E-Invoice Software: Formats, Functions and Selection Criteria

Two formats dominate the German and European market: ZUGFeRD and XRechnung. Both are electronic invoice formats, but they differ in scope of application and structure.

What is ZUGFeRD and Who Uses It?

ZUGFeRD (Central User Guide of the Forum for Electronic Invoicing Germany) is a format that combines a PDF file with embedded structured data. The advantage: the recipient sees a readable PDF and can simultaneously process the data in a machine-readable manner. ZUGFeRD is primarily used in the B2B sector between private companies. It is optional but widely used because it is flexible.

What is XRechnung and When is It Required?

XRechnung is a standard for e-invoices to public clients (federal, state, and municipal authorities). It is a pure data format without a visual PDF component – only the structured data counts. If you issue invoices to authorities or public institutions, you need XRechnung. The standard is increasingly becoming mandatory in Germany and the EU.

Compatibility and Conversion Between Formats

Many e-invoice software solutions support both formats and can convert between them. This is practical: you create an invoice once and send it in the appropriate format depending on the recipient. Some tools also offer automatic format selection – the software recognizes whether the recipient needs ZUGFeRD or XRechnung and adapts accordingly.

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Not all e-invoice tools are the same. A good solution should cover these core functions:

Invoice Creation and Templates

The software should allow you to create invoices quickly – with predefined templates, automatic numbering, and company data. You should also be able to flexibly adjust line items, tax rates, and payment terms without starting from scratch each time.

Automatic Sending and Receiving

Good software sends invoices directly in the correct format to the recipient – via email, through a portal, or via an API. It should also be able to receive incoming e-invoices, automatically recognize them, and organize them in a central system.

Incoming Invoice Processing

When you receive invoices from suppliers, the software should process them: extract data, organize by vendor, and prepare for approval. This reduces manual data entry in accounting.

Archiving and Compliance Requirements

E-invoices must be stored in a way that preserves the original file and tracks changes. The software should maintain a record of who accessed or modified each invoice and when, and comply with retention policies. Check your software's archiving features before purchase.

Integration with Accounting and ERP

E-invoice software that connects with your accounting system or ERP allows invoice data to automatically flow into financial accounting without manual entry. This reduces errors and saves time. Before selecting, check whether your existing system is supported.

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The decision between free and paid depends on your invoice volume and requirements.

What Free E-Invoice Generators Can Do

Free tools allow you to create individual invoices and export them in ZUGFeRD or XRechnung format. They work well for sole proprietors or very small businesses with few invoices per month. Typically, you enter your company data and invoice line items, and the tool generates the file.

Limitations of Free Solutions

Free tools typically offer limited or no automation, archiving, or integration with other systems. You create and send invoices manually. If you create many invoices per month or need to process incoming invoices, this quickly becomes time-consuming. Archiving and compliance features are also often missing or limited.

Example workflow with a free tool: 1. Open the online generator 2. Enter company and customer data 3. Add invoice line items 4. Download the ZUGFeRD or XRechnung file 5. Send via email or portal manually 6. Store the file in a folder (no automatic archiving or change tracking)

This process works for occasional invoices but becomes inefficient at scale.

When a Paid Subscription Makes Sense

A subscription model makes sense if you: - Create more than 50 invoices per month - Need automated sending - Must process incoming invoices - Want to organize your accounting digitally - Need to meet compliance and archiving requirements

Paid solutions offer scalability, support, and security – important if e-invoices are central to your business.

Subscription Models and Pricing Structures

Most e-invoice software providers use subscription models because the software must adapt to new laws, standards, and security requirements. Pricing typically follows one of these patterns: - Per-invoice fees: You pay for each invoice sent - Monthly flat rate: Fixed monthly cost regardless of invoice volume - Tiered pricing: Different price levels based on features or invoice volume

Compare these models against your expected monthly invoice volume to determine the cost-benefit fit for your business.

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The right choice depends on your situation. Use these questions as a decision aid:

Questions You Should Ask Before Selecting

1. How many invoices do you write per month? (< 10, 10–50, > 50)
2. Do you need incoming invoice processing? (Yes/No)
3. Which systems do you already use? (Accounting, ERP, CRM)
4. Who are your customers? (Private individuals, companies, authorities)
5. What is your budget? (Free, < €50/month, > €50/month)

Comparison Criteria for Different Providers

Criterion	Free	Entry-Level Subscription	Professional Subscription
Invoice Volume	< 10/month	10–100/month	> 100/month
Automation	None	Partial	Complete
Archiving	Limited or none	Yes	Yes + Change tracking
Integration	None	Optional	Comprehensive
Support	Community	Email	Phone + Chat

Using Free Trial Periods and Demos

Before deciding, test the software. Many providers offer free trial periods or demos. Create a real invoice, try to send it, check the user interface. This quickly shows you whether the solution fits your workflow.

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Use this practical framework to clarify your requirements:

Step 1: Business Size and Invoice Volume - Sole proprietor, < 10 invoices/month → Free generator may be sufficient - Small teams, 10–100 invoices/month → Entry-level subscription with automation - Growing company, > 100 invoices/month → Professional solution with integration

Step 2: Integration and Automation Requirements - Invoice creation only → Simple tool - Invoice creation + sending → Medium tool - Invoice creation + sending + incoming processing + accounting → Comprehensive system

Step 3: Budget and Licensing Model Compare the pricing models of the providers you are considering. Pay attention to whether fees are charged per invoice, monthly flat rates, or tiered pricing. Use free trial periods to test the cost-benefit ratio for your business.

Checklist Before Purchase: - ☐ Does the software support ZUGFeRD and/or XRechnung? - ☐ Can I send invoices automatically? - ☐ Is there integration with my accounting system? - ☐ How does archiving work and how long are data stored? - ☐ What support is included in the plan? - ☐ Can I export the data if I switch software?

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Once you have decided on e-invoice software, follow this practical plan:

Preparation: Check Data and Processes

Before you start, gather your master data: company information, customer list, product catalog, tax rates. Also review your current invoicing processes – who creates invoices, how are they sent, who archives them? This helps you set up the software correctly.

Import Master Data and Customer Data

Most tools allow you to import master data – from Excel, CSV, or directly from your old system. This is faster than manual entry. After importing, check that all data is correct, especially customer addresses and tax numbers.

Train Your Team and Test Workflows

Show your team the new software. Create a test invoice together, send it, check receipt. This is important so everyone understands how the new workflow works. There are often questions like: Who sends, who archives, who checks for errors?

Avoid Common Implementation Mistakes

• Going live too quickly: Test sufficiently before switching to real invoices.
• Not checking master data: Incorrect customer data leads to inquiries and delays.
• Not training the team: If users don't understand the software, it won't be used.
• Ignoring integration: If invoice data doesn't flow into accounting, the benefit is limited.

Good e-invoice software is a tool; success depends on your preparation and use.

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What free e-invoice software is available?

There are several free online generators with which you can create ZUGFeRD or XRechnung files. They work well for individual invoices but offer no automation, archiving, or integration. For regular invoicing, they are more of a temporary solution.

Can I create an e-invoice myself?

Yes, you can create an e-invoice manually – either with a free online tool or by entering the data into an XML format. This is practical for individual invoices but becomes time-consuming with regular sending. Software automates this process.

What do I need to receive an e-invoice?

You need a system that can process ZUGFeRD or XRechnung files – either your accounting software, a specialized e-invoice tool, or a service provider. Without such a system, you can technically receive e-invoices but must enter the data manually.

What does e-invoice software cost?

Costs vary depending on the provider and scope of functions. Compare the pricing models of the solutions you are considering – some charge per invoice, others charge flat monthly fees. Use free trial periods to test the costs for your business.

Do I have to buy software for e-invoicing?

No, not necessarily. For a few invoices per month, a free generator is sufficient. However, if you regularly create or receive invoices, a solution with automation and archiving is worthwhile – it saves time and reduces errors.

Which format should I choose: ZUGFeRD or XRechnung?

It depends on your customers: ZUGFeRD is common for B2B invoices between private companies. You need XRechnung for authorities and public clients. Many software solutions support both and automatically select the correct format based on the recipient.