Hear from Andrus Kaarelson, CEO of Unifiedpost Estonia, and his insights into the real time economy and why millions of euros can be saved in the public and private sector.
Have you heard of the real time economy? A debt lever that will save hundreds of millions of euros in public and private sector savings? To put it simply: your company documents, invoices, receipts and financial statements are created and moved electronically "online", in real time. There will be a dramatic reduction in clumsy manual work, thus resulting in time and cost savings.
A full 83% of businesses surveyed by the Estonian Ministry of Economy in 2022, had heard of the real time economy and understood the value it can bring to their business in dealing with the government and improving reporting. For example, three quarters of companies would be happy if their annual report could be produced in real time "on its own". However, real-time taxation and data reporting to the government, the cost of implementing solutions and the lack of readiness of the business environment, were all cited as concerns.
We asked three questions at the Pärnu Accounting Conference in autumn. Firstly, do you ask your partners to send e-invoices? It was much better than expected to hear that 56% do. Secondly, we asked whether you have registered as an e-invoice recipient in the commercial register. 64% said yes, a super result! Thirdly, we asked whether customers are sent e-invoices and as many as 80% prefer to do so. On top of this, it is a well-known fact that accountants are the most in need of e-receipts, so far they have been entering the data manually.
These are very good results, and it seems that accountants from the most modern companies were present at the conference. Unifiedpost's customer base is about half 'real', or machine-readable e-invoices, but this number is not set to grow very rapidly after 2019. While there will be a flurry of paper and PDF-free e-invoicing with the government from 2019, this is not yet the case among businesses themselves. However, I believe that in the next three years, businesses will also start to e-invoice each other, so that they can focus on growing their business and at the same time increase efficiency instead of time-consuming financial processes. After all, in a recent survey by the Estonian Ministry of Economy, businesses themselves say that they estimate that nearly half of their administrative time is spent on manual support activities.
My estimate is that if 20-30% of large companies start to require e-invoicing from their suppliers, most of the companies will go along. There are already a number of companies in Estonia that are doing this - for example, Eesti Energia asked me, as a small electricity producer, to use e-invoicing.
Implementing a real-time economy with e-invoicing, e-receipting and automated reporting will lead to efficiency gains and cost savings in both the private and public sectors. The next steps should be for the state to develop an ecosystem for automatic reporting (tax office, financial inspectorate, statistical office, Eesti Pank), saving companies from a large and burdensome administrative burden. These steps also go hand in hand with a much-heralded green turnaround e.g. e-invoicing reduces the carbon footprint by 63-99% compared to paper invoicing! And by adopting real economy solutions, greenhouse gas emissions will be reduced by 27,000 tonnes per year.
Once all the ways to avoid manual work and make billing more efficient for businesses and governments are in place, millions of working hours will be saved. Put into monetary terms, hundreds of millions of euros of taxpayers' money are saved every year. The first €100 million a year will be saved by e-billing with the state, with hundreds of millions more on the table to be shared. This money needs to be picked up, metaphorically speaking, and the wider roll-out of business-to-business e-invoicing alone would save an estimated €100 million a year on top of what has already been saved. E-invoicing is also one of the most central areas of the real economy and one with the greatest savings potential.