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Why do I need an electronic invoice?

September 8, 2021

Andrus Kaarelson, CEO of Unifiedpost Estonia, explaining the e-invoices on the Estonian market and why the private sector should learn from the Estonian state.

I recently spoke to an entrepreneur who asked: why do I need an e-invoice? However, two years after the start of e-invoicing with public authorities, the entrepreneur should think about process innovation, which helps to save costs and make companies more efficient.

In 2019, the Estonian state wanted all providers of services and sellers of goods to sub-agencies to receive money only if they submit an electronic invoice (e-invoice). This forceful step significantly reduced the volume of paper and PDF invoices in Estonia. The share of e-invoices sent to the state jumped from 35% in June to 90% in July, and today, two years later, the share of business-to-government (B2G) e-invoices sent to the state is as high as 98%. Looking at the volume, about 30,000 e-invoices will be sent to the state during the month, even more in the last months of the year. The state has given a good impetus to innovation!

By the way, do you know when the first B2B e-invoice was sent in Estonia?

This happened in 2007, and so we have a history of 14 years in this area, which is not a small amount of time at all.

According to Unifiedpost, e-invoices account for about 40% of the invoices sent in Estonia, and they are mainly sent to state-owned companies. The share of e-invoices in our own customer base is even higher, 50%, and it is clear that large Estonian companies support the transition to e-invoices. Our invoicing solution for small and medium-sized enterprises, arved.ee, which can also be used to send invoices to the state, has almost 18,000 users.

The other half of e-invoicing should come from a settlement between private companies, but this is not yet the case. Why? First of all, it seems to some old-fashioned entrepreneurs that e-invoicing moving between companies' information systems is not a real invoice. They want to see an invoice in PDF format in the mailbox or even an invoice on paper, which can be picked up and signed when sending for payment. Others think that we have an accountant; after all, he enters sales invoices and checks into the computer, and that work is included in his salary. Why change anything?

We have examined whether the entry of purchase invoices is to the liking of accountants, and two-thirds have answered that it is not. I would venture to say that today, accountants do not want to see a large number of purchase invoices and checks on their desk, but rather on the computer screen. The perception of CEOs and CFOs, and accountants needs to change - we are moving towards digital governance, and the time spent on administrative tasks should be reduced. To automate the sending and receiving of invoices, one can select an e-invoice operator and make some adjustments to the accounting program. The company's accountant then deals with more substantive financial matters and management accounting and will be able to enjoy his position as a minor CFO.

We are talking about the efficiency of using e-invoicing, but what is it?

First of all, the invoice sent always reaches the invoicing environment automatically. It does not disappear, and this speeds up the flow of money - the recipient confirms on the phone or computer, and the seller receives the money on time.

Second, the cost of time. No one has to waste time entering or digitalising the invoice. It can take a total of half an hour or more to process one paper invoice; in the case of an e-invoice, we are talking about minutes.

Thirdly, the amount of money spent is certainly less, because information systems themselves send invoices from one system to another, and figuratively, only a small amount of money is spent on electricity.

The Estonian state has set the goal in the real-time economic development plan that by the end of 2023 at the latest, the use of e-invoicing has also become predominant in the private sector. And the private sector has to learn from the Estonian state and Scandinavian companies, where e-invoices are widely used and can be received in their company's financial information system.

What will the near future bring?

Already this fall, we will share innovations. An all-in-one platform is being completed that provides an overview of all incoming and outgoing invoices. It can be configured to suit your business needs and helps reduce administrative burdens - all invoices are in one place, digitalised, and shared with an accountant without the need for file platforms. Payment services for both sales and purchase invoices will be added soon.

Coming back to the title - why do I need an electronic invoice?

If it is sent by e-mail, it is an e-invoice! After all, a practical entrepreneur does not care what form an invoice is in. He wants to get paid for his goods or services as early as possible, efficiently, and without asking the customer if they have already received the invoice. To be able to do more work, to make more profit from the time and money saved, to develop the business, and sometimes to go home or deal with a hobby earlier. And in this direction, we are moving together with the Estonian state and Estonian entrepreneurs.

Take a look at how Unifiedpost Group can help with your electronic invoicing processes.

Explore our e-invoicing solution.

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