From paper to e-Invoicing and Legal Compliance San Diego ACH Meeting February 2011 Bruno Roussel

Agenda Paper to e-Invoicing: Legal Compliance Invoicing today SIS is not just an IT project IS-Web vs. IS-XML SIS e-Invoicing Best practices Legal Compliance Legal framework Digital Signature SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Paper Invoicing in ICH world today Airline Financial System Accountant Typical paper process AP Clerk Finance Print Paper Invoice Mail Invoice Invoice Data Entry Receives Paper Invoice Supporting documents are compare to the invoice Photocopy The invoice enters the validation workflow for approbation Engineering Accountant Supporting document Scan SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Electronic Invoicing in ACH Airline Financial System E-Mail Invoice Accountant AP Clerk Electronic process Finance Generate a file Invoice Data Entry Receives Electronic Invoice Supporting documents are compare to the invoice The invoice enters the validation workflow for approbation Engineering Accountant Supporting document SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Problems with the paper or e-paper cycle Needs people to consolidate the invoices and supporting docs Needs people to put it in envelopes etc Needs to be sent somewhere, possibly delivered to a collection point first Needs to be AWBd, couriered or posted Needs someone at the other end to receive it, take it out of envelopes and distribute it Needs someone to check it’s all there Needs someone to check it reconciles with settlements Etc etc etc SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

SIS e-Invoicing benefits Reduce cost of paper process Improve efficiency: Data quality Speed of information Automation Access to detailed information Audit trail Uses IATA IS-XML e-Invoice Standard Contributes to the green initiative SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

SIS is not just an IT project You have to reengineer the current process to adapt to SIS: Will you generate Invoices in each department or centrally ? How will you Capture detailed information of the invoice at the source? Which level of automation would you like to achieve? SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

SIS is not just an IT project How to reconcile the invoices against clearing house settlement? Today claims may not match IDEC or invoice Tomorrow all the information will be consistent Will you reconcile invoices against purchase order? Reconcile the invoices against your account posting based on: Your operational system Contract database Aircraft schedules Define your objective SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

IS-Web vs. IS-XML IS-XML: Could be generated/ processed from different systems including ERP or financial systems Easy to handle large amount of invoices Ease the use of workflow validation Increase IT project requirements IS-WEB: Allows multiple locations to capture their invoices easily Suitable for small amount of invoices Workflow validation could be set up in SIS Simplify SIS implementation Payable invoices as PDF view SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

SIS e-Invoicing SIS will allow legal e-Invoicing NOTE – not legal in some countries yet PDF or XML could be used as the legal invoice. PDF by Default XML when legally required In case of an XML invoice an additional XML file will be created Legal XML is a subset of the IS-XML SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

SIS e-Invoicing The files may need a Digital Signature (DS) This digitally signed file should be archived in accordance with legal rules You may have to print the incoming invoice in your country if the electronic format is not considered as legal: You can do this yourself, or You can ask the billing entity to send you a paper copy, but this will be charged as defined in IATA RAM Chapter A13 or per bilateral agreement. SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

SIS e-Invoicing with DS and Validation Billing information file Digitally sign the invoice and Validation of DS Integrated Settlement Settlement Processes ICH ACH IS-WEB IS-WEB Billed Airline Germany Billing Entity USA Digital Signature And Validation 3 IS-XML IS-XML 1 1 Overall Processes Overall Processes Billing & Invoicing Processes IS-IDEC IS-IDEC Central Repository 2 Legal PDF Usage File 5 Processes at time of Sales NFP engine ARC COMPASS™ Legal XML Legal PDF 4 Create the invoice e-Invoice Legal XML SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

SIS e-Invoicing with Digital signature Sign the invoice Integrated Settlement Billing information file Settlement Processes ICH ACH IS-WEB IS-WEB Billed Airline USA Billing Entity Germany “Digital Signature” Company 3 IS-XML IS-XML 1 Overall Processes Overall Processes Billing & Invoicing Processes IS-IDEC 2 IS-IDEC Central Repository Legal PDF Usage File 5 Processes at time of Sales NFP engine ARC COMPASS™ Legal XML Legal PDF 4 Create the invoice e-Invoice Legal XML SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Charge Category One charge category only allowed per invoice Invoices are standardized and structured 12 Charge Categories Airport Mail ATC Miscellaneous Cargo Partner Alliance Engineering Property Flight Ops Service Provider Ground Handling IT Services One charge category only allowed per invoice SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Charge Code Several charge codes allowed per invoice 84 different possibilities to classify an invoice Example charge category Engineering charge code: Handling LM Lease Loans Misc MRO - Maintenance MRO - Repairs & Overhaul Pool Several charge codes allowed per invoice SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Invoice Structure Composed of : Invoice Header Line Item Line Item details (replace supporting document) Including : Legal fields Required by law Mandatory fields Substitution allowed for one year Recommended fields R for recommended for one year and will become mandatory RA for recommended always Optional fields Additional information not required to reconcile, may be used within Alliance SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Ground Handling / Catering Invoice sample SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Supporting document SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

SIS e-Invoicing fields Mandatory: Ground Handling / Catering LocationCode Invoice or Line Item Level AN 5 M   IATA airport code or UN/LOCODE or city code if non-airport. AircraftTypeCode LineItemDetail 3 IATA aircraft types Dictionary defined (IATA aircraft type codes) '0' (Numeric Zero) will also be allowed as substitution value FlightNo 8 Unique flight identifier: Shown in field 7 of the ICAO flight plan consisting of either the aircraft reg. or the flight number (which itself consists of the two or three character airline designator code followed by an up to 4 digit number with optional Quebec single suffix letter). SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

SIS e-Invoicing fields Recommended: Ground Handling / Catering ProductID LineItemDetail AN 25 R Supplier code for the product or service.   ContractNo CabinClass A 1 RA Values: C,Y,F plus any other value FlightDateTime DT Date&Time allowing to identify the flight the service is related to YYYY-MM-DDThh:mm:ss Time is optional AddOnChargeName 30 Name of the AddOnCharge Possible Values: Discount; Fees etc AddOnChargeAmount N 18,3 Amount of the AddOnCharge. This can have a negative value for discount SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Original invoice is missing: Mandatory fields: Charge Category: Ground Handling AircraftTypeCode: Substitution “0” FlightNo: CHARTER Recommended fields CabinClass ContractNo SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

SIS invoice view SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

SIS supporting document SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Best Practices e-Invoicing is a complete change for your organization, benefit from that to design optimal processes Use of Charge Category and Charge Code allows appropriate routing of the invoice for validation, and GL posting Use segregation of tasks to ensure better controls on overall validation process The sooner the better, project could be implemented in several phases, but be ready to process incoming billing from day one in an electronic manner SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Best Practices Automate the reconciliation with the maximum of electronic data possible, general ledger posting against CH settlement... Automate the matching of PO and invoices or contract Generation and integration of electronic data should be automated. Leveraging your existing ERP system will ensure an all electronic data world Use the IATA IS-XML e–Invoice standard, develop once, connect to all. SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Question & Answer e-Invoicing contact in IATA: Invoicestandards@iata.org for any request to add information in the IS XML such as charge category charge code or new business requirement SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Agenda Paper to e-Invoicing: Legal Compliance Invoicing today SIS is not just an IT project IS-Web vs. IS-XML SIS e-Invoicing Best practices Legal Compliance Legal framework Digital Signature SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Role of Integrated Settlement Replace paper IS will be legally mandated by billing carriers to “create”, “transport” and deliver the invoice Where necessary, submitted billing data is “transformed” to a legal invoice by creating the digital signature as appropriate and/or adding the reference data IATA will use a “trusted company” to help comply with local laws and to create and verify the digital signatures, and perform legal archive SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Legal framework What is a legal framework for e-Invoicing that SIS needs to comply to? Recognition from the tax authorities that electronic invoicing is legal Technical recommendations for implementation (DS and Archiving) Framework is country dependant Should be defined in law and may: Include means of integrity (e.g. EDI) Include means of authenticity (e.g. Digital Signature) Define format to be used, (e.g. XML or PDF) Require prior authorization from tax authorities Include any additional specification (e.g. legal Archiving, specific XML layout) If none exists, either discuss a legal framework definition with tax authorities or agree exemption. SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Legal obligations for e-Invoicing … where applicable Billing Party: Apply VAT Prove conformity with e-Invoicing laws Create and attach digital signature Billed Party: Verify digital signature before processing the invoice Both Parties Archive and prevent modification Log digital signature, validation key Give auditors access to e-Invoices SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Different jurisdictional requirements 1/2 Requirements are not consistent across countries IS e-Invoice process is generic: SIS has a generic invoice template that should meet everybody’s requirements SIS e-Invoice will be created: Based on information provided by the billing entity Based on the member profile of the billing and billed entity SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Different jurisdictional requirements 2/2 Various types of Digital Signature - most restrictive airline legislation prevails Digital signature: SIS will use the countries in the from/to address mentioned on the invoice header to define DS to be applied The DS provider depending in the countries of a cross border invoice will: Sign with the most restrictive DS if they are compatible OR Sign with both signatures if they aren’t SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Legal requirements, your responsibility Provide mandatory information on the invoice e.g. : The 14 elements that define a legal invoice in most of the jurisdictions (e.g. VAT Registration #, VAT Amount, Billing Carrier’s Address, Billed Carrier’s Address, etc). Other legal information that is present on your invoice template today (e.g. board of directors…) Specify in your member profile that Digital Signature is required Define invoice format according to your legislation All SIS participants will be required to enter this type of data in their member profile enabling legal invoice creation by default SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Value Added Taxes Context Tax administrations want long term access to the invoices, as a guarantee of proper VAT treatment of sales transactions Responsibility It will be your company’s responsibility to determine whether VAT applies, how much it should be, and where to put it Some jurisdictions require the proper naming conventions (Reference list for your information in chapter A13) To give auditors access to e-Invoices SIS will ensure technical integrity of your invoice, but not the validity of your submission SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Legal requirements, SIS Responsibility Technical requirements e.g. : Digital Signature Type of DS required ( Advanced, Qualified, Specific Qualified..) Validation of the DS Data formatting SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Digital Signature complexity DS complexity will be handled by SIS and the DS provider For example: Advanced Electronic Signature AES Qualified Electronic Signature QES There is a hierarchy within Digital Signature QES has stronger requirements than AES QES > AES But two QES signatures may be not equivalent: IT: Qualified Electronic Signature with time stamp QES IT CH: Qualified Electronic Signature with local certification authority QES CH QES IT is not equivalent to QES CH SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Digital Signature matrix samples FR IT CH Billed Member FR IT CH IT IT IT+CH Billing Member CH CH+IT CH FR: Advanced Electronic Signature AES IT: Qualified Electronic Signature with time stamp QES IT CH: Qualified Electronic Signature with local certification authority QES CH SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Final note about legal compliance Integrated Settlement will provide the tools that will help your company ensure legal compliance with regards to invoices However, it will be your company’s responsibility to know the local laws and enable the options which will make your invoices compliant SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Question & Answer e-Invoicing contact in IATA: Invoicestandards@iata.org for any request to add information in the IS XML such as charge category charge code or new business requirement SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance

Thank you. Email: sis@iata.org SIS Website: www.iata.org/sis SIS P3 – ACH – From Paper to e-Invoicing & Legal Compliance 40