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started issuing invoices How can we electronically using the country’s online exchange system. The benefit from decision in Italy, like many others, was again driven by tax efficiency. While these mandated mandated government decisions can help achieve this, experts say the benefits e-invoicing? of e-invoicing actually go well beyond this and it is time the arguments for Electronic invoicing is at a tipping point. mandating e-invoicing On the one hand, only a small minority of include the benefits for small, medium and invoices that are sent globally are e-invoices. global businesses too. The EU has been clear: It is estimated that 75% of the world invoices mandated e-invoicing has the potential to not are still transacted on paper, and those that only save government processing costs, but rely on email instead experience similar also provide the stimulus for private sector inefficiencies. On the other, a recent trend adoption that can drive the environmental, of B2G mandates from governments around cost, and efficiency benefits. the world could potentially serve as a catalyst For businesses, the potential benefits are for a new wave of public and private sector huge. Companies on average able to save e-invoicing adoption. between 50-70% of processing costs and In India this week, for example, the Central 65% of invoice processing time. E-invoicing Board of Indirect Taxes and Customs has reduces errors, fraud and human intervention. regulated that e-invoicing will be mandatorily A Wax Digital study found about 25% of adopted by all companies with a turnover time handling paper invoices is spent on exceeding INR 500 crore. The decision resolving problems related to data entry and follows many countries in Latin America, processing. As there are roughly 16 billion most notably Brazil and Mexico, where B2B invoices processed each year in Europe electronic invoices have been mandated alone, Deutsche Bank projected that full as the only acceptable standard for all adoption could lead to an annual saving of significant public and private commercial at least €260 billion. Organisations already transactions. using e-invoicing have been motivated to In Latin America, these systems are aspect. do so because of this huge cost efficiency government’s fiscal control and recapture In the most recent Spring Statement, the lost tax revenue from economies with high Chancellor of the Exchequer described late rates of cash transactions. Brazil, Chile payments as a ‘scourge’ and according to and Mexico have all adopted a ‘clearance Siemens Financial Services, SMEs in the UK model,’ where before invoices are sent, are missing out on over £250bn of working they are cleared by a government portal. capital cash flow due to late payments. Documents are therefore tax-compliant in Xero found that businesses which use real-time, reducing delays and fines, while online tools get paid 33% faster than those significantly reducing tax leakage. India’s which use paper invoices. Faster approval model is broadly similar to this, and the EU cycles result in better cash flow, which can is also looking towards adopting a similar be passed down the supply chain in cost clearance model. and time savings. Finally, a mandated move from paper to paperless could have a huge In 2019, all VAT-registered businesses in Italy impact on the global carbon footprint. In addition to the impact that the reduction of late payments can have on the working capital of businesses globally, e-invoicing can provide a more efficient avenue for the funding of invoices. Invoice financing is not new, but the level of transparency and depth of data accessible via modern e-invoicing platforms enable direct access for financiers to provide faster, efficient, derisked, and innovative funding solutions in relation to the financing of such invoices. There is a growing belief that this will have a fundamental, evolutionary impact on the invoice financing space.

Public sector mandated e-invoicing therefore can be expected to drive private sector e-invoicing adoption and provide the gateway for the digitisation of many business processes. The blueprint for adoption was Denmark’s pioneering 2005 legislation that allowed vendors to submit invoices online, free of charge, using a SaaS service. The Danish were focused on the economic benefits of e-invoicing and decided the best way to influence behaviour would be to keep the barriers to entry as low as possible. By offering a free and open service, Denmark was able to voluntarily achieve the long-term commercial adoption of B2B e-invoicing in the private sector after mandating public sector B2G e-invoicing.

With the emergence of Covid-19, global governments will be more focused than ever on cost efficiencies and the need to guarantee tax revenues. Mandating e-invoicing, however, can also have huge knock-on benefits for the wider B2B business market. With a higher adoption rate across the private sector, mandating e-invoicing will provide huge cost and efficiency savings for businesses at a time when public and private finances are under significant pressure.

Mark Stephens CEO Blackstar Capital