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E-invoicing: bringing the payment process fully into the digital age


Every time goods and services are bought and sold, an invoice is created. This is the first step in the payment process. In the past, payments were generally made in cash and book-keeping was done by hand. Now that we are in the digital age, we have electronic payment systems, card payments and electronic transfers. Manual intervention, which tends to come at a much higher cost, has largely been eliminated throughout the payment process. Except where invoicing and final book-keeping are concerned.

Broad numbers of companies still print and send out paper invoices and some still do the book-keeping manually. Yet it is possible to automate and eliminate manual intervention in these parts of the payment process as well. Some companies are already doing this, but there are still many that are missing out on all the benefits a fully digital payment process can bring. This article looks into e-invoicing, explores exactly what the benefits are and explains what the EU is doing to promote its use in Europe.

What is e-invoicing?

Electronic invoicing (e-invoicing) is the exchange of a bill and payment details between a supplier and a buyer in electronic format. This means that the invoice is issued, transmitted and received in a structured electronic format which allows for its automatic and electronic processing.

Some solutions combine e-invoicing with payment – meaning that the e-invoice is integrated with an existing payment instrument. This service is often provided to the supplier by either a bank or a service provider and allows the supplier to send out the e-invoice to the buyer’s internet banking environment, a suitable digital wallet or another application. The buyer checks the invoice and can initiate the payment – via credit transfer, direct debit or card payment – without having to type in the payment data as the e-invoice already contains everything that the buyer needs to make the payment.

Why not stick to paper?

Since e-invoices contain all of the information that is needed to make the payment, it removes the possibility of mistakes being made, for example the wrong amount being sent or typos occurring when entering payment details. By automating this part of the payment process, both the sender and the receiver of the invoice can benefit from great cost-savings.

For example, the supplier saves money that would otherwise be spent on printing and posting invoices, responding to customer requests for copies or lost invoices, sending out reminders and dealing with errors in payment. The labour costs of performing all of these tasks can quickly add up. In addition, e-invoicing makes the whole process faster, meaning the supplier can receive the money more quickly and have a more predictable and manageable cash flow. Likewise, the buyer (whether a private consumer or a small business) saves time and the labour costs associated with processing paper invoices and avoids bank fees and extra administration costs that can arise when mistakes are made paying bills.

Reports have estimated that the direct staff costs of compiling and sending out paper invoices are between €2.50 and €10 per invoice. Receiving and settling paper invoices is even more costly, at an estimated €5 to €15 per invoice, as the reconciliation needs to be done by hand.

Who is already using e-invoicing?

In Europe, according to research , the annual invoice volume is estimated to reach 36 billion invoices in 2016. Approximately half of this number are invoices to consumers; the other half to businesses and the public sector.

Of invoices sent either between two businesses or between businesses and the public sector, the estimated share of e-invoices is above 40% only in Denmark, Norway, Sweden, Finland, Iceland and Estonia. This share drops to between 15% and 40% for much of Europe and even below 15% for a few countries (see Charts 1 and 2).

Of invoices sent to consumers the statistics are even lower with the estimated share of e-invoices below 15% in most of Europe. The share is between 15% and 40% in Finland, Sweden, France, Ireland, the Netherlands and the United Kingdom. Only in Denmark, Norway, Iceland and Estonia does the share go above 40%.

Chart 1: B2B/G2B/B2G electronic share of total invoice / bill volume. Source: Billentis

Chart 2: B2B electronic share of total invoice / bill volume. Source: Billentis

That being said, another study shows that the number of e-invoices processed in both segments is growing rapidly (see Table 1).

B2B and B2G Direct (electronic invoices delivered to customers) Indirect (electronic invoices delivered to other service providers destined for their customers) Total
2013 463,512,001 139,513,992 603,025,993
2014 495,670,263 125,623,446 621,293,709
2015 622,176,197 144,722,343 766,898,540
Increase 25.52% 15.20% 23.44%
2013 174,493,368 63,216,762 237,710,130
2014 238,589,671 126,002,783 485,380,819
2015 274,238,390 211,142,429 485,380,819
Increase 14.94% 67.57% 33.13%

Table 1: Annual increase of direct and indirect e-invoicing. Source: European E-invoicing Service Providers Association

The study not only shows an increase in the volume of e-invoices sent by businesses directly to another business, to the government or to a consumer, but also a large increase in the use of indirect e-invoices. This indicates that a network of service providers is being established, which could help further the use of e-invoicing across Europe.

What is the EU doing to make e-invoicing easier for businesses and consumers?

One of the objectives of the European Commission’s Digital Single Market strategy is to remove the regulatory and technical barriers that prevent mass adoption of e-invoicing and to ensure that e-invoicing becomes the predominant method of invoicing by 2020. In 2014 a Directive was adopted to ensure that e-invoices will be able to flow seamlessly across the EU. As part of this work, the Commission has requested that the European Committee for Standardization draw up a European e-invoicing standard to avoid new fragmentation across Europe. Publication of the standard is set for May 2017. In addition, the European Commission has made e-invoicing mandatory in public procurement as of 2016.

The Euro Retail Payments Board (ERPB) has decided to set up a working group that will deliver a report by late 2016. The report will sketch out the current European landscape of combined solutions that integrate e-invoices with existing payment instruments and examine why previous attempts at mass take-up have failed, what barriers hamper take-up and why existing solutions are not integrated. On the basis of this report, the ERPB will consider whether further work is needed in this field.