A key part that any business undertakes is sending out invoices. From SaaS services to healthcare, virtually every business has to send invoices to get paid.
In the past, your invoice process was probably entirely paper-based. It might have involved printing out physical invoices, mailing them off to a client, and waiting for them to confirm, pay, or send proof of payment. That doesn’t have to be the case anymore.
Over the last several years, electronic invoicing (or e-invoicing) has taken the invoice management game to the next level, streamlining workflows and simplifying the entire process. In fact, research shows that the global e-invoicing market was worth $8.74 billion in 2021 and is expected to reach $29.68 billion by 2027.
While there’s a growing trend shifting towards e-invoices, industry data shows that on average, accounts payable (AP) departments received over a third of their invoices on paper, despite a paper invoice error costing $53.50 to fix. Clearly, there’s still a way to go.
Want to learn more about all things e-invoicing? In this article, we’ll explain what electronic invoicing is (and isn’t), its benefits, and how you can successfully implement an e-invoicing solution.
TL;DR
- Electronic invoicing (or e-invoicing/digital invoicing) is the process of billing your customer digitally or through the Internet, generally through structured data formats like XML or EDI.
- There are several reasons you might consider switching to e-invoicing, including lower costs, improved productivity, and fewer bottlenecks. That said, it’s important to ensure stakeholder buy-in and proper security.
- To successfully implement e-invoicing, create a comprehensive strategy introducing the switch to e-invoicing, inform your customers well in advance, and focus on the benefits they’ll receive to drive adoption rates.
E-Invoicing and How It Works
Electronic invoicing goes by a few other names, including e-invoicing and digital invoicing. It’s the process of billing your customer digitally or through the Internet, instead of in-person or by mail.
However, the digitization of paper invoices is not the same thing as e-invoicing. If you take a photo of a paper invoice or use an app to convert it into a PDF invoice, that isn’t e-invoicing. If it wasn’t issued electronically and didn’t include structured data a machine can read or extract, it’s not an e-invoice.
E-invoicing has been around for decades, since the days of XML formats and electronic data interchange (EDI) for document processing and material procurement. Now, digital invoices are often prepared with billing software solutions, allowing customers to access their invoice data via their email or in an online environment. Most invoicing systems also let customers make payments through the portal.
Of course, like paper invoices, you need to include the same information on your e-invoice, including the customer and seller info, goods or services purchased, amount due, payment date, and invoice number.
E-Invoicing Benefits
There are several reasons why you might switch to e-invoicing, including:
Overall convenience and improved productivity. Companies can avoid many hours of manual processing, using templates to quickly generate their invoice to send electronically and securely—wherever they are.
Automated and touchless invoice processing. Larger companies that regularly send recurring invoices can benefit from the automation functionality of e-invoicing, freeing up more time for their accounts payable department.
Early payments. Minimize the risk of late payments with paper invoices and improve your cash flow with quicker, streamlined payments updated in real-time.
Fewer bottlenecks. Manually adjusting errors on paper invoices costs time and money. With invoicing software, you can reduce the risk of human error and instantly make changes, all reflected instantaneously in your invoicing portal—i.e., your single source of truth.
Potential E-Invoicing Drawbacks
While the benefits of e-invoicing are quite clear, there are a few possible challenges you should keep in mind before you make the switch.
Ensuring stakeholder buy-in. Change can definitely be difficult, even if it’s for the best. If you have customers who are used to traditional invoicing, switching to electronic invoicing may take time and cause short-term frustration. If you’re struggling with getting everyone on board, check out our tips later in this blog to help overcome this challenge!
Ensuring proper security. Invoicing naturally means dealing with potentially sensitive data, so it’s important to not cut corners when it comes to e-invoicing! Make sure that your documents can be encrypted and securely stored in the cloud, and that the payment processing provider you work with offers the latest security standards, like PCI compliance.
How to Get Started with Electronic Invoice Processing
It can be hard to choose the right e-invoicing software for your business, but it’s important to take into consideration the needs of your department or company. Some general questions you should ask are:
- What kind of functionalities and integrations do you need? How specialized should they be? Do their services comply with (inter)national standards for electronic data exchange, like EDIFACT or PEPPOL?
- Do you only need invoicing or accounting features, or also additional features such as project management?
- How robust can the e-invoicing solution be, given your budget?
- How scalable is the product? Will it be able to match your growth and needs over the upcoming years?
By taking the time to answer these questions, you’ll be able to choose the perfect invoice service provider for your needs.
How to Implement Electronic Invoicing Successfully
Once you’ve chosen a digital invoice provider, you’re only halfway there. After all, if your clients don’t make the switch with you, you’re back to square one. To make the transition process easy and seamlessly onboard your clients, here are some tips to take into consideration.
Create a comprehensive strategy introducing the switch to e-invoicing. If you’ve decided to go digital, it’s important to bring your clients alongside your thinking. This means you shouldn’t just send one update email and call it a day, but provide multiple opportunities for your customers to understand why you’re making the transition.
If you’re in healthcare and primarily bill individuals, you might consider creating an email, letter, and a short video with FAQs. If you’re in financial services and mostly invoice accounts payable departments, you could organize a webinar where they can speak to a representative about your new ERP system.
Whatever option you go with, make sure your messaging is consistent and straightforward.
Inform your customers well in advance of any changes. Old habits die hard, and expecting your clients to make a switch within a week is not only unrealistic but also poor customer service. For example, if you’re an accounting firm working with larger corporate clients, they may need to go through lengthy internal approval processes. By giving your clients enough time, you’ll avoid running the risk of them switching to a competitor providing paper invoices.
Focus on the benefits your clients will receive. Don’t only talk about why e-invoicing is a smart choice for your company. Instead, explain what’s in it for your customers.
- How much time will they be able to save?
- Will they need to contact customer service less frequently?
- Will their data be more secure?
By answering these questions, you’ll be able to drive your e-invoicing adoption rates.
Provide incentives to your customers. Since you’ll be saving on costs once you switch to e-invoicing, consider allocating some of that budget to offering discounts. For example, you might offer a small discount on the next three invoices if customers switch to e-invoicing ahead of the final deadline. Alternatively, you could make a donation to a charity of the customer’s choosing on their behalf.
Avoid a “one size fits all” approach. While all your customers should be well-informed on your digital transformation towards e-invoicing, it might make sense to create a dedicated approach for high-value customers. Let’s say you’re a legal firm, and a small handful of clients account for over 70% of your revenue. If so, you could consider offering a 1-on-1 meeting with them to personally walk them through why you’re making the switch. This could be the manager of the accounts payable department or the CEO if it’s a smaller company.
Another option could be offering custom programs, where you accommodate certain requests your clients have, such as training sessions or deadline extensions. By recognizing the importance of your high-value clients, you’ll be more likely to keep them on board.
The Future of E-Invoicing
If you think you can get away with using traditional invoices for the foreseeable future, think again. E-invoicing is projected to have an annual growth rate of 25% between 2022 and 2029, reaching a market value of over $6 billion by 2029. Plus, more places are requiring it through a top-down approach.
In 2014, the European Union, for example, put up an e-invoicing mandate that required all public sector bodies to accept e-invoices, so it’s not unlikely that the U.S. will follow suit to some extent down the road, with mobile-friendly alternatives becoming increasingly important. While it’ll definitely take some time to pick up in the U.S. and certain regions in the world, those who adhere to e-invoicing compliance will undoubtedly have a competitive advantage that will fuel their growth in the long run.
Wrapping Up
Adopting digital invoices can streamline your workflow, increase productivity, and save costs—all while providing an improved customer experience and staying ahead of the digital curve. With a little bit of time and effort, you can successfully implement electronic invoicing and keep your customers throughout the transition period.
Stax has an all-in-one payment platform that makes billing and invoicing simpler. We offer scalable e-invoicing solutions for each business, always with transparent pricing.
FAQs about Electronic Invoicing
Q: What is electronic invoicing?
Electronic invoicing, also known as e-invoicing, refers to the process of billing your customer digitally, generally through structured data formats like XML or EDI.
Q: What distinguishes e-invoicing from digitization of paper invoices?
E-invoicing shouldn’t be confused with the digitization of paper invoices. If a paper invoice is scanned or converted into a PDF and issued, this does not constitute e-invoicing. To classify as e-invoicing, a bill must be issued electronically and must include structured data that a machine can interpret and extract.
Q: What are the advantages of e-Invoicing?
The advantages of e-invoicing include enhanced productivity, time-saving by avoiding manual processing, efficient and touchless invoice processing, and faster payments. E-Invoicing also reduces the risk of human errors and ensures all alterations are instantly reflected in the invoicing portal.
Q: What challenges might businesses face when implementing e-invoicing?
Switching to electronic invoicing can pose potential challenges like ensuring stakeholder buy-in and ensuring proper security. Stakeholders who are accustomed to traditional invoicing methods may resist the transition to digital invoicing. Furthermore, securing sensitive data involved in invoicing transactions is vital.
Q: How can a business implement e-invoicing successfully?
For successful e-invoicing implementation, businesses should create a comprehensive strategy to introduce the switch to e-invoicing. It’s also important to provide customers with ample notice of changes, highlight the benefits they stand to gain from the transition, and offer incentives to encourage adoption.
Q: What is the future of e-Invoicing?
E-invoicing is projected to have an annual growth rate of 25% between 2022 and 2029, reaching a market value of over $6 billion by 2029. More jurisdictions are starting to require it, indicating that its adoption will give businesses a competitive edge in the long run.
Q: What factors should be considered when selecting e-invoicing software?
Whilst choosing an e-Invoicing software, businesses should consider the needs of their department or company, the functionalities and integrations required, compliance with national and international standards for electronic data exchange, the software’s ability to match the growth and needs of the company, and the budget allocated for the solution.
Q: What information should be included in a digital invoice?
Like paper invoices, digital invoices should include customer and seller info, goods or services purchased, the amount due, the payment due date, and the invoice number.
Q: How does e-invoicing contribute to improved cash flow?
E-invoicing minimizes the risk of late payments associated with paper invoices and improves a company’s cash flow through faster, real-time updated payments.
Q: Does Stax offer an e-invoicing solution?
Yes, Stax offers an all-in-one payment platform that includes scalable e-invoicing solutions for each business, with transparent pricing.
