An ACCA report investigates the relationship between e-invoicing and SMEs’ access to finance
This report is based on data from a sample of 20,000 UK businesses and nearly 3,000 loan and overdraft applications, as recorded by the independent SME Finance Monitor.
It updates and expands ACCA’s 2012 estimates of e-invoicing adoption among UK SMEs, and investigates the relationship between e-invoicing and SMEs’ access to finance.
This report has improved greatly on ACCA’s 2012 calculations of e-invoicing adoption rates among UK SMEs.
Although its headline estimates remain closely aligned to Eurostat’s, it sheds much more light on adoption rates among very small businesses, the probable determinants of e-invoicing adoption, and the probable volumes of invoices sent by adopters in different sectors and regions.
It also provides the most accurate snapshot of e-invoicing adopters’ characteristics, resources and behaviour possible for the UK SME population.
Since 2011, e-invoicing penetration among UK SMEs has increased steadily and significantly, led by businesses with 10 to 49 employees.
The total turnover of SME e-invoicing adopters grew by 67% per annum in 2013 alone, reaching 12% of the SME sector’s entire volume of sales.
This is mostly owing to increased e-invoicing penetration, with an estimated 90,000 SMEs newly embracing e-invoicing in 2013 alone.
True e-invoicing adoption is, of course, still eclipsed by the vast numbers of UK SMEs that send unstructured invoices electronically, or email simple .doc or . xls invoices.
In sectors dealing mostly with individual consumers, this is unlikely to change much in the future. Yet due to growing penetration, the collective turnover of true adopters is rising three times as fast as that of ‘low-potential’ adopters.
For the first time, this report has been able to investigate in depth the effect of e-invoicing on SMEs’ access to finance.
Findings suggest that, while e-invoicing does not account for much of the advantage adopters appear to have when seeking finance, it does make access to alternative sources of finance (including invoice discounting and specialist export finance) significantly easier, particularly for smaller SMEs.
E-invoicing is still nowhere near dominant among UK SMEs; there is still no region in the UK where adopters account for more than one-fifth of SME turnover, and no sector in which they account for more than one-quarter.
The report hints at some of the influence of government policies; in Wales, for example, local councils’ intentions for adopting e-invoicing could be driving adoption rates.
Similarly, a significant bias towards e-invoicing adoption by firms just below the VAT threshold suggests that compliance concerns can be as much a driver as a barrier for e-invoicing penetration.
Much of the untapped potential for increasing penetration among SMEs may lie with the providers of key enabling technologies; this report has documented, for instance, the very close (and not entirely surprising) correlation between online business banking, online sales and e-invoicing adoption.
Much potential also lies with government and major corporates, but some also lies with SMEs themselves; businesses that are better at making the business case for innovation and rolling out internal policies generally find adoption easier.
Without appropriate professional advice, adoption rates could plateau once most of the best-prepared SMEs have been brought on board.