Unlocking Growth: Frictionless Trade for SMEs Powered by E-Invoicing and AI

E-Invoicing has the potential to transform how entire economies operate. To highlight its impact, Sage has released new insights into how it helps eliminate everyday barriers faced by small and medium enterprises (SMEs).

The report -  Unlocking Growth: Frictionless Trade for SMEs Powered by E-Invoicing and AI – outlines a bold vision for a future where widespread adoption of e-invoicing and AI enables frictionless trade for these businesses.

Supported by an international panel of experts and feedback from over 11,000 SMEs and accountants, the report shows how structured invoice data can unlock significant productivity gains, reduce fraud, speed up payments, and simplify tax compliance – enabling SMEs to thrive in a digital-first economy.

Electronic-invoicing (e-invoicing) is often misunderstood. It’s not just about digitising paper invoices or sending PDFs via email. Instead, it refers to the automated generation, exchange, and processing of invoices in a structured, machine-readable format. E-Invoicing enables data to flow seamlessly between systems, enabling invoices to be validated, matched, and paid - without manual intervention - reducing delay, error and cost.
 
Key Findings:

Friction Points Holding Back SME Growth

Despite digitalisation in other areas, many SMEs are still stuck in outdated, manual processes that waste time and limit growth:

• 1 in 4 SMEs use three or more disconnected systems to manage their finances — a clear sign of fragmentation.
• 40% of invoices are paid late, creating cash flow pressures that force businesses to borrow unnecessarily.
• 69% of SMEs say tax compliance is one of their biggest burdens, with many citing the complexity and time required to meet obligations.
• Overall, SMEs identify getting paid, dealing with suppliers/customers, and tax submissions as the top three frictions holding back their growth.

These inefficiencies are not just operational annoyances — they directly limit investment in talent, innovation, and expansion.

The report reveals a sharp rise in fraud exposure, driven by unstructured data and manual oversight:

• Nearly 50% of SMEs admitted to paying at least one fraudulent invoice.
• The lack of a standardised digital identity system for businesses makes it easier for bad actors to impersonate legitimate suppliers.

Accountants are trusted Advocates for Change

Accountants and bookkeepers are emerging as key enablers of digital transformation for SMEs:

• More than 8 in 10 accountants and bookkeepers in Europe, and half of accountants in US and UK, are already familiar with e-invoicing.
• More than 8 in 10 would recommend it to their clients saying it facilitates easier tax compliance and automates financial processes.
• 7 in 10 believe e-invoicing helps reduce fraud, and 74% say it will free up their own time for more strategic work.

SMEs are burdened by inefficiencies and exposed to growing risks, but there is strong support — especially from accountants — for e-invoicing as a solution

Government recommendations: Summary

To unlock the benefits, governments are urged to take the following actions:

1. Prioritise e-invoicing as core to future digital infrastructure
   • Why: It boosts productivity, reduces fraud, and enables real-time economic insight.
   • Action: Embed e-invoicing into national digital strategies and economic planning.
2. Mandate structured e-invoicing across the economy
   • Why: Voluntary uptake is too slow. Mandates drive adoption and unlock benefits.
   • Action: Introduce phased mandates for all businesses, starting with larger firms.
3. Adopt a single, harmonised standard
   • Why: Avoids fragmentation and reduces compliance costs for SMEs.
   • Action: Use the EN 16931 standard (already used across the EU) to ensure interoperability.
4. Integrate e-invoicing with procurement infrastructure
   • Why: Linking to tax, procurement, and payment systems maximises impact.
   • Action: Connect e-invoicing to VAT systems, customs, and public procurement platforms.
5. Embed digital identity and fraud prevention
   • Why: 79% of SMEs report receiving fraudulent invoices.
   • Action: Require verified sender IDs and link e-invoicing to trusted digital ID systems.
6. Support SMEs with awareness, tools, and funding
   • Why: Many SMEs are unaware or unprepared for e-invoicing.
   • Action:
     • Launch national awareness campaigns.
     • Provide step-by-step guidance and sector-specific support.
     • Offer financial incentives or subsidies to ease adoption.
7. Enable real-time economic monitoring
   • Why: Governments currently rely on outdated data to understand the economy.
   • Action: Use anonymised e-invoicing data to track economic trends and inform policy.
8. Promote access to finance through e-invoicing
   • Why: SMEs face high rejection rates for loans due to paperwork and poor data.
   • Action: Allow lenders to access verified invoice data via secure APIs to speed up credit decisions.
9. Incorporate ESG and sustainability metrics
   • Why: SMEs struggle to meet growing sustainability reporting demands.
   • Action: Add optional ESG fields to e-invoices and incentivise their use in procurement.
10. Coordinate internationally
    • Why: Fragmented rules hinder cross-border trade.
    • Action: Align with global standards and collaborate with other governments to reduce trade friction.
11. Link to Faster customs and border processes processing
    • Why: This reduces clearance times and errors, and supports pre-clearance and automated checks.
    • Action: Structured invoice data can be linked directly to customs declarations.