Get ready for KSeF – now!

Poland is about to take the big leap into electronic invoicing; a revolutionary step along the way to real-time accounting. Tomasz Kuciel, CEO of Editel Polska S.A. talks to the BPCC’s Michael Dembinski about the challenges facing businesses as they prepare to digitalise their invoicing processes.

Will large firms find it easier or harder than small firms in general to make the change to KSeF (Poland’s national electronic invoice system)? To what extent will the accounting software used make a difference as to how smoothly the process will go?

Large companies have more resources and often find it easier to gather a project team. At the same time, it is the size of the organisation that poses the biggest challenge, as large organisations usually cannot handle their business processes by relying on a single information system. It may turn out that cost invoices are received in multiple places, depending on the cost type or even on their location. Sales invoices may be issued separately for online sales, in-store sales, and wholesales. The older and more complex an organisation, the bigger the challenge. Why? Because KSeF means centralising all invoices – it will be possible to download all cost invoices from one place (the KSeF account). The entire process, in which the supplier was also an active participant (knowing how and where to deliver the invoice), will change – all cost invoices will have to be downloaded from one account and distributed to the appropriate units. The process will be the simplest for companies using one integrated system such as an ERP, which is usually the case of small and medium-sized businesses.

The problems of implementing KSeF may be mitigated by firms taking a proactive approach in good time, though that time is short. What steps need to be taken right now by C-level executives to minimise disruption within their businesses?

First and foremost, it’s important to realise that KSeF applies to all invoices, and let me emphasise that – all invoices. This also includes invoices traditionally delivered by employees (such as invoices for fuel or travel expenses). You need to start by analysing the current situation and mapping out invoice-sending and -receiving processes as per today. The next step would be to investigate the impact that centralisation of invoice receipt and sending has on the company’s business processes. What could be particularly challenging is the task of identifying and assigning cost invoices to the correct process.

I strongly advise against leaving this until the last minute!

KSeF will be one of the first e-invoicing systems to be introduced anywhere in the EU. Poland’s experience in rolling out KSeF will offer valuable lessons to other larger EU economies as they follow in Poland’s footsteps. What are the advantages to Poland of being an early adopter of electronic invoicing?

There are tangible benefits for Poland from the early implementation of the e-invoicing system. Being one of the first EU countries to adopt such a system has given Poland the upper hand in terms of experience, which can later be used to improve the system and serve as an example for other countries. Early implementation also translates into noticing the results, such as increased VAT revenues and going more effectively against tax fraud, sooner.

In practice, identifying and eliminating potential issues and vulnerabilities in the system early on can provide Poland with the opportunity to address them promptly, which in turn can expedite benefits for the economy. Furthermore, early modernisation of accounting and administrative processes can lead to quicker gains for businesses in terms of time and resource savings.

Looking at Editel, will it give you a competitive edge in other EU member states as they eventually come around to implementing e-invoicing? You are present in the markets of Central Europe – are you looking at markets further west in the future as digitalisation of tax systems reaches them?

Certainly, the experience gained in Poland will be valuable in addressing similar issues in other markets. The ViDA (VAT in Digital Age) report presented by the European Commission aims to unify the methods of reporting invoices to tax authorities, therefore ultimately, all solutions are expected to be very similar. An important element of the entire real-time transaction reporting (CTC – Continuous Transaction Control) system will be the Peppol network. Editel has been a member of the Open Peppol organisation since 2019 and of course maintains a certified access-point status.

When it comes to Western European markets, we, as one of the largest EDI (Electronic Data Interchange) providers, already conduct a significant portion of our operations across the entire EU and this trend only gets stronger.

Poland has already introduced SAF-T (the single audit file – tax or JPK in Polish) and split payment of VAT. How did the implementation of those projects go? Are there any lessons to be learned?

There sure are! In 2016, entrepreneurs were obliged to adapt their tax records to electronic requirements. Although this step aimed to facilitate the work of tax authorities, the Ministry of Finance faced numerous delays in implementing tools to support the new format, especially JPK_VAT. During the implementation of JPK files, businesses encountered technical, procedural, and substantive challenges. They had to adapt to new designations and reporting rules, and the information provided by the Ministry of Finance was often insufficient. The later introduction of the split payment mechanism (MPP) marker further complicated the situation. Implementing JPK structures required the involvement of specialised teams within companies, both from a business and IT perspective. Because the implementation of the government’s KSeF system involves the digital circulation of invoices, companies will need to conduct even more comprehensive pre-implementation analyses to avoid errors and tax-related risks associated with invoice accuracy. In summary, while the goal of the KSeF reform is to simplify processes, the introduction of new solutions proves to be challenging and requires careful analysis and proper implementation.

One of the benefits of e-invoicing will be the ability of firms and tax authorities to put advanced analytics to work on large volumes of digital data. What new business insights can be gathered from data gathered in this way?

From a business perspective, in a nutshell, that includes:

• The ability to introduce process automation
• Eliminating repetitive tasks,
• Introducing additional data verification for tax purposes,
• Reducing errors resulting from incorrect data interpretation,
• Creating custom business reports (data warehousing),
• Ordering tax and business processes
• Simplifying tax processes – automation, making more informed decisions, and possibly achieving better results, facilitating result interpretation through real-time financial document information, which in turn can contribute to a faster and more precise decision-making process and to activities optimisation and setting the direction for development.

The KSeF system will greatly reduce the amount of data that needs to be physically entered into computers by humans, reducing errors and speeding up the entire process of tax payment, reconciliation and reporting. How far do you think we are from real-time accounting, where a CFO has up-to-the-minute visibility of a company’s financial situation?

It’s true that KSeF will contribute to reducing the amount of data needed to be manually entered into accounting systems. However, it’s worth noting that structured invoices contain information or areas which will be implemented from the financial and accounting systems. Data describing transactions must be entered and verified in the settlement systems long before the invoice is issued (such as, orders, contracts, offers, deliveries, etc.).

Regarding error reduction and the tax levying processes, we cannot argue with the idea that these processes will be significantly reduced. What constitutes a completely different matter, however, is real-time accounting, or more precisely, the financial information derived from it that the financial directors could rely on.

From a financial-management perspective, all documents that constitute receivables and liabilities in a given month, including invoices, are important. Invoices also have a way of having to be issued and paid within a specified period. In this context, KSeF data will certainly help in monitoring receivables and liabilities in real-time. However, to grasp a complete picture of the company’s financial situation, you will still need to wait until the ultimate closure of the month. This is because there may be a different moment in time, when costs or revenue are recognised for tax and accounting purposes. Nevertheless, such month-end closure in real-time accounting can take place much earlier because KSEF guarantees issuing and receiving documents at the moment of assigning the KSEF ID, which shortens the period of document sending and receiving.

What are the data-security risks of implementing KSeF within a business? Looking at financial data and personal data stored on systems, what are the chances that firms could be open to fraud and privacy breaches during the implementation process?

One of the biggest threats businesses face is a cyberattack on their corporate IT system. It can result in data breaches, thereby compromising the privacy of business owners and their customers. KSeF introduces a range of security measures, such as SSL certificates and multi-factor authentication mechanisms, which are ultimately aimed to nearly eliminate the risk of information leaks. Regardless of the Ministry’s assurances, business owners should pay special attention to the ‘integrity’ of their systems and regularly update their security software. Conducting periodic security audits by a trusted external company is also a good idea. It will identify all weaknesses in the security measures and provide suggestions on how to strengthen protection.

Breach of data confidentiality is a significant potential threat. Structured invoices are stored in the system for ten years, which could potentially grant unauthorised third parties an access to these documents. At least in theory. In practice, access to KSeF and the platform is granted in a tightly controlled and multi-stage manner. Therefore, the chances of unauthorised individuals gaining access to the system are almost non-existent.

Many indications suggest that the risk associated with using KSeF will be minimal.

Finally, what advice would you offer to anyone involved in implementing KSeF in their business?

My advice would be to start analysing the situation as soon as possible. If it turns out that invoices (sales and purchase) are processed in more than one system, we need to start thinking about how to address this. I invite you to contact Editel Poland – we know everything about electronic invoices, not only in Poland.