In a nutshell, an e-invoice is a paper-free invoice that is stored and sent digitally. It’s just as legally valid and significant as traditional, paper-based types of invoice, but it can be much cheaper and easier to process.
In order for an e-invoice to be valid though, it must contain the correct data and it must be verifiably authentic. The invoice should be compliant, should clearly state the goods or services received, and be executable based on the payment terms set up with the seller before the transaction.
Just like with paper invoices, it’s recommended to hold onto electronic invoices for a certain period of time. HMRC recommends keeping both e-invoices and paper invoices for at least 22 months if you’re an individual, 5 years if you’re self-employed and 6 years if you run a company¹.
The system you’ll use for e-invoicing depends on your company size, business volume, and number of suppliers. For smaller businesses, there are lots of user-friendly, affordable invoicing solutions and even apps available.
For example, you can start sending electronic invoices using your accounting software, such as QuickBooks, Sage, Xero or FreshBooks. Payment processors such as Square, SumUp or Zettle also offer e-invoicing capabilities.
Other options include apps and software such as:
- Zoho Invoice - a popular cloud-based invoicing application for small businesses, with extensive capabilities
- InvoiceBerry - an invoice builder app geared towards micro businesses
- KashFlow - a UK-based accounting app with the capability to link directly to HMRC
- Zervant - an invoicing app for small businesses and entrepreneurs
- Tradify - job tracking and invoicing software specifically for tradespeople.
One important thing to consider when choosing an e-invoicing system is compliance. For example, if your company sends and receives VAT invoices, you’ll need to ensure your electronic invoicing methods adhere to HMRC’s rules².
E-invoicing is a smart idea for a lot of reasons, starting with the ability to automate tasks. Where paper invoices have to be processed manually through accounts payable systems, this can take a lot of time. There’s also a high risk of human error, along with the potential for paper invoices to be lost.
By using an electronic invoice system, companies can save an enormous amount of admin time and money. Plus, they can improve the accuracy of their accounts.
Other benefits of e-invoicing include:
- Increased ability to analyse spending and contract performance
- Faster payment cycles
- Enhanced tracking
- Ease in dispute mitigation
- Opportunity to find more supplier discounts and rebates
- Better auditability overall
- Ease of access to data
- Environmentally friendly - through reduction of paper use.
Your first step to e-invoicing depends on your company size, business volume, and number of suppliers. If you’re a larger company, you’ll need to put some time into assessing your needs and finding a system (usually rolled in with larger accounting software packages) that offers the capabilities you need.
But for smaller businesses, freelancers and the self-employed, it could be as simple as choosing e-invoicing software. Many of these are relatively inexpensive, but make sure you check features as well as the monthly cost when comparing solutions.
For example, consider the following:
- Option to create customised invoices
- Currency limits and billing for international clients
- Ability to create estimates and convert quotes to invoices
- Payment methods, including credit cards
- User-friendliness - how long does it take to create and send an invoice?
- Invoicing apps - whether you can send invoices on the move from mobile devices
- Generating reports, analysis and insights.
One of the key benefits of e-invoicing is facilitating international trade. By invoicing electronically, your company can more easily interact with overseas clients. It can essentially eliminate the language barrier, by using a uniform template structure that’s automatically recognised by e-invoicing systems.
It also means neither supplier nor customer are faced with sending important documents such as invoices through international mailing systems. This can be an expensive process that can take weeks or even months, depending on where the documents need to go and the reliability of that region’s postal service.
However, not all electronic invoicing systems score highly when it comes to accepting payments in multiple currencies. This is an important thing to check when choosing an e-invoicing solution, particularly if your company regularly trades internationally.
Whatever method you choose for sending electronic invoices, you’ll need to find the most cost-effective way to get paid. If you plan to use e-invoicing for international clients, this means getting paid without losing a small fortune to currency conversion fees and poor exchange rates.
Use a Wise multi-currency account for business and you can accept payments in the client’s local currency - without high recipient or conversion fees. You’ll get an IBAN or other international account details to use for a choice of countries, but without the need to open an actual bank account there.
Plus, all currency conversions will be done at the real, mid-market exchange rate, without the expensive mark-up that banks usually charge.
You can also use your borderless Wise Business account to pay invoices with the real exchange rate in 70+ countries, using the handy Wise mobile app. This could work out as much as 19x cheaper than PayPal.
Sticking with paper invoicing for now? Download a handy Wise invoice template here.
And that’s pretty much it - all the essentials you need to know about e-invoicing in one handy guide. We’ve covered how it works, the benefits for business and how to get started, plus how you can use a combination of e-invoicing and international transfer specialists like Wise to save money on overseas billing.
You should be all set to send your first electronic invoice, and start saving your business both time and money.
Sources used for this article:
Sources checked on 28-June-2021.
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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