e-invoicing: Will it become mandatory and what action should you take?

Is the UK on the brink of mandatory online invoicing for business-to-business transactions?

In the European Union, public bodies are already required to receive invoices electronically, and member states are progressively introducing rules for B2B e-invoicing. Although the UK has not yet made e-invoicing compulsory, the potential for larger businesses to face such requirements looms, especially following the full implementation of HMRC's Making Tax Digital initiative.

Becca Durrant, Cloud Accounting Manager at Saffery, anticipates that e-invoicing will eventually be adopted in the UK. She notes that the government will likely seek greater visibility into business transactions, a goal partially driving the Making Tax Digital initiative. Once this initiative is fully rolled out, the transition to e-invoicing could accelerate, particularly for larger companies.

Durrant highlights several benefits of adopting e-invoicing early, even before it becomes mandatory. Embracing e-invoicing ahead of a legal requirement can help businesses avoid last-minute rushes and potential disruptions, as seen with the Making Tax Digital rollout. It can also enhance efficiency, reduce errors, and provide real-time financial data, offering a competitive edge and better alignment with international trading practices.

Some benefits of adopting e-invoicing 

There are a host of reasons for embracing e-invoicing at the earliest opportunity. 

You could avoid the rush 

When e-invoicing becomes mandatory, a significant surge in interest from late adopters is expected.

“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 

Many organisations fail to utilise all the tools that could boost their productivity, even when they are already investing in these 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 only access comprehensive financial data after a lengthy month-end process, by which time the figures are already outdated.

“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.”  

With the global shift towards digital solutions, including e-invoicing, businesses are encouraged to consider these advantages and prepare for future developments in the financial landscape.