As momentum grows in the shift towards e-invoicing, it’s clear that the benefits of adopting this technology extend far beyond simply achieving compliance with SARS’ planned rollout of its VAT modernisation programme by 2028.
The growth of the e-invoicing industry itself is evidence of this, with the global sector anticipated to grow to $45.44 billion in 2028 at a compound annual growth rate (CAGR) of 23.3, according to The Business Research Company
E-invoicing is the process of digitally exchanging documents with a strictly structured or machine-readable data format, which means that they can be sent, received, and processed without any manual or human intervention. This process not only streamlines and automates the invoicing and accounts payables and receivables processes, but it also reduces costs, minimises errors, and improves security for both parties involved. Its implementation is crucial to digital transformation in finance, and is inevitable, particularly for large businesses and those that operate internationally.
Already adopted by tax authorities in the European Union, Brazil, Chile and India, e-invoicing has become the invoicing method of choice for numerous international businesses who value the myriad benefits it offers. South African businesses can also benefit by implementing the systems that make e-invoicing possible, enjoying its positive outcomes long before doing so becomes a tax compliance issue.
“Even though compliance with SARS’ intended framework will become compulsory over time, there are so many reasons for businesses to modernise their invoicing systems,” says Shannon Friedman, CEO of VAT Modernisation SA.
“The most obvious benefit is that businesses have a much clearer, accurate, always-real-time view of their ingoing and outgoing transactions, made possible by greater efficiency and the transparency that comes with increased visibility over potential fraud. This in turn improves their operations, access to financing and other financial services, and their relationships with their clients, suppliers and their employees.”
Having an always real-time, clear view of the business’s financial transactions and position offers benefits beyond knowing about invoicing and payments in real time. Businesses have greater visibility into the various types of data that reveal their true status, and they can more easily track their income and how it’s being distributed. Over time, this level of data reveals trends that can inform strategy and future planning.
E-invoicing reduces invoice processing costs by as much as 60%, saving hours in accounts receivable clerks’ time each day. On the accounts payable side, it can yield up to 81% in savings on document capture and processing costs, and a 73% time saving. Document errors are reduced by at least 40%. This in turn improves employee morale, as clerks have to complete fewer tedious manual processes and have more time available to allocate to more strategic, value-added tasks.
From a cash flow point of view, e-invoicing can reduce days sales outstanding (DSO) by 30%, and improve time taken to pay suppliers by 5.5 days. This is just one way that e-invoicing systems can improve customer relationships – faster document processing and increased visibility lead to fewer queries and faster query resolution, with improved accuracy making for a better experience for all parties involved.
Being able to share an always real-time view of a business’s financial position means that it is likely to gain better credit options from banks and other finance providers too, as accounts receivable processes are a key indicator of risk and influence the financing terms offered.
Following recent instances of big businesses being found to have missed instances of fraud in their environments, banks will also look more favourably on businesses that have increased their security around invoicing. The encrypted exchange of information made possible by e-invoicing means that invoices are sent over secure networks as opposed to email, reducing opportunities for phishing and cyberfraud. E-invoicing systems track financial data, and enable a quicker response if there are any anomalies.
“Given the numerous benefits of adopting e-invoicing as part of a business’s digital transformation journey, it doesn’t make any sense to ‘wait and see’ when SARS starts to implement these protocols, as businesses will benefit from these systems, regardless” says Friedman.
“In an economic climate where everyone is seeking growth to help stimulate South Africa’s economy, it makes sense to adopt digital transformation opportunities that can only improve a business’s processes, and in turn, its success.”