What is e-invoicing? Advantages and disadvantages of electronic invoicing

For business owners and finance leaders, improving efficiency and reducing manual work are top priorities. 

One way to streamline your operations is through electronic invoicing (e-invoicing)—a digital alternative to traditional paper invoicing. Many governments now mandate e-invoicing for compliance, but beyond that, it can help businesses save time and money.

So, what exactly is e-invoicing, and how does it compare to traditional invoicing?

Let’s break it down.

Here’s what we’ll cover

What is an e-invoice?

An e-invoice is a structured, digital invoice that contains billing information in a standardized format.

This format enables automatic processing and integration between suppliers and buyers without manual intervention. 

Unlike a simple digital invoice (such as a PDF sent via email), a true e-invoice adheres to structured data formats like XML or EDI, ensuring seamless data exchange between accounting systems.

However, it’s important to understand that e-invoicing can mean different things depending on the context.

Some businesses use structured e-invoices, which follow standardized formats for seamless system-to-system data exchange.

These invoices allow full automation and compliance with government regulations.

On the other hand, many businesses adopt digital invoicing, which refers to electronically generated invoices that may be sent as PDFs via email.

While these invoices speed up processing, they do not include structured data for automatic integration.

When considering e-invoicing for your business, it’s essential to determine whether you need structured e-invoices for automated processing or digital invoices for faster, paperless transactions.

Understanding these differences will help you choose the right solution to streamline your invoicing and payment processes.

Types of e-invoicing systems

When choosing an e-invoicing system, you’ll typically find two main options that take different approaches to generating, processing, and delivering invoices.

Understanding how they work can help you pick the right fit for your business.

1. Electronic Data Interchange (EDI)

Direct invoices are exchanged directly between you and your customers or suppliers without intermediaries.

This system is commonly used by large organizations that process high volumes of invoices, ensuring seamless, automated transactions between compatible accounting systems.

2. Third-party or intermediary systems

These systems are cloud-based service providers or platforms that generate, transmit, and process invoices.

The systems connect multiple buyers and sellers, allowing them to exchange invoices in the same format.

For example, Sage invoicing software has seamless through the Sage Network, enabling businesses to create, transmit, and receive invoices in a structured data format through Paya, our trusted partner. 

This connectivity supports global electronic transfer standards, automates compliance checks, reduces delays from misplaced invoices, and improves accounts payable workflows—helping businesses streamline invoicing while boosting efficiency and productivity.

E-invoicing versus traditional invoicing

Traditional invoicing has evolved significantly over the years.

While some businesses may still deal with paper invoices, many now create digital invoices—typically PDFs—which are emailed to customers.

However, even this method can be inefficient, as it often requires manual entry and tracking, leading to potential delays, errors, and extra work.

Electronic invoicing simplifies this by automating invoice creation, delivery, and tracking, ensuring a more efficient e-invoicing process from start to finish.

Payments are processed faster, reducing the risk of errors and improving cash flow.

With Sage solutions, businesses can streamline invoicing and payments through digital invoicing solutions, while some industries may require fully structured e-invoicing for regulatory compliance.

Advantages of electronic invoicing

Switching to electronic invoice management comes with many benefits, from simplifying your billing process to improving efficiency and speeding up invoice processing.

Here are ten advantages of using an e-invoicing system:

1. Cost savings

E-Invoicing reduces expenses related to manual invoicing, such as data entry, reconciliation, and payment follow-ups.

Electronic invoicing automation also minimizes errors that could lead to costly disputes or late payments.

2. Faster payments

With instant digital delivery, invoices reach customers immediately, reducing processing delays and helping businesses maintain steady cash flow.

Plus, when integrated with an accounts payable automation solution, e-invoicing makes the entire process even more efficient.

3. Fewer errors

Automating invoice generation and processing reduces common manual entry mistakes, lowering the risk of disputes and ensuring quicker approvals.

4. Better compliance

E-Invoicing helps businesses meet tax and regulatory requirements, simplifying audits and financial reporting. 

5. Real-time data, tracking, and reporting

E-Invoicing platforms provide real-time visibility into invoice status, making it easier to monitor payments, detect issues early, and generate financial reports effortlessly.

6. Increased transparency

Digital invoicing improves end-to-end visibility across the invoicing process, reducing disputes, enhancing communication, and strengthening relationships with customers and suppliers.

7. Environmental impact

For companies that still use physical invoices, the switch to digital processes can significantly cut waste and carbon emissions.

Even businesses already using PDFs can benefit from automation, reducing unnecessary printing and manual data entry, leading to a more sustainable, efficient workflow.

8. Easier scalability

Whether a business processes a handful or thousands of invoices, e-invoicing systems scale effortlessly without adding extra administrative workload.

9. Enhanced security

E-Invoicing platforms incorporate encryption, authentication, and fraud prevention measures, protecting sensitive financial data and transactions.

10. Better supplier relationships

Faster invoice processing, automated payments, and real-time status updates foster trust and stronger, long-term partnerships between businesses and their suppliers.

Disadvantages of electronic invoicing

While e-invoicing offers many benefits to your billing process, there are potential challenges that may come with its adoption:

1. Initial setup costs

Transitioning to an e-invoicing system can require a significant upfront investment.

You may need to purchase new software, train employees, and integrate the system with existing financial processes.

These initial costs can be a barrier, especially if you’re part of a small business with limited budgets.

2. Learning curve

The shift to e-invoicing can be complex, particularly if your business is used to traditional invoicing methods.

Learning new software, keeping up with different e-invoicing regulations, and managing digital data formats can be tricky—especially if you don’t have a dedicated IT team.

3. Resistance to change

Some businesses, especially those with long-established processes, may resist the transition to e-invoicing.

Overcoming this resistance requires effective change management, clear communication of benefits, and a cultural shift within your organization.

How to set up e-invoices

Getting started with e-invoicing is easier than you might think.

Follow these simple steps, and your finance team will be able to generate and send digital invoices quickly:

1. Notify suppliers and vendors

Before transitioning to e-invoices, inform your suppliers and vendors about the change.

Communicate your decision to move to electronic invoicing and provide them with the necessary details on how they will receive the invoices moving forward.

Ensuring all parties are on board with the process will prevent confusion and ensure smoother implementation.

2. Input essential invoice information

Just like with traditional invoices, e-invoices need to include key details.

Make sure to add your business and your customer’s information (name, address, and contact details), an itemized list of goods or services, pricing, taxes, and any discounts.

Don’t forget to clearly state the invoice number and payment terms to keep everything organized and ensure smooth processing.

3. Generate the invoice

Once all the required information is entered, use your e-invoicing software to generate the digital invoice.

Many systems offer templates that follow industry standards and ensure compliance with electronic invoicing regulations.

4. Send the invoice

E-Invoicing software offers multiple delivery options, such as direct transmission to your supplier’s system, email, or through an e-invoicing network.

Make sure the invoice is sent through the most secure and efficient channel and track its status to check that it has been received and processed.

E-Invoicing trends and the future of billing

The adoption of e-invoicing is growing rapidly.

With more than 100 countries already enforcing some form of e-invoicing regulations, businesses worldwide are transitioning to digital-first financial processes.

In the US, while there is no federal mandate for e-invoicing yet, government suppliers must comply with the Treasury Department’s Invoice Processing Platform (IPP), which requires electronic invoicing for federal agencies.

Additionally, states like California and Texas have implemented e-invoicing standards for state contracts, ensuring transparency and reducing fraud risks.

Starting in 2025, France will mandate structured e-invoicing for businesses to enhance tax compliance and reduce fraud.

Similar regulations are expanding across the globe, making it essential for businesses to stay informed about their regional requirements.

Companies that adopt e-invoicing early will gain a competitive edge with more efficient operations and better cash flow management.

Beyond compliance, e-invoicing enables real-time financial insights, helping businesses make smarter decisions and stay ahead in an increasingly digital world.

Emerging AI-powered e-invoicing solutions, like the ones powered by Sage Ai, can further enhance automation by predicting payment trends, flagging anomalies, and reducing invoice fraud, allowing finance teams to operate more efficiently.

Simplify your billing with invoicing software

If you want to take control of your invoicing, enhance electronic invoice processing, and ensure faster payments, Sage invoicing software provides the tools you need to simplify your billing process. 

With seamless automation, real-time tracking, and Sage Ai-powered insights, Sage software helps businesses reduce errors, enhance compliance, and improve cash flow efficiency. 

Integrated with trusted partners like Paya, powerful solutions ensure that businesses of all sizes can effortlessly create, send, and process invoices—saving time and resources while strengthening financial operations.

FAQs about electronic invoicing

How do I create an electronic invoice?

To create an electronic invoice, follow these steps:

1. Choose e-invoicing software: select a reliable e-invoicing software or platform that supports creating and transmitting structured electronic invoices.
2. Set up your account: once you have your software, set up your account by entering your business details, including your company name, address, and tax identification number.
3. Enter invoice details: input the necessary invoice details, such as the invoice number, date, due date, and payment terms. Include itemized descriptions of the goods or services and the corresponding quantities and prices.
4. Add customer information: enter the recipient’s details, including their name, address, and other relevant contact information.
5. Review and finalize: double-check all the information for accuracy and ensure that the structured data format complies with relevant legal and regulatory standards.
6. Send the e-invoice: once everything is correct, send the e-invoice directly through the platform to the customer’s accounting system or email, depending on the setup.
7. Track and manage: use the software to monitor the invoice’s status, track electronic invoice payments, and manage any follow-up actions.

Who is eligible for e-invoicing?

E-Invoicing can be adopted by businesses of all sizes, from small startups to large corporations.

Whether you’re managing a few invoices per month or thousands, e-invoicing offers benefits like automation, compliance, and faster payments.

However, businesses should assess their digital infrastructure and regulatory requirements before implementation.

What is an electronic invoicing system?

Unlike standard digital invoices, which are often sent as PDFs via email, an e-invoicing system ensures invoices are structured in a way that allows for seamless automated processing, validation, and compliance.

This eliminates manual data entry, reduces errors, and streamlines financial workflows.