E-invoicing is set to take over in the UK—here’s how to prepare

The days of paper and pdf billing are fading away. E-invoicing is set to take over quickly for many UK business transactions, and it’s a good idea to start preparing your firm or accountancy practice now.

Some British businesses may initially be cautious about the rapid spread of e-invoicing, but many will welcome the change, as has happened in other countries.

Once it gathers momentum, the practice could bring benefits for all Small and Medium-sized Enterprises (SMEs) and their accountants—far outweighing the minor set up costs and effort.

What is e-invoicing?

E-invoicing does not refer to bills held digitally or sent by email. An e-invoice is a document that uses specialist software to create structured data files that allow the recipient’s software to read and process them automatically.

This could make the process of sending and receiving invoices dramatically smoother and more efficient for businesses and state entities, like the NHS, for example.

Governments could also benefit if they introduce a tax reporting mechanism alongside a mandate for e-invoicing as it could help tax authorities boost transparency, reduce fraud, and increase revenues.

E-invoicing started in South America, but it caught on quickly elsewhere, and more than 80 countries already mandate its use, according to the Institute of Chartered Accountants in England and Wales (ICAEW).

A 2024 report by Billentis, sponsored by Sage, says the size of the global e-invoicing market is set to grow around three times by 2028 and compares the speed of adoption to a tornado.

Research by Sage also shows adopting e-invoicing can lead to significant annual savings of around €13,500 for small businesses by nearly halving the time spent processing invoices.

Anyone trading within the EU will know regulators there have blazed a trail with their 2014 E-invoicing Directive and 2017 Standard. The EU is also planning to mandate e-invoicing for VAT, which will include many B2B transactions.

By contrast, the UK has so far only required e-invoicing for certain public sector transactions, though some larger corporations and international traders have adopted it.

All change in the UK

The new Labour government wants the UK to catch up, with potentially radical impacts on the way organisations handle their billing and payments. In September, Chancellor Rachel Reeves announced a consultation on how to promote e-invoicing in UK businesses and government departments.

The government will look at options for a full or partial move towards mandatory e-invoicing for business transactions.

Organisations can only access the full benefits of e-invoicing, such as greater efficiency and real-time information, if it becomes widespread. Catherine Heinen, technical content writer at Tax Assist, says a mandate is “wholly necessary” to ensure standardisation and maximise business productivity and savings. “We should see compulsory e-invoicing as a positive advancement that promotes greater efficiencies across business,” she says.

“We should see compulsory e-invoicing as a positive advancement that promotes greater efficiencies across business.”

Catherine Heinen, technical content writer at Tax Assist

The UK’s Autumn Budget confirmed the consultation on e-invoicing will be published in early 2025.

“It will then take time for the government to define legal and technical requirements, and for businesses to build, test, and implement new e-invoicing systems,” says advisory services provider Baker Tilly. “Based on other countries’ adoption of e-invoicing, this entire process is likely to take at least 3 years.”

But others say implementation should be much quicker and easier for businesses whose financial software already incorporates e-invoicing.

How e-invoicing works and the benefits

The e-invoicing process typically begins with a supplier creating an invoice using specialist software to generate the structured data.

They transmit that to their customer’s system, which automatically receives and processes the data, and integrates it into the customer’s accounting system without manual intervention.

A 2024 EU report says that, if widely adopted, the benefits of this process for businesses include:

• reduced administration
  
• fewer manual errors
  
• faster payments and cashflows
  
• greater security, as data is encrypted
  
• reduced carbon footprint
  
• instant data available in your Enterprise Resource Planning (ERP) system
  
• scalability—allowing SMEs to grow with no extra admin
  
• higher productivity—the invoices an accounts team can process in an hour increase significantly.
  

The EU report estimates the current saving from automated invoicing is around €5.28 per e-invoice issued and €8.4 per e-invoice received, based on labour costs of €46 an hour.

But the technology around e-invoicing is also evolving rapidly, promising even greater benefits.

AI and blockchain are improving tax compliance, fraud detection, and real-time information exchange. AI-powered software could help you use invoice data to predict tax amounts; and enhance monitoring and accuracy.

Emissions reporting could become more precise, with e-invoicing calculating and disclosing line items to enhance environmental accountability.

Additional business communications could be supported by the e-invoicing framework, such as order confirmation and statement exchange; plus it could help with validation, correlation, and order and invoice matching.

E-invoicing could also merge with other business-critical areas such as tax, payments, factoring, and supply chain management to become a broader, unified solution.

Benefits for accountants

Catherine says e-invoicing can also benefit accountants by enabling them to:

• get information from clients sooner
  
• prepare VAT returns and tax returns earlier
  
• reduce workload close to deadlines
  

“Accountants want to provide clients with expertise, not just enter data,” she says. “By reducing data processing, e-invoicing can help the relationship between client and accountant focus on advice and planning.”

“By reducing data processing, e-invoicing can help the relationship between client and accountant focus on advice and planning.”

Catherine Heinen, technical content writer at Tax Assist

She adds that smaller businesses may have less time and resources to implement e-invoicing, creating an opportunity for accountants to help them with solutions and training around adoption.

The challenges

Businesses may face some challenges in implementing e-invoicing. Probably the biggest issue for those who trade internationally is interoperability of transmission and governance, as local rules and standards differ.

Small businesses also often face difficulties due to the closed nature of e-invoicing networks among larger customers. However, you can overcome this by agreeing common transmission methods and protocols.

The EU says its directive and standard have significantly contributed to harmonisation, interoperability, and e-invoicing uptake. With many countries beyond the EU also adopting its model—including Australia, Japan, New Zealand, and Singapore—and others using an adapted version, standards can move closer to improve cross-border operations.

Efforts to increase harmonisation will continue and the EU’s forthcoming VAT in the Digital Age (ViDA) package will address this issue further.

The EU says software providers will play a role too, especially in helping SMEs. For them, the critical and most efficient way to increase e-invoicing adoption is through ERP and accounting software.

E-invoicing and tax

Billentis says tax solutions will increasingly integrate with e-invoicing software. “As the digitisation of tax compliance continues, businesses are required more often to submit electronic versions of audit files, invoices, credit notes, debit notes, and payment receipt data to tax authorities,” it says. “E-invoicing solutions will become central to tax compliance strategy for businesses of all types and sizes.”

Firms should find integrating tax solutions and e-invoicing relatively easy if their software provider already has e-invoicing facilities.

Implementation tips

UK businesses that work with the public sector may have experience with e-invoicing. But many other companies and accountants will not.

For accountants, one implementation tip is to start using e-invoicing in your practice first, so you can see how it works before rolling it out to clients.

Catherine says it’s essential to use reputable software to ensure a smooth transition; and to work with suppliers who use the widely-adopted global Peppol standard for e-invoicing. This helps transactions flow across borders and with more trading partners.

Rather than looking at e-invoicing in isolation, consider how you can achieve even greater savings by automating the entire order-to-pay cycle, including orders, transport documents, invoices, and payment notices. The EU estimates automating these processes together can save between €25 and €65 per cycle.

SMEs surveyed by the EU also say they would maximise their benefits from e-invoicing if they used it for further applications, such as VAT reporting, customs declaration, sustainability reporting, and integrating electronic orders and dispatch advice.

Final thoughts

While most of the details in the UK are still up for discussion, it looks inevitable that e-invoicing adoption will increase. So, the sooner your business or accountancy firm starts preparing, the better.

Any initial set-up effort will be well worth it. As Catherine says: “The benefits of automation, access to real-time financial information, and less human data entry error will outweigh any initial admin burden.”

The UK may have arrived later than some to the e-invoicing party. But that’s all the more reason to embrace it now by adopting the latest technology in your business or accountancy practice. The current benefits are already compelling. But the huge long-term potential could be transformative.