The Chancellor unveiled a series of announcements recently that could have implications for UK businesses. One of the most relevant for business owners was the government’s push for electronic invoicing (e-invoicing).

HMRC will soon launch a consultation on encouraging the wider use of e-invoicing. It suggests various benefits for businesses as a result, including simplifying business transactions and reducing the administrative burden, but also reducing errors in tax returns so that HMRC can close the tax gap.

What is e-invoicing?

E-invoicing is the electronic exchange of invoice data between suppliers and buyers, replacing traditional paper-based invoicing. It’s a significant step beyond the process of electronic invoicing that most businesses now use, where a PDF of an invoice may be sent to a customer. 

Both Xero and QuickBooks can already accommodate e-invoicing processes. Xero has been actively campaigning for e-invoicing adoption and rebranding late payments as ‘unapproved debt’ to highlight the issue. 

E-invoicing is likely to become more widespread over the coming few years, particularly if HMRC are driving the process.

The benefits for small businesses:

Moving to E-invoicing could bring significant benefits:

1. Improved efficiency: E-invoicing reduces processing time by up to 44%, saving small businesses up to £11,300 per year.

2. Faster payments: It can decrease late payments by 20% and cut average payment times by four days, improving cash flow.

3. Reduced errors: Automated data capture and validation checks minimize mistakes and disputes.

4. Cost savings: Eliminating paper, printing, and postage expenses lowers operational costs.

5. Enhanced visibility: Real-time tracking allows better monitoring of invoice status and cash flow management.

How could you take advantage of e-invoicing?

While the consultation is yet to launch, some businesses may want to consider moving to an e-invoicing system now to gain the advantages detailed above, particularly if you work with larger businesses.

As always, if you’d like to discuss how to improve your cashflow, or streamline your invoicing processes, please get in touch.

Find out how to use e-invoicing as a Xero user here.

Find out more about the Chancellor’s announcement here.