The government is urging businesses to adopt electronic invoicing to reduce VAT fraud and improve tax collection efficiency.
E-invoicing is where invoices are created, sent, received and processed in a digital format, with the e-invoice containing exactly the same information as a traditional invoice.
With more than half of the Organisation for Economic Co-operation and Development (OECD) countries having mandated e-invoicing, the UK is seriously lagging and even still allows paper invoices. The government plans to carry out a consultation, the details of which are scarce.
Benefits of e-invoicing
Even though UK mandation almost certainly remains some way off, you will probably need to use e-invoicing if your business operates internationally. Even if this is not the case, there are still benefits to early adoption:
- With a standardised and structured format, e-invoices can be processed faster and with fewer errors. Invoices sent to a buyer can be tracked in real time, and the number of invoice rejections and disputes considerably reduced.
- Duplicate invoices are avoided, and fraudulent activity will be largely prevented since it will not be possible to intercept invoices to change bank details.
- Invoices, both sent and received, will be processed immediately, so cashflow forecasting will be improved and working capital requirements better managed. Faster payment of invoices received will ensure prompt payment discounts are taken advantage of.
Apart from the more obvious benefits, the relationship between buyer and supplier should improve, leading to higher customer retention and satisfaction.
Implementation of e-invoicing
Based on what has happened in other countries that have adopted e-invoicing, the implementation process can take at least three years. The usual approach is for a phased roll-out, with larger businesses required to comply first.
With mandatory e-invoicing likely for the UK, businesses should start preparing as early as possible. Rather than developing their own e-invoicing solution, many businesses will prefer to work with an e-invoicing service provider. Take care in the selection process to ensure that future e-business needs will be fully met.
Guidance on selecting the right service provider can be found here.
For more information, contact us on 0114 266 4432 or email info@smh.group.
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