The Digital Push: More Countries Introduce Mandatory Electronic Invoicing
In a world where digital advancements are everyday news, paper still reigns supreme for B2B payments and invoices.
In fact, research indicates that 64% of B2B payments are still made with checks.
Not only is it a dated process, but reliance on paper also comes with a spectrum of problems, like security risks, errors, and, of course, the dreaded ink stains.
But there is change on the horizon.
Several countries in Latin America have become world leaders of mandatory electronic invoicing and many have had legislation in place for years on electronic invoice requirements.
The momentum to digitize transactions continues to gain traction worldwide.
Spain is one of the latest countries to jump on the bandwagon to shift B2B invoices over to digital. The country recently passed legislation that will increase the number of invoices processed electronically.
Spain and B2B Transactions
Let’s go back to 2015 for a moment. That’s when Spain made electronic invoicing mandatory for all transactions between the government and suppliers. After a few technical glitches when it first rolled out, the country’s business-to-government (B2G) platform now has 9,000 public administrations registered and processes 900,000 invoices every month.
Now, Spain has used its B2G mandate as a basis to start digitizing B2B transactions.
As of June 30, 2018, government contractors and subcontractors in Spain must use a new platform, called FACeB2B, to exchange electronic invoices for any public procurement contracts of €5,000 or more.
Spain also allows private companies to use the new platform voluntarily. And with benefits such as reduced costs per invoice and quicker turnaround on processing payments, many businesses will no doubt take advantage of the opportunity.
While the new mandate has a limited focus on B2B payments, there is speculation that Spain will soon implement mandatory electronic invoicing for additional, if not all, B2B transactions.
Electronic Invoicing in Other European Countries
Spain certainly isn’t alone in its push to go digital.
Earlier this year, Italy announced it would make electronic invoicing compulsory for B2B and B2C payments as of January 1, 2019. The country’s had compulsory electronic invoicing for B2G transactions since March 2015.
The new legislation will apply to all domestic B2B and B2C invoices for goods or services between parties established or VAT (Value Added Tax)-registered in Italy.
The Italian government has said the mandatory requirement is meant to tackle tax evasion and fraud.
While Italy will be the first European country to introduce a law for mandatory electronic invoicing, there’s no question that others won’t be far behind. In fact, Greece has already announced plans to introduce national mandatory electronic invoicing by January 1, 2020.
Electronic Invoicing in the US
Mandatory electronic invoicing is catching on in the US as well.
Since 2015, the federal Office of Management and Budget (OMB) has officially supported the use of electronic invoices. But the OMB took that support a step further when it directed federal agencies to start using electronic invoicing by the end of fiscal 2018 (September 30).
Of the 19 million invoices the US federal government receives annually, only about 40% are electronic, meaning the benefits of moving to digital invoicing will undoubtedly be significant.
How significant? The OMB has projected the annual savings to be upwards of $260 million.
Benefits of Electronic Invoicing
For businesses that issue many invoices, doing it manually is likely to have the person tasked with invoicing bleary-eyed and tired. And that runs the risk of errors. Electronic invoicing alleviates the (inevitable) human errors that come with manual invoicing.
And let’s not forget about the associated costs. For small and large businesses alike, electronic invoicing can reduce costs by 60 to 80% compared to paper invoices.
Plus, when it comes to processing speed, digital invoices have paper methods beat hands down.
Blockchain technology is revolutionizing the way payments are processed, and it is expected to gain popularity as the push to digitize transactions continues.
That’s because blockchain streamlines the entire transaction process, allowing for faster processing of payments. The security that blockchain technology offers also means that all transaction details are validated to mitigate fraudulent activity.
Blockchain ensures all the necessary information is available at each step in the transaction process, meaning businesses don’t have to worry about lost invoices or late payments that stem from calculation errors.
And having payments come in quickly and accurately is vital for every business, no matter the size.
One economic report found that late payments cost small and medium-sized businesses as much as $3 trillion globally, and that 40% of those businesses experience direct negative impacts from late payments.
So while we all know that late payments are a frustration, for some small business owners they are also proving to be seriously detrimental to a company’s growth and success.
One way to help alleviate that uncertainty is to start streamlining invoice and payment processes.
Check out Veem. Veem uses multi-rail technology that finds the most efficient, cost-effective, and secure path for your transaction. One of these “rails” is blockchain.
Best of all, Veem makes it easy to send, receive, and request payments. In just a couple of minutes and with a few clicks, your transaction is on its way.
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