E-Invoicing: Five benefits for small businesses
According to a series of online polls conducted by the Office of the Small Business Commissioner (OSBC), 75% of respondents understood e-invoicing but only 40% were using digital software to manage their invoicing process and 55% still use PDF files attached to emails.
We want small businesses to understand the benefits of e-invoicing but recognise that there are some concerns and confusion. This article sets out five major benefits for small businesses that are considering adopting e-invoicing, whilst addressing possible barriers.
What is e-invoicing?
E-invoicing automates the digital exchange of invoices between buyers and suppliers. It eliminates the need for paper invoices and manual data entry, streamlining the invoicing process and reducing errors. The Department for Business and Trade (DBT) recently published figures showing that 24% of surveyed small businesses attributed late payment to administrative errors, which could be resolved with e-invoicing.
1. Improved cashflow & reduced manual errors
The case for small businesses to consider e-invoicing is increasingly supported by emerging data. UK Government research suggests that 10% of invoices submitted in the UK contain errors, slowing down payments and cashflow. Whilst setup and adoption of an e-invoicing system can take time to embed into a business (though most software providers deliver accessible training), once in place e-invoicing replaces manual input and reduces opportunity for errors, removing a barrier to faster payment times. This could prove a worthwhile investment for small businesses as research by Sage indicates e-invoicing can reduce the incidence of late payments by up to 20%.
2. Reduced admin burden & increased efficiency savings
E-invoicing could improve productivity up to 3% and lead to an average annual saving of around £11,300 by reducing the admin burden on staff. It is easy to become sceptical of such claims as increased productivity is often promised by proponents of new technology. However, research shows smaller firms adopting e-invoicing experience immediate tangible savings on staff time chasing unpaid invoices and the cost of paper and storage. This enables businesses to reskill their people to engage in growth activities that directly affect positive outcomes for the business.
3. Unlock your accountant’s expertise
E-invoicing can enable accountants to get information from clients sooner, prepare VAT returns and tax returns earlier, freeing-up time to provide businesses with advice as opposed to just inputting data. Several professional accountancy bodies report this is what accountants would prefer to do for their customers. In other words, many small businesses already have a potential strategic business adviser in their accountant. By adopting e-invoicing technology, and easing the admin burden, small businesses could unlock their accountant’s expertise, allowing them to focus on advice and planning.
4. Enhance compliance, prepare for growth
The direction of travel in Europe is towards making e-invoicing mandatory, something that several European countries have already done. Smaller firms looking to successfully sell to overseas customers and grow their business could give themselves a competitive edge by adopting e-invoicing now and enhancing their compliance with European business partners. Businesses looking to explore exporting can get support from the UK Government here.
5. Strengthen business relationships, don’t replace them
Adopting e-invoicing can improve relationships between customers and suppliers. Rather than replacing existing or even longstanding relationships with a payment portal, e-invoicing can serve and strengthen those relationships by ensuring faster payments, reduced opportunity for disputes and even providing system features that facilitate communication and collaboration.
To better understand the benefits of adopting e-invoicing in your business, please speak with your accountant, contact Business Support Services, or seek advice from a financial professional.
If your business is still suffering from late payment or unfair contractual payment terms, the Office of the Small Business Commissioner (OSBC) supports small businesses to resolve disputes with larger customers over unpaid invoices and is working to drive change in UK payments culture. Firms can access our free complaints service and see if they are eligible for a Fair Payment Code Award for their payment practices via our website.