As the UK government stares into a £22 Billion deficit black hole, and we all share the doom and gloom of potential tax rises in the autumn budget, there has at least been some positive news in the run-up to the 30th of October, and it should not be understated.
On the 23rd of September, the government announced that it would launch a consultation to “gather input from businesses on how HMRC can support investment in and encourage e-invoicing uptake”, and in my opinion, there’s not a moment to lose.
As part of a wider international Group, at Xledger we have the privilege of gaining a great deal of insight into how business is done around the world. E-invoicing is gaining significant uptake globally, and as the benefits come to fruition, this momentum is only set to grow. More than 80 countries already have e-invoicing mandates, with South America leading the charge, and several European countries, such as Italy, France, Sweden and Germany, not far behind.
The business case
Many studies have taken place over the years on the numerous benefits of e-invoicing, some estimating the productivity gains could be as much as £12bn annually for UK plc.
Unlike traditional paper invoices or documents sent by email, e-invoices are generated, transmitted and received in an electronic format that allows for automated processing.
It is this automation that reduces errors in invoice processing, and ultimately leads to faster payments and improved cash flow, all the while freeing up inordinate amounts of man-hours to focus on more productive and strategic activities within the organisation.
E-invoicing is also far more secure and less susceptible to fraud, provides organisations with greater visibility and understanding of their VAT obligations, and promotes best practices ahead of ongoing legislative changes.
While businesses incur implementation costs, e-invoicing will, over time, reduce business spending as well as create a snowball effect to motivate the broader digitalisation of taxation-related processes within the UK economy.
For the UK government, near real-time data availability will provide the possibility of quicker and more in-depth analysis of economic developments across the breadth of the country, allowing greater accuracy in forecasting.
In addition, e-invoicing enables organisations to optimise their invoicing procedures, reduce mundane admin, and enhance accountability. This automation not only leads to more efficient operations but also promotes a culture of transparency and responsibility within enterprises, to the benefit of the wider economy.
For example, Brazil has experienced a staggering $58 billion (USD) surge in tax revenue by addressing financial gaps within invoicing and reporting.
Where the UK is right now
At the moment the use of e-invoicing in the UK is optional for most organisations, although some large businesses, particularly those engaged internationally, have already adopted it in some capacity.
E-invoicing is also already mandatory for transactions with public bodies. E-invoicing systems must be used for any payments to and from public entities like the NHS, councils and government departments.
E-invoicing is unlikely to gain speed on its own accord, primarily because it’s the receiver of the invoice, not the sender, which ultimately accrues most of the benefits. It is a government mandate that is now required to ensure the private sector – particularly SMEs and mid-market organisations – follow suit and don’t get left behind.
The European Commission’s VAT in the Digital Age (“ViDA”) initiative is an EU-wide mandate for system-to-system data exchange, with the aim of making electronic invoicing the default method of issuing invoices.
Its objective is to accelerate the adoption of e-invoicing across EU member states, resulting in widespread adoption by 2030. Those even further ahead of the game include Germany, who are set to adopt the scheme next year, followed by France in 2026.
It’s more than fair to say that not all EU businesses and those that trade in the EU are prepared for ViDA yet, but it’s critical the UK, although no longer an EU member, sets off on the same or similar journey.
Looking into the future
I think we can all be sure that the measures coming out in the autumn budget will not please everyone. There’s no silver bullet or quick fix, so it’s important that we look at the long term. E-Invoicing does, at the very least, look like a good practical example of how UK plc can further prosper.
