Electronic Invoicing poses new challenges for European SMEs

By Fabio Massimo, SBS expert. 

e-Invoicing is not a new topic. For many years large companies have created proprietary systems to receive electronic invoices from their supply chain in order to avoid the process of loading data into computer systems, therefore managing and storing digital documents only. In recent years various Public Administrations in different countries have addressed the same issue: they want to receive only digital bills relating to public procurement in a centralized way.

For instance, in Italy e-invoicing is compulsory: starting from 1st July 2015 every public office can accept and pay electronic invoices only. The advantages of the system are obvious: expenditure flows are centralized and become controllable, no manual loading of documents is needed, documents are ready for digital conservation. In this way Public Administrations, as several large companies have been doing for some years already, achieve huge savings.

SMEs are often suppliers of both, large companies and administrations, therefore they must use the digital methodologies required to submit invoices for their services; However, due to the due to their nature and size of SMEs, they were not involved, if not marginally, in the process of defining procedures and standards for e-invoicing.

SMEs are therefore in a passive position on the market, as they must adapt themselves, rather than force public administrations and large companies to work with the solutions used by the SMEs.

If SMEs do not adapt themselves they are no longer able to work with their customers and clients and, thus, will be out of the market. The introduction of e-invoicing has, thus, cleaned up the market from smaller or less structured companies. From a macroeconomic point of view, this phenomenon can be seen in a positive way, as an incentive for businesses to reach a larger size and more structured organisation. However, at the same time it has the potential to destroy many local micro-companies, such as crafts, whose skills and competences cannot be easily replicated in a larger less flexible organisation. It could, then, also be argued that the costs for public administrations might increase especially on the regional and local scale since cheaper but less structured suppliers are being replaced by others that are more expensive but more structured.

Anyhow, the overall benefits for the national public administrations are so high that they justify the loss of micro-economies, so the benefits of e-invoicing can hardly be questioned. For companies e-invoicing means implementing new software procedures and managing a hybrid situation: bills are still on paper for “normal” customers that are the majority, whereas they are digital for a limited number of “special” customers. That means facing more costs and more complexity. Currently, e-invoicing is ruled under national laws: this means that companies that export goods or services within the European Union have to face not only different legal, financial and administrative rules and tax systems, but also different billing protocols.

The result is unnecessary complexity and higher costs for businesses and public entities. The EU decided to introduce a European Standard for e-invoicing in response to the many e-invoice formats used across Europe: the Directive 2014/55/EU. While all contracting authorities will have to accept electronic invoices that comply with the European norm, national rules will remain valid. In other words, the Commission initiative will result in a norm and not in a European e-invoicing infrastructure: this latter will be supplied by service providers on the market. Once the e-Invoicing Directive 2014/55/EU will be transposed into national laws in EU countries and a European norm approved, we hope that electronic invoices will be able to flow seamlessly across the EU. In conclusion, e-invoicing is a important issue for SMEs as it will generate costs and problems, but at a later stage we hope that benefits will materialize. We will analyse in depth the different angles in the next articles.