How e-Invoicing is Addressing the Cash Flow Crisis

With approximately £55bn in unpaid invoices, it is apparent that there is a cash flow crisis for many UK businesses at present. Can e-Invoicing solve this?

During the production of our latest White Paper (“Improving Cash Flow and Service through e-billing and e-invoicing”) it became apparent that there is something of a cash flow crisis for many businesses at present. Most alarmingly, on our doorstep in the UK, we see that there is approximately £55bn ($91.5bn; 66.5bn Euros) held in outstanding or unpaid invoices.  No wonder so many businesses fail each year due to problems with cash flow.

Putting those costs into perspective, it’s reported that 2/3 of SMEs are suffering from late payment of invoices.  So this is a big problem.  Digging into the reasons for late payment doesn’t yield any surprises for those familiar with Accounts Receivable challenges, but we’ve captured some highlights in a recent infographic to highlight the role invoicing accuracy and processes play in this.

e-Invoicing to the rescue

The flip side of this cash flow crisis is the impact modern solutions such as e-invoicing can have on the process.  To quote Neopost (a Corcentric client), they were able to reduce DSO by 5 days after implementing electronic invoicing.  Similar, and sometimes more extreme, impacts are seen across every possible industry as e-invoicing is increasingly high-up the financial agenda.

Going back a few years, it was the pioneers – typically large enterprises with the most to gain – who implemented e-invoicing.  As the benefits have become more widely known, it’s not just market leaders who are taking advantage of the benefits, it’s broadly recognized that having the Accounts Receivable department licking and stuffing envelopes might not be the most efficient way of doing things.

The struggle to modernize Accounts Receivable

Still, whilst there’s a lot of talk and e-invoicing/e-billing is high on the agenda for many businesses, there is estimated to be just 15-40% uptake in the UK depending on which industry you consider.  However, with a 17% increase in the volume of invoices send electronically in 2015, this is fast changing.

Given that, for any successful business, the vast majority of departments and their processes have modernized significantly in the last decade or two, it seems incredible that Accounts Receivable suffer outdated invoicing processes in so many cases.  Many of our clients see the gains in efficiency, having their AR teams focus on more proactive and profitable work, to be one of the biggest drivers for deploying e-invoicing.

Something is clearly holding businesses back though, with the benefits of e-invoicing and e-billing clear for all to see, why isn’t this being rolled out by every business right now?  One of the main reasons may be the sensitive nature of the credit control process seems too delicate to change for some – “if it ain’t broke, don’t fix it” mindset.

The decision to modernize invoicing processes comes with a number of factors to consider, so choosing the right type of e-invoicing process and supplier is crucial for success.  You can see an appraisal of the most popular models for e-invoicing, as well as considerations to make when ‘going paperless’ in our “Improving Cash Flow and Service through e-billing and e-invoicing” white paper.

It’s clear that e-invoicing can dramatically improve cash flow and therefore improve the health of any business.  And it’s a great time to implement e-invoicing as a strategic advantage in an increasingly competitive world.  Perhaps it’s time to explore e-invoicing further and find out what those in the know, know.