What is Peppol and Why use Peppol for e-Invoicing?

The exchange of business-critical information like transactions, invoices, purchase orders and so on  plays a pivotal role in streamlining supply chain operations.

Among the various methods employed to achieve this, electronic data interchange (EDI) stands out as one of the most popular approaches. EDI involves the automatic exchange of pre-defined structured electronic messages between companies, aiming to minimize transmission errors and hence maximize efficiency.

In recent years, the use of PEPPOL has surged across the world, revolutionizing electronic data interchange (EDI) and streamlining supply chain operations for business. 

But what exactly is PEPPOL, how does it work, and what advantages does it offer? Let's discuss everything in detail.

What is PEPPOL?

PEPPOL, the Pan-European Public Procurement Online, is an international network and a protocol established to facilitate the exchange of business-critical electronic documents securely.

Originally developed as an EU standard, PEPPOL enables companies to send invoices, orders, confirmations, catalogues, and other business documents seamlessly across borders directly to the vendor party system and software.  While its primary focus is on e-invoicing (explained below), PEPPOL serves as a broader platform for cross-border procurement processes.

Operating as a standardized framework, PEPPOL ensures interoperability among various source systems, making it easier for businesses to engage in electronic transactions globally. Although initially concentrated in Europe, PEPPOL's influence has extended worldwide, with companies in countries like Malaysia, Canada, Singapore, the United States, and New Zealand.

How does the PEPPOL Network work?

PEPPOL streamlines the secure exchange of electronic documents crucial for business transactions.

Traditionally, businesses generated invoices in their accounting systems, converted them into electronic formats like PDFs, and then either emailed them or physically delivered them to buyers. The buyer would then manually input the invoice details into their system.

PEPPOL eliminates these cumbersome steps. Users can seamlessly connect their business systems, accounting software, or ERPs directly to the PEPPOL network using the receiver’s PEPPOL ID. Invoices are then securely transmitted in the specified format over the PEPPOL network and are received and can be directly integrated into the receiver’s business system.

While PEPPOL is primarily known for digital invoice transmission, it also facilitates the exchange of other documents like transport documents and electronic ordering.

The Four-Corner Model:  PEPPOL operates on the four-corner model, involving four key entities: the document sender, the recipient, and their respective access points.

Supported Documents: All data transmitted via PEPPOL must adhere to one of two Extensible Markup Language (XML) formats: Universal Business Language (UBL) or Cross Industry Invoice (CII). UBL provides a standardized library of electronic business documents, compatible with most accounting software, while CII facilitates the exchange of electronic documents between trading partners.

Communication Protocol: Communication within the PEPPOL network occurs over open protocols via the PEPPOL eDelivery Network. This network provides a directory service like the Yellow Pages, enabling users to identify recipients, their supported processes, and access point providers.

Document Exchange Process: When a document, such as an electronic invoice, is sent within the PEPPOL network, it follows a systematic process facilitated by the four-corner model. The sender transmits the document to their chosen access point, which then forwards it to the recipient's access point. The recipient can then retrieve the document from their access point and integrate it into their internal systems.

Basic Components of the PEPPOL Network

PEPPOL is not a software, rather it’s a complete ecosystem that integrates people, processes, systems, and protocols. Here are the basic components of the Peppol network.

Access Points (APs)

Access Points serve as the primary interface for enterprises and business entities to connect to the PEPPOL network. It is typically a service one needs to purchase from a service provider. 

These access points act as direct contact points, enabling the secure exchange of electronic documents. They adhere to agreed-upon communication protocols and standards, such as the UBL XML standard, ensuring interoperability and reliable data transmission. 

PEPPOL eDelivery Network

The PEPPOL eDelivery Network is built upon common national IT-compatible standards, fostering seamless communication and interoperability among participants. This network employs shared formats and sets standard business processes and technical standards, all while maintaining robust security through digital signature technology.

Service Metadata Publisher (SMP)

Functioning as a decentralized registry, the Service Metadata Publisher (SMP) provides crucial information about Access Points and the types of messages that a PEPPOL recipient can receive. Each participant's SMP contains essential details and metadata, including available addresses and supported document types. It acts as a vital resource for locating the appropriate recipient for electronic transactions within the PEPPOL network.

Service Metadata Locator (SML)

The Service Metadata Locator (SML) serves as the central registry within the PEPPOL network, collecting and identifying all SMPs. It assigns a unique identifier, typically in the form of a URL, to each participant. Access Points utilize the SML to locate the appropriate SMP and the recipient's access point for seamless transaction routing.

Standards and Framework

The PEPPOL network operates within a robust standards and framework environment to ensure consistency, interoperability, and legal compliance. This includes:

• Business Interoperability Specifications (BIS): PEPPOL Business Interoperability Specifications define standardized document formats and data exchange protocols. These specifications, updated by OpenPEPPOL, facilitate secure and open data exchange between businesses across public and private sectors.
• Transport Infrastructure Agreements (TIA): The Transport Infrastructure Agreements establish the legal framework governing the PEPPOL network's operation. They outline network governance, including general terms of cooperation and responsibilities for all parties involved.

e-Invoicing and PEPPOL Network

An e-invoice serves as a digital record documenting a transaction between a seller (supplier) and a purchaser (buyer). This process can involve validation and recordkeeping via a government portal.

e-invoicing is increasingly becoming a mandatory compliance measure globally. The PEPPOL network plays a crucial role in facilitating the exchange of transactional data among suppliers, governments, and buyers. Leveraging its existing network and infrastructure for transmitting digital documents, PEPPOL streamlines this process.

In Malaysia, PEPPOL service providers enable businesses to efficiently transmit high volumes of transactions for e-invoice generation through API model integration. These providers are tasked with establishing and maintaining connectivity gateways that act as access nodes on the e-invoicing network. They ensure compliance with PEPPOL standards, route e-invoices to the correct destination APs (Access Points) and manage the registration and updating of participant details.

Benefits of using Peppol for e-Invoicing

PEPPOL offers numerous advantages for businesses and even the government when it comes to e-invoicing.

Here are some key benefits:

1. Standardization: PEPPOL provides a standardized framework for e-invoicing, ensuring consistency and compatibility across different systems and organizations, reducing errors and facilitating seamless communication.
2. Existing Infrastructure and resources: Utilizing Peppol's established infrastructure and resources streamlines the implementation process for both businesses and government entities. This not only speeds up implementation but also reduces costs and minimizes errors and downtimes.
3. Existing User Base and Service Providers: Peppol's network boasts an extensive user base and a variety of service providers, including Access Point Providers and compatible accounting software and ERP systems. With many businesses already Peppol-compliant, adopting e-invoicing becomes simpler.
4. Interoperability: The network's interoperability ensures that invoices can be sent and received regardless of the recipient's location or system, simplifying cross-border transactions.
5. Cost Savings: Automating the invoicing process eliminates the need for paper-based invoicing, postage, and manual data entry.
6. Enhanced Security: PEPPOL provides encryption and authentication mechanisms to protect sensitive information during transmission. This level of security reduces the risk of fraud, identity theft, and unauthorized access to financial data.
7. Faster Payments: Invoices can be transmitted electronically in real-time, reducing delays in processing and approval. This accelerated payment process improves cash flow and liquidity for businesses.

How to send an e-invoice using PEPPOL?

To send an e-invoice through PEPPOL, follow these steps:

• Create a Profile: Begin by establishing a profile within the PEPPOL network. This ensures that your company is recognized and authenticated within the system.
• Choose an Access Point: Select an access point within the PEPPOL network through which you'll connect to send your e-invoice. Access points serve as gateways for transmitting documents securely.
• Select a Recipient: Identify the recipient of your e-invoice within the PEPPOL network. This could be a public sector institution or any other business entity that is part of the network.
• Fill and Send the Invoice: Once the recipient is identified, fill out the invoice with the necessary details, such as invoice number, items/services provided, and payment terms. Ensure compliance with PEPPOL's formatting requirements. Once the invoice is complete, send it through the selected access point.
• Monitor the Status: After sending the invoice, monitor its status within the PEPPOL network. This allows you to track the progress of the invoice, ensuring timely delivery and processing.

Conclusion

Over the years, PEPPOL has transcended its European origins to become a globally recognized standard and network for electronic document exchange, transforming the way businesses interact with both public and private sectors worldwide.

Its secure platform and standardized processes simplify operations, while its global adoption by governments and businesses promotes interoperability and efficiency. As countries are adopting e-invoicing compliance, governments and businesses are turning to the PEPPOL framework as the de facto standard.