Gary Benson, VP of Corporate Development at Tungsten Network, argues how imperative it is that the UK does not fall behind the rest of the world in digitisation practices.
One of the biggest electronic invoicing initiatives – the implementation of an interoperable, common standard for public sector trade in Europe – is set to come into effect in April 2019. This is great news for Europe, but where will it leave digitisation in the UK post-Brexit?
The EU Withdrawal Bill outlines that all existing EU legislation will be copied across into domestic UK law to ensure a smooth transition in the days following Brexit. The UK Parliament will then “amend, repeal and improve” individual laws as necessary. Of course, this won’t apply to any statutes coming into effect after the Brexit date of 29 March 2019, such as the e-invoicing directive.
Becoming a world-leading digital economy
For this reason, we would like the UK to bring in its own e-invoicing legislation, independent of the EU, in order to continue to drive forward its digital strategy. The UK’s Digital Strategy,1 which was launched by the Government in March 2017, has been put together to help the UK become a world-leading digital economy, building on its history of digital innovation and natural strengths, such as the established FinTech industry. The strategy aims to help businesses become productive and competitive, adopting digital technologies wherever possible and making the most of data.
It is clear to us that e-invoicing is a key part of the digital revolution that should be taking place across the UK. Many businesses have had their front office operations transformed by digitisation, such as:
- Marketing;
- Sales; and
- Customer services.
However, many have not realised how back office processes could be similarly changed.
Electronic invoicing completely eliminates paper from the process of paying suppliers, and increases the productivity, efficiency and accuracy of an accounts payable team. Research by Billentis suggests that e-invoicing reduces the costs of handling invoices by between 60-80 per cent.2
Through digitisation of this process, errors and the potential for serious fraud are reduced and companies get access to an incredible wealth of real-time procurement data which they can use to optimise spending and negotiate better prices. These are just some of the advantages that the UK government’s Digital Strategy is looking to promote, so we believe that the government should take action and drive forward e-invoicing legislation that can apply post-Brexit.
Friction-less businesses
It is also the right thing to do for British businesses as it would ease friction in the UK supply chain, whilst addressing some of the biggest issues for suppliers:
- Getting paid on time; and
- Managing cash flow.
When questioned, we found that for nearly two thirds (64%) of businesses, slow internal processes are the biggest obstacle to timely payment. Thirty nine per cent of businesses said that lack of automation prevents them paying on time and 27 per cent recorded administrative errors.3 Our research gets to the heart of the matter – it is not wilful sluggishness on the part of buyers that causes late payment, rather much of the issue seems to stem from the way accounts payable departments manage the payment process.
Late payment is something we know the UK government cares about, having last year brought into law the requirement for large companies to report on their payment practices twice a year, and appointed its first small business commissioner with a remit to help firms tackle late payment.
If the UK government follows some of its European counterparts in mandating or at the very least, encouraging e-invoicing for business-to-government (B2G) contracts, then much of the headache around payment would be automatically removed.
The countdown begins
So what exactly is happening in digitisation in Europe over the next 18 months? By April 2019, public sector buying organisations in each EU member state will have to accept e-invoices from suppliers in one of two standardised formats. This should encourage the uptake of e-invoicing in public procurement and bring about huge cost savings. Some member states are taking the legislation a step further by not just accepting e-invoices, but actually mandating that some or all enterprises send B2G invoices electronically, including:
- Denmark;
- Finland;
- France;
- Germany;
- Italy; and
- Spain.
Italy is going even further by mandating that all business-to-business (B2B) invoices must be electronic via the government platform from 1st January 2019, similar to, but not the same as the successful Turkish project started in 2014 which is now fully implemented.
Past research suggests the mass adoption of e-invoicing within the EU would lead to significant economic benefits. It is estimated that moving from paper to e-invoices could generate savings of around €228 billion over a six-year period, according to a report by Capgemini Consulting.4
Until now, the uptake of electronic invoices in Europe’s public sector has been quite low, despite the many obvious benefits. The EU Directive should address this, as well as clearing up the existing confusion and overlapping systems, where countries have slightly different models and requirements, in some cases even varying regionally within a country. The legislation will drive forward change across the continent and demonstrate tangibly how digital innovation can bring efficiencies and cost savings for public administrations at a local, regional and national level.
Championing the case for digitisation
I have recently become a member of the European Multi-Stakeholder Forum on Electronic Invoicing. This is a European Commission group of “experts” committed to making Europe competitive and smoothing the way for the change in law. All 28 states in the EU have two delegates on the forum – one from the public sector and one from the private sector – and we are working together to remove any perceived obstacles and friction as April 2019 swiftly approaches.
We are reporting our discussions to advocacy groups within the respective countries, which will in turn be fed back to governments. Even though the UK is leaving the EU, I believe having a role on this forum is important and that it is critical that we do all we can over the coming 18 months to prepare our business communities for the rollout of B2G e-invoicing.
I am passionate about lobbying to the government and shouting about the importance of digitisation; it is crucial that the UK does not allow itself to fall behind the rest of Europe, let alone the rest of the world, where e-invoicing is making significant strides forward.
Playing catch up in digital markets
Ten years ago when Europe began thinking about e-invoicing, it was ahead of the curve. Now, it is behind in terms of e-invoicing adoption, with countries in Central and Latin America such as Brazil and Mexico, and Scandinavia and Turkey already paving the way. The Billentis E-Invoicing International Market Overview and Forecast describes the uptake of e-invoicing in Europe as “average”, compared to Central and Latin America which are “world leaders”.5
In 2017, according to Billentis, around 36 billion electronic invoices were exchanged worldwide. Of these, just nine billion were in Europe and around five billion were issued between companies and the public sector. This is still a drop in the ocean compared to the total number of invoices issued worldwide – in 2014 around 170 billion business invoices were sent globally.6
We believe that the adoption of e-invoicing across the public and private sector is a no-brainer and that it is crucial the UK government is mobilised and acts independently of European requirements to bring in new legislation.
Smoothing the way after Brexit
In addition to the economic benefits, digitising the payment process will ensure that the post Brexit overhead on businesses is minimised, and possibly even reduced. It should, for example, help with future import/export paperwork which is inextricably linked to invoicing. Post Brexit, this paperwork will be required as we will no longer be in the customs union; using e-invoicing processes will mean that detailed documentation is already in place, therefore massively helping to relieve the burden for businesses.
What’s more, by encouraging the uptake of e-invoicing for government contracts, there is an opportunity for the public sector to lead the way and influence the private sector. It would be an excellent outcome for UK plc if, because of interactions with government agencies, thousands of new businesses got to see the benefit of e-invoicing first-hand. If, as a result of public sector contracts, small businesses across the UK began to get paid promptly and in a more traceable and transparent way they too may become advocates for e-invoicing.
Whatever the Brexit negotiations bring, we all agree we want the UK to remain competitive and to continue on the road to digitisation. Encouraging e-invoicing in the public sector could be a great first step forward, bringing significant cost savings and benefits to all. At Tungsten, we are committed to doing all we can to drive forward innovation and accelerate global trade through the intelligent use of data and the death of paper. The UK must not lag behind – now is the time to act, to allow digitisation to touch all parts of our businesses and to welcome in an e-invoicing revolution.
References
- https://www.gov.uk/government/publications/uk-digital-strategy
- http://www.billentis.com/e-invoicing-businesscase.pdf
- https://www.tungsten-network.com/press-releases/half-of-businesses-admit-to-paying-suppliers-late/?id=20315
- http://ec.europa.eu/internal_market/payments/docs/sepa/sepa-capgemini_study-final_report_en.pdf
- http://www.billentis.com/einvoicing_ebilling_market_overview_2017.pdf
- http://www.ekepler.com/ekepler-wp/2017/09/19/worldwide-adoption-of-e-invoicing-a-slow-but-sure-progression/
Gary Benson
VP Corporate Development
Tungsten Network
