E-invoice
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Nov 24, 2024
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The Implementation of E-invoice: The Case of Jingdong (JD)
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The Implementation of E-invoice: The Case of Jingdong (JD)
The advancement of technology has aided in the improvement of company processes.
There has been extensive usage of cloud-based solutions, cognitive computing, blockchain
innovation in firms (Kotyla, 2021). E-invoicing allows a JD business to streamline and automate
the handling of invoices. A variety of strategic and operational advantages accrue to buyers,
suppliers, and other management due to this. Additionally, the ability to automate and connect
the invoicing process with other business systems improves the company's productivity and the
potential for income generation possibilities. In this light, the paper provides a detailed analysis
of what motivated JD to design the e-invoice, appraises the benefits of issuing e-invoice,
analyses why JD chose Blockchain Technology over Other Options for Designing the E-invoice,
and lastly outlines the drawbacks that JD might face in the future due to e-invoice
implementation.
What Motivated JD to Design the E-invoice
Jingdong (JD) has witnessed a substantial rise in demand for paper copies of the VAT
special invoice as it has grown toward becoming China's leading technology and development e-
commerce company and retail infrastructure service provider. Since e-commerce enterprise
Procurement Company has overgrown, it will be provided to companies (Yan et al., 2020). Due
to the company's expansion, operational challenges relating to the marketing of electronic
corporate procurement processes arose, which had to be addressed. Difficulties included, among
other things, balancing accounts that did not represent a closed-loop, enhancing the customer
experience, and invoicing concerns created by the high cost of invoice hazard identification and
the inefficiency of invoice control. However, at the previous internal discussion, it was raised to
the leadership's attention the need of issuing a digital version of the VAT unique invoice and
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promoting its usage across the country as soon as feasible. Consequently, the decision was taken
to incorporate electronic VAT to link various systems, including reimbursement, finance, and
procurement.
Benefits of Issuing E-invoice
There are many advantages to sending electronic invoices, including time savings, labour
cost savings, risk reduction via participation in the invoicing chain, and increased efficiency. As
such, given the time savings aspect, JD and CPIC’s electronic special invoice with blockchain
lowered the waiting time of paper invoices, which took an average of 6 days for submitting,
transferring, processing, and receiving, to just a few seconds (Kotyla, 2021). On the other hand,
electronic invoicing reduced expenses by eliminating labour costs, shipping costs, the cost of
setting up organizations for generating and receiving bills, and the cost of manually entering
invoice information on the invoice recipient side. Additionally, it averted additional costly
problems, including fake invoices, non-compliant invoicing, and repeated repay using the same
invoice.
Also, the system mitigated risk by being a part of the invoicing chain, which contained
comprehensive information on capital, logistics, orders, and reimbursements. As a node in the
blockchain consortium chain, taxation authorities could properly monitor invoice flow and
processing status in real-time, thereby preventing counterfeit and non-compliant invoices and
substantially increasing taxation administration efficiency. On the other hand, special electronic
invoices would increase efficiency by utilizing blockchain to address ineffective invoice
leadership and facilitating internal compensation and account reconciliation, thereby improving
user experience and enhancing businesses' ability to manage finance and tax effectively.
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Ultimately, business transactions will become increasingly paperless as more businesses
use digital VAT special invoices using blockchain technology. Electronic VAT special invoices
were produced while selling goods and delivering services and tax-paying people may complete
and enter tax deductions by validating their digital communications (Yan et al., 2020). The
closed-loop system of the electronic invoicing cycle would also represent the culmination of
businesses' Internalization of their operational practices. The digital VAT special invoice would
become a critical component of tax management's informatization and the fundamental technical
means for developing a new tax management paradigm. Additionally, it would enhance tax
management skills by lowering invoicing costs, improving the quality and effectiveness of
corporate finance and taxes, encouraging green energy conservation, and playing a critical role in
creating a new industry, new economy, and society.
Why JD Specifically Choose Blockchain Technology
Satoshi Nakamoto created bitcoin, which laid the foundation for blockchain technology.
The basic technology behind bitcoin, Blockchain, was how people cooperate to maintain a
trustworthy database without central control. Unlike traditional databases, blockchain technology
stores, verifies, transports, and communicates network data via its own distributed nodes rather
than relying on third parties (Yan et al., 2020). This makes it a database technology. In contrast to
conventional databases, where central organizations and data managers are required, blockchain
technology uses neither main entities nor data administrators; it does not need resources to
prevent data tampering. Collective consent needs to be obtained via a "consensus method,"
guaranteeing legitimacy to gain stakeholders' confidence. For these reasons, the Blockchain was
widely regarded as the most transformative technical development since the advent of the
Internet. Through mathematics and encryption, Blockchain enables its members to agree without
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a third party, ensuring they can trust deals via the Internet, where reliable connections are seldom
found, at a cheap cost.
The Potential Challenges that JD Might Face
The significant drawbacks that JD may face in the future as a result of e-invoice
execution entail the frequent use of an invoice for compensation, the deception of invoice data,
the requirement for a printed version for payment, and the burdensome validation process that
could not be eliminated during the development and research (Zhongming et al., 2018). The most
significant challenges for blockchain e-invoices occurred when they crossed cities, raising the
question regardless of whether or not the distribution of e-invoices could very well benefit more
towns from the comfort of blockchain and irrespective of whether or not blockchain e-invoice
implementations could be realized in a broader range of business instances.
Also, if someone deliberately or accidentally recorded incorrect data on the blockchain,
this data could not be changed due to immutability. In reality, it was challenging to identify the
person guilty of using information contained in the blockchain due to user anonymity.
Additionally, since users were required to memorize their private keys, there was a risk of
deleting the data and tracing the authenticity.
JD had to contend with unique difficulties. It tried to grow in three distinct areas: a value-
added e-VAT special invoice, the e-invoice growth, and using the Internet and big data tools to
tax administration. To offer data support for developing the administration operations system,
frequent evaluations of the transaction data on the digital VAT special invoice were necessary
(Zhongming et al., 2018). A VAT-specific invoice service and a value-added e-invoice provider
were also required to be developed. They provided a new tax ecosystem that integrated all the
processes from delivery transactions, collection, issuing invoices, redemption, management,
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reimbursement, accounting, and archiving, and the development of new online services for
governments, businesses, and individuals. These were the following areas of study that JD could
explore in the future.
Conclusion
To summarize, it can be said that electronic invoicing offers several benefits, including
cost savings and time savings. As a result of its transition to electronic invoicing, JD has
achieved value; electronic invoices have increased automation across the business, and
blockchain technology has enabled efficient data governance. Unfortunately, electronic invoicing
has drawbacks, including a time-consuming validation procedure that could not be avoided
during development.
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References
Kotyla, C. (2021). Electronic Document Management Systems as an IT tool for processing
accounting e-documents in Polish local government.
Zeszyty Teoretyczne Rachunkowości
,
(111), 112-134.
Yan, N., Chen, J., Pun, H., and Lei, Y. (2020). JD: E-Invoice with Blockchain.
Ivey Business
School Foundation,
p. 1-5.
Zhongming, Z., Linong, L., Wangqiang, Z., & Wei, L. (2018). Embracing the E-commerce
Revolution in Asia and the Pacific.