines the rules for mutual recognition of non-EU certificates 24

Why certificates? 1. Public keys are stored in public databases anyone can introduce a public key claiming they are someone else Digital certificates can be compared to passports a traveller arriving at a foreign country is authenticated by trusting the passport issuer (the Certification Authority) Certification Authorities are third-party entities that issue certificates to ensure the authenticity of the signer In trusted, secure environments, where the parties already know each other, organizations can host a PKI certificate authority within their own infrastructure 25

Agenda Electronic invoicing The UNe. Docs solution Electronic signatures Annex - UNe. Docs documentation 26

UNe. Docs documents… 27

…comply with the UN Layout Key standard… 28

…and completion guidelines 29

They can be generated with Infopath, … 30

. . or with Adobe acrobat Reader, … 31

… in paper, PDF, … 32

…XML, … 33

…and EDI format, … 34

…using web-based code validation, … 35

…format translation and delivery services 36

UNe. Docs documents’ data model… 37

…is based on UML (Unified Modelling Language)… 38

…and incorporates UN/CEFACT Core Components 39