SME e-Invoicing Adoption in Europe: Pt 2

The Role of Service Providers

One of the biggest complaints about B2B and perhaps true in the early days is that this method is too expensive for small and medium companies, and that these B2B programs were all driven by larger customers who essentially left their trading partners with little choice about participating.

I’m not sure that the statement is 100% accurate. It is true to say that some companies initiate their e-Invoicing programs with a ‘mandate’ to their suppliers that they must use a certain tool, or service provider, however I can also give plenty of examples where large companies offer their SME suppliers a range of different solutions, and incentivise their suppliers through early payment (if electronic), or supply chain finance. It is also true to say that this method has been the most successful to date in increasing e-Invoicing adoption.

However, the world is changing. Not all service providers are aimed at large corporate customers; many are now focused on providing solutions that specifically target the SME market, including the major accounting solution providers. But these solutions need to be able to connect SMEs to their larger customers. In the majority, SME solutions are commercial; an SME could face an up-front investment of anything from €50.00-€3,000 depending on the complexity of the solution and process. But the transaction fees will be less than the price of a stamp, and given enough time and volume – the system will pay for itself. Commerce in action.

Why should an SME pay to e-Invoice? Each of these solutions has been researched, developed and offered to the market by private enterprises. Each solution has involved a level of investment, and therefore requires a return on that investment in some shape or form. There are some solution providers who claim ‘free’ e-Invoicing for SMEs. In many cases, the large buyer pays so that SMEs adopt quickly but my personal thoughts are clear: Somewhere, somehow… somebody pays (even if through taxes) and it is well to remember Zuckerberg’s quote, “If you’re not paying for the product, you are the product”. Others disagree.

Of course SMEs can engage in electronic invoicing by themselves. A recent report from Sage France highlighted that the majority of SMEs in France are currently sending e-Invoices via email as PDF attachments. This is both encouraging and disheartening at the same time. It is a positive thing that these companies have thought to remove paper from the process, but essentially a PDF is ‘digital paper’ – in that it does not contain structured data that can be easily imported and processed through their customer’s systems. In fact, many companies that receive these PDFs print them to paper… and as we discussed in my previous post, innovative service providers are now offering solutions that can extract data from modern PDFs.

Another factor to consider in the PDF scenario is tax compliance. Under the new rules in Europe, it is still unclear as to whether this method meets the requirements of 2010/45/EU as implemented by each member state. Do SMEs care? Probably not, it is doubtful they examine the intricacies of doing business electronically – they just do it, but this can have tax and process consequences for their customers.

This leads me to another complaint I hear about service providers. They confuse the e-Invoicing marketplace on tax compliance and use ‘scare tactics’ to win business. It’s a perspective I guess, but not one that I subscribe to, much of my life is spent assuring my customers that they and their suppliers, will be tax compliant if they use our solutions. The hardest part of this is interpreting the current rules over every 27 member states and working with tax consultants to ensure certainty in tax matters. Far from confusing the landscape, I think that the majority of service providers work very hard to provide clarity – and to ensure their customers meet the expectations of tax authorities.

How networks interoperate has been a topic of discussion for years, with telecoms being an historical example, but the interoperation of B2B networks is more challenging due to the complexity of processes, standards and tax regulation. Service providers are coming together in industry associations and working to ensure challenges around the interoperability of networks is overcome.

Another set of service providers that should not be overlooked is banks. While some have attempted to enter the B2B market selling to corporates they have met with varying levels of success. But all SMEs have banking relationships, so can banks leverage this relationship further? In the Nordics banks are very successful in consumer e-Invoicing, as direct debit is not widely used and a consumer can log into their on-line bank account, view and pay their bills. This model could potentially be used across the B2B SME community and banks could also have a larger role to pay in early payments through different supply chain finance models.

It seems to me that B2B service providers are providing valuable services and solutions that help companies to do business electronically. Essentially, a service provider ‘does what it says on the tin’ – it provides a service, which, if it does not provide value, will not be purchased. This is how commerce works and how private individuals acquire wealth by starting their own companies.

I think this is important to understand; within the European Union there are moves to fundamentally alter the way that business is done electronically. The European Commission has invested €millions into large scale pilot programs that compete with private companies in the B2B space with a value proposition that is ‘free’ (again, nothing is free, your tax Euros are funding it).