Updated on August 7th, 2023
A digital document is a readable document that is paperless in its original form. An example of this is an invoice that is received as a PDF via email. As either the sender or the receiver, you can easily interpret the data included in the document (e.g., line items). This makes it fairly easy to then enter this information into your organization’s ERP or other system simply by looking at it.
Digital documents are very similar to paper documents. Although a digital document can only be viewed on an electronic device, it pretty much looks the same as it would on a piece of paper. Because of this, even when a company receives a digital document, it’s common for it to be printed.
Putting the digital document on paper is often how documents are transferred internally. For instance, moving an invoice from operations to accounting. This often results in a room full of filing cabinets, which isn’t ideal for records management.
However, it is very important to understand the difference between an electronic document and a digital one, especially when speaking of e-invoices.
What Is an Electronic Document?
Unlike a digital document, an electronic document is pure data. This makes it difficult for the untrained eye to interpret. That’s primarily because a document in an electronic form is meant to be understood by a computer. In other words, electronic data is meant to be transferred from one system to another without human intervention.
With an electronic document, all data is automatically available in the appropriate systems (internal and external) as soon as it has been sent or received. There’s no need to waste time and resources on printing. All of that being said, true electronic document exchange can only be realized when you have an EDI solution.
If your company doesn’t have an EDI solution or some sort of electronic document management system, you’re almost certainly exchanging digital documents as opposed to electronic files. In that case, you’re no stranger to passing paper documents around the office and monotonously typing digital document data into one or more business applications so that everything can be processed accordingly.
Now you have to remember that the ViDA project is going to change the processing of e-invoices in the European Union. An e-invoice will be required for all B2B transactions, and companies will have to invest to be compliant with the law as no digital documents will be accepted.
The Link Between Digital and Electronic
Despite major differences, it’s no surprise that many of us use the terms digital and electronic interchangeably when referring to document exchange. Industry jargon is partially to blame.
For example, TIE Kinetix is committed to helping businesses achieve 100% supply chain digitalization. Considering the many advantages of electronic documents when compared with digital documents, a dedication to digitalization doesn’t make much sense. After all, we sell EDI solutions which ultimately enable electronic document exchange.
As great as it would be to say that we help companies to reach a fully electronic supply chain, we can’t say that for one major reason. The reason being, every business has a different level of digital maturity. Supply chains are becoming increasingly complex. Any single business typically relies on a large number of trading partners of all sizes and varying technical capabilities.
Put simply, not everyone has an EDI solution. It’s not realistic to assume that everyone is willing to invest in one. However, given the new regulations that are to come in regards to e-invoicing, we can safely say that switching to an e-invoicing solution is the first step into the right direction toward digitalization.
Electronic Format vs. Digital Format
In a digital supply chain, it’s a blurred line when it comes to electronic format vs. digital format. That’s because while one company might want to receive all of their documents in an electronic format (i.e., in accordance with the EDIFACT standard), any number of their trading partners might not be capable of sending or receiving EDIFACT documents. There’s a high chance that these trading partners prefer to rely on PDFs or manual entry into a web-based portal.
For technically advanced companies—those that already have an EDI solution and are looking to further optimize supply chain operations — a digital supply chain is the logical next step. That’s because in order for any one company to send and receive all documents in an electronic format, they have to consider the trading partners that still rely on digital and paper documents. Meaning, they need to offer these trading partners a solution that’s easy to adopt.
Regarding the specific case of e-invoicing, local regulations like in France are enforcing specific standards and formats to comply with the law. The ViDA project is built on the same logic; one of the goal being the standardization of exchanges between all companies. In that case, organizations will have to be aligned with the law and provide an electronic invoice accordingly. This means that in the end, European companies will all have found a new way of communicating electronically.
In conclusion, the difference between an electronic document and a digital document lies in their underlying characteristics and applications. An electronic document refers to a pure data representation that can be read by a computer but has no vocation of being editable, it is structured for automated processing. On the other hand, a digital document includes data that is human readable, but not structured and easily processed by computers.
In the realm of e-invoicing, this distinction is important as companies increasingly use electronic invoicing to streamline their financial processes. E-invoicing in a digital format ensures seamless and automated integration with accounting systems, reducing manual errors and increasing overall efficiency in the invoicing and payment cycle. As a result, the adoption of e-invoicing is essential for companies that are looking to streamline their financial operations and remain competitive in today's technology-driven world.