Are we approaching the day when all business-to-business invoicing will have to be done online?
In the European Union, it’s already mandatory for public bodies to be able to receive invoices electronically. Member states are introducing their own rules about e-invoicing for B2B transactions, with some much closer than others to making it compulsory.
E-invoicing isn’t about to become a requirement in the UK but that possibility could be on the horizon for larger businesses – at least once HMRC finishes rolling out the Making Tax Digital initiative.
“I think it will trickle into the UK at some point,” says Becca Durrant, Cloud Accounting Manager for Saffery, who has written about the benefits of e-invoicing.
“The government is going to want more visibility over what’s going on between businesses, which was part of the rationale for Making Tax Digital. Once the government has got Making Tax Digital over the line, things might roll quicker, because you’ve already digitised records to quite an extent. It’s still distant but I think it could happen for bigger companies sooner.
"Although it’s not mandatory, my opinion is that it’s beneficial to do it anyway.”
There are a host of reasons for embracing e-invoicing at the earliest opportunity.
You could avoid the rush
If and when e-invoicing becomes the law, there will of course be a sudden spike in interest from late adopters.
“If you wait for it to become mandatory, you’re going to get a mad rush,” says Becca.
“It’s the same with Making Tax Digital at the moment. People are waiting – and then everyone’s going to want it at the same time. All that does is prevent things getting done properly. You’re going to have under-resourced accounting firms trying to get things done for their clients.”
You could be more efficient than the competition
A lot of organisations don’t use all the tools that could make them more productive – even if they’re already paying for those tools.
“If you look at the statistics for the number of companies which are even using things like bank feeds – all the standard automation tools – not many are,” says Becca.
“So the chances of people adopting this before it’s compulsory are very small.
“But this comes back to the key benefits of cloud software, automation and IT in general. E-invoicing will save you time and give you quicker payment processes, with no chasing up – everything is one click. Someone will get their invoice on a phone and pay it then and there.
“When you’re considering these things, you need to add in the cost of the people you’re employing to do things they probably don’t need to be doing. They could instead be doing work that is much more beneficial to your business.”
You’ll reduce errors
The more manual data entry is involved in your finance system, the greater the risk of mistakes.
“With e-invoicing, there should be less room for user error,” says Becca.
“Errors will still happen but I think they will be identified a lot quicker. I still see quite big clients that have overpaid their invoices. For example, they might have multiple entities and two of those entities might have settled the same invoice, and they don’t even notice it until we go into the books three years later when there’s no prospect of getting that back from your supplier.”
The supply chain may demand it
“If your supply chain is demanding e-invoicing and you want to compete, then you’re going to have to do it,” Becca says.
This will be particularly pertinent if you trade on the continent, or in any of the other countries that are ahead of the UK in adopting e-invoicing.
“Even if it never becomes mandatory, if other countries are doing it, are they going to want to trade with a company in the UK that still wants to send a paper invoice? It’s all part of competition in the market,” says Becca.
You’ll enjoy real-time data
Many businesses don’t have access to full financial data until after a lengthy month-end process – by which time the figures are already out of date.
“We need to move away from that historical data approach that we’ve been stuck in for so long now,” says Becca.
“I think entrepreneurs are more concerned about what’s happening now and what will happen in the future. If we’re automating processes such as invoicing, we can see real time data.
“That’s good for us as accountants because people want to come to accountants for advice now, as they used to go to bank managers. We can’t really give good advice based on historical data. We need current data and e-invoicing is a massive bonus on that front.
“With a lot of the compliance work – where we were just preparing sets of accounts for our clients – they’re not bothered about it and eventually they’ll do it themselves. What they really want to know is how we can help grow the business. For businesses to do that, they need the data, and need to start automating their processes.”
It seems clear that, whenever it comes, the move to e-invoicing will catch many businesses unprepared.
“There is a massive tranche of people that either are not on cloud software or are using it to a very basic degree, so they won’t be ready for Making Tax Digital or e-invoicing,” says Becca.
“In my opinion, everybody should be on cloud anyway.”
She says e-invoicing will be attractive to government as a way of giving it visibility over transactions.
“I think we should assume it will come, whether it’s in two years or 10 years,” she says.
“We know HMRC wants to try and restrict tax avoidance schemes and anything like that as much as possible, and the more it can keep an eye on transactions, the more it can do that. We’ve seen the slow elimination of cash because you can’t trace it very well – whereas with e-invoicing, you can trace exactly who’s paying who, so I think it will come.
“But if it’s happening across the world, then the more we trade with other countries, the more we’ll need to accept it.”
All the factors above add up to a compelling case for embracing e-invoicing early, she argues.
“There’s the automation, the time saving, the real time data and the ease of access to the data – as well as the costs in many cases, because having on-premises software is expensive,” she adds.
“Don’t think about the mandating of e-invoicing; think about the positive effect of doing the things that you’ll eventually need to do anyway.”
Becca Durrant of Saffery has written more about e-invoicing here.
E-invoicing is one of the subjects discussed by a dozen accountants and finance professionals in Change Is Coming: 7 Key Trends in Finance Software You Need to Know About, available to download for free.
To find out more about iplicit’s cloud accounting software for finance teams and accountancy practices, you can take a tour of the system or get in touch for a demonstration.