With the next European mandate fast approaching, new research shows how digital tools – such as e-invoicing – are poised to unlock a new era of productivity and competitiveness for Europe’s SMEs.
Derk Bleeker, Chief Commercial Officer, Sage.
Europe wants to be digital, green, and competitive: to become a tech powerhouse on the global stage, to lead on sustainability in a rapidly warming world, and do so in a way that enables European businesses to rise to the top of global markets. As competitiveness and digitalisation go hand in hand, the EU’s Digital Decade goals, including getting 90% of SME’s to a basic level of digital intensity, are a critical underpin to delivering this vision. The EU’s SMEs represent 99% of all its businesses, which means that any effort to put Europe in the lead of the green and digital transition must put SMEs at the forefront. This was echoed in Enrico Letta’s much-anticipated report on the EU Single Market, which emphasised the importance of SMEs and making it easier for them to do business.
Turning this ambition into reality requires governments and the tech sector to work together. For example, the VAT rules in the Digital Age (ViDA) package being discussed by EU Member States is set to mandate and standardise cross-border business-to-business e-invoicing, and its success will be dependent on the ability of software companies to build, deliver, and implement solutions to 25 million SMEs across the EU in a short timeframe. Its success will be a defining moment for the Digital Decade goals, as e-invoicing has been proven to be an important ‘gateway’ to broader adoption of digital technology, as demonstrated by our research, but also by countries that have led the charge, like Finland and Singapore.
E-invoicing is the process of creating and providing an electronic invoice (e-invoice) to exchange data between a supplier and a buyer in a structured data format, over a network. It is the next step in creating a connected economy – moving from manual, slow, expensive processes that have not fundamentally changed for years, to automated digitalised workflows. France, Germany, and Spain are set to introduce mandatory e-invoicing for businesses in 2026, whilst 40 other countries globally have already introduced legislation and many more encourage it, and it’s easy to understand why. Mandating e-invoicing has benefits far beyond accurate tax reporting, both for the SMEs themselves and for society and the economy as a whole. By automating a process that takes a heavy toll on the valuable time of business leaders and also eliminating fraud and human error, the benefits for competitiveness are significant. It also opens up further opportunities: for example, automated carbon accounting to lower the burden on SMEs from new carbon reporting rules, as well as improved policy-making and economic management enabled by accurate, real-time data.
As it stands, invoicing presents a significant administrative burden for many businesses. SMEs in particular grapple with many pain points when it comes to invoicing – with direct impacts on their productivity and cash flow, which consequently holds them back from investments. The annual cost for European companies chasing late payments is 275 billion euros, with it taking on average 74 days for a company to settle the payment.
E-invoicing will make a real impact to the EU’s late payment agenda. SMEs clearly see the potential of e-invoicing solutions to materially improve their cash flow. This is especially the case among the 70% of SMEs who report that cash flow is a major problem for their business. Cumbersome invoicing processes stop SMEs getting paid on time: the most common reason for businesses paying their suppliers late was due to invoice disputes (33%) and late receipt of invoices (32%).
But e-invoicing offers a tangible solution. SMEs that have adopted it experience a significant decrease in the number of late payments. The benefits of e-invoicing are clear and this is why more than eight in ten adopters would recommend it to other businesses. E-invoicing is a powerful tool for businesses to unlock productivity as well as cashflow.
Perhaps most importantly for Europe’s Digital Decade ambitions, e-invoicing will be a gamechanger for Europe’s low levels of advanced tech adoption: our research shows critical links between e-invoicing and increased tech adoption and investment, with 9 out of 10 SMEs that have implemented e-invoicing having going on to purchase other digital solutions. Moreover, our research shows that cashflow is a major issue when it comes to investing in digital technology – at least 1 in 5 of all EU SMEs are struggling with cash flow, and those grappling with liquidity invest 44% less in technology. Thus, by tackling late payments and improving cashflow, e-invoicing acts as a stepping stone to further digitalisation.
The success of Europe’s Digital Decade hinges on its SMEs: their digitalisation is the crucial policy lever underpinning widespread digital transformation throughout the European economy, and bolstering Europe’s competitiveness on the world stage.
SMEs will only be able to rapidly digitalise if they have the access to the cash needed to invest in advanced tech like AI and big data applications. E-invoicing has the potential to be a key accelerator of digital investment and transformation in the EU. As negotiations continue on ViDA, with a political agreement amongst European economy and finance ministers almost within grasp, it is crucial for policymakers to keep up the momentum in reaching an agreement and lock in the significant benefits for both SMEs and the broader economy. With the right support and action from government – such as through strong public-private-partnerships – e-invoicing will unleash SMEs’ business potential: freeing up their time, getting them paid faster, and allowing them to refocus on the things that matter to grow their business.
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