{"id":13349,"date":"2025-03-05T19:56:20","date_gmt":"2025-03-05T19:56:20","guid":{"rendered":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/?p=13349"},"modified":"2025-03-06T15:55:55","modified_gmt":"2025-03-06T15:55:55","slug":"e-invoicing-explained","status":"publish","type":"post","link":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/e-invoicing-explained\/","title":{"rendered":"E-invoicing explained – the benefits, challenges, and how to prepare\u00a0"},"content":{"rendered":"
The UK government is focusing on electronic invoicing, known as e-invoicing, as one potential solution to reducing businesses’ administrative burden. It recently launched a 12-week e-invoicing consultation and actively encourages UK businesses to participate.<\/span>\u00a0<\/span><\/p>\n E-invoicing is a system of digitally exchanging invoices between buyers’ and suppliers’ financial systems. If e-invoicing became mainstream or compulsory, it would eliminate the need to manually enter data into both systems, resulting in reduced administrative labour and increased business productivity.<\/span>\u00a0<\/span><\/p>\n It would also ensure that invoices are accurately and promptly recorded directly in the recipient’s financial system, removing the likelihood of human errors and streamlining tax processes.<\/span>\u00a0<\/span><\/p>\n <\/div>\n <\/div>\n \u00a0<\/span><\/p>\n On 13 February 2025, HM Revenue & Customs (HMRC) and the Department for Business and Trade (DBT) jointly published \u2018<\/span>Promoting electronic invoicing across UK businesses and the public sector<\/span><\/a>.\u2019 This consultation seeks to explore various aspects of e-invoicing, including:<\/span>\u00a0<\/span><\/p>\n The consultation is open until 7th May 2025, and the government encourages businesses of all sizes, industry bodies, and public sector organisations to participate.<\/span>\u00a0<\/span><\/p>\n This consultation will not result in immediate changes. However, it is an opportunity for businesses to influence policy decisions about the future of e-invoicing.<\/span>\u00a0<\/span><\/p>\n Adopting e-invoicing can offer numerous advantages for businesses:<\/span>\u00a0<\/span><\/p>\n By removing the administrative burden of manually inputting invoice information, businesses stand to save a significant amount of time from e-invoicing. This results in cost savings and increased productivity. The government estimates that moving to e-invoicing reduces invoicing costs by 60-80%.<\/span>\u00a0<\/span><\/p>\n A <\/span>Sage<\/span><\/a> report indicates that small European companies could save approximately \u20ac13,500 (around \u00a311,000) annually by implementing e-invoicing. These savings stem from reduced time spent on processing invoices and correcting errors.<\/span>\u00a0<\/span><\/p>\n E-invoicing also has the potential to speed up payment cycles. For instance, an <\/span>NHS<\/span><\/a> trust reports that e-invoices were ready for processing within 24 hours, compared to 10 days for paper invoices. This efficiency made payments almost twice as quick, with a 15% reduction in supplier queries.<\/span>\u00a0<\/span><\/p>\n Automating the invoicing process reduces the likelihood of human errors, ensuring that VAT (Value Added Tax) returns and other financial reports are more accurate.<\/span>\u00a0<\/span><\/p>\n The UK’s move towards e-invoicing is part of a global shift towards digital invoicing to improve efficiency in business transactions. Approximately 130 countries have implemented or are in the process of implementing e-invoicing standards.<\/span>\u00a0<\/span><\/p>\n For example, in Italy, e-invoicing is mandatory for all business transactions, and in Sweden, public sector entities are required to accept e-invoices.<\/span>\u00a0<\/span><\/p>\n PEPPOL (Pan-European Public Procurement On-Line) is an existing secure and standardised infrastructure for e-invoicing and other procurement documents. Originally developed in Europe, PEPPOL is now used in several countries worldwide, including Australia, Singapore, and New Zealand.<\/span>\u00a0<\/span><\/p>\n If the UK aligns with PEPPOL, it could simplify international trade, making cross-border transactions more efficient and secure for businesses.<\/span>\u00a0<\/span><\/p>\n While the benefits are clear, transitioning to e-invoicing comes with certain challenges businesses must be aware of and prepare for.<\/span>\u00a0<\/span><\/p>\n Businesses may need to invest in new software or upgrade existing systems to handle e-invoicing. This is especially relevant for businesses currently using paper-based systems.<\/span>\u00a0<\/span><\/p>\n Staff will need training to use new systems effectively. Moving to a digital automated system may initially prove challenging for businesses without in-house financial professionals.<\/span>\u00a0<\/span><\/p>\n Without a standardised format, businesses might face issues when handling international transactions. Until governments agree on a universally accepted system, businesses may have to rely on traditional invoicing methods when dealing with suppliers or buyers overseas.<\/span>\u00a0<\/span><\/p>\n With the digital nature of e-invoicing, protecting sensitive financial data is a crucial concern for businesses. Businesses will need to implement strict access controls so that only authorised personnel can view or modify financial data. This will ensure businesses adhere to <\/span>GDPR<\/span><\/a>, safeguarding customer and business information.<\/span>\u00a0<\/span><\/p>\n Businesses are encouraged to share their views by completing the online form \u2018<\/span>Promoting electronic invoicing across UK businesses and the public sector<\/span><\/a>\u2019 on the government’s official website. Responses can also be emailed to <\/span>einvoicingconsultation@hmrc.gov.uk<\/span><\/a>.<\/span>\u00a0<\/span><\/p>\n\n <\/i>\n Key Takeaways<\/span>\n <\/h3>\n
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What is the government’s proposal on e-invoicing?<\/span>\u00a0<\/span><\/h3>\n
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Potential benefits of e-invoicing<\/span>\u00a0<\/span><\/h3>\n
Cost savings<\/h4>\n
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\n <\/a>\n <\/div>\n \n
Improved cash flow<\/h4>\n
Enhanced accuracy<\/h4>\n
Do other countries use e-invoicing?<\/span>\u00a0<\/span><\/h3>\n
What is PEPPOL?<\/h4>\n
E-invoicing challenges and considerations for businesses<\/span>\u00a0<\/span><\/h3>\n
Initial setup costs<\/h4>\n
Training requirements<\/h4>\n
International issues<\/h4>\n
Data security<\/h4>\n
How to participate in the consultation<\/span>\u00a0<\/span><\/h3>\n