Electronic Invoices in California: Welcome to the 19th Century

Electronic invoicing is one of the simplest and most effective ways to efficiently run a modern business. You can create, send, and archive electronic invoices in a fraction of the time it takes to do the same task with traditional, paper-based methods.  Electronic invoices eliminate the problems that inevitably come with paper-based processes such as misplacing paper, duplicating or overpaying invoices, or making late payments.  Electronic invoicing services can be set up to include online notifications that remind approvers that an invoice needs to be processed.  Electronic invoices also help facilitate audits, because AP departments can more quickly provide access to electronic invoices than to paper invoices buried in files. Last but not least, electronic invoicing is better for the environment.  Hundreds of thousands of trees are harvested each year to support paper invoicing in the US alone, not to mention the related energy and pollution costs; and although digitizing a single invoice may not lower greenhouse gas emissions significantly, the cumulative effect of removing millions of paper invoices from the financial supply chain would have an impact.

However, despite these benefits, despite the fact that there is no California law or regulation that explicitly prohibits electronic invoicing, and despite the fact that many other states’ alcohol regulatory agencies permit it (at least 25 other states by our rough count), the California Alcoholic Beverage Control does not allow suppliers (including wholesalers) to use electronic invoices instead of paper-based invoices when making sales and deliveries to retailers:

“Neither the Alcoholic Beverage Control Act nor the Department’s business regulations specifically authorizes electronic invoicing. A written invoice must accompany the alcoholic beverages when sold by a supplier to a retailer and theses invoices must be maintained on the licensed premises for inspection by Department personnel.”  (Email from the Trade Enforcement Division of the California ABC on December 12, 2012)

As a state agency in a state that is a world leader in developing information technologies and considers itself an environmental leader as well, the ABC’s position on electronic invoicing demonstrates a frustrating reluctance to adapt to the modern world, and effectively keeps alcoholic beverage licensees decades behind other businesses in the modern use of their accounting systems.  As more and more businesses cross state lines, the requirement that in California all suppliers and retailers must maintain (at the risk of license revocation) paper-based and manually-filed invoices seems strangely anachronistic and, for those who have adopted electronic invoicing systems without checking with the ABC, dangerous to their continued licensure.