What Are The Risks of Delaying The Switch to E-invoicing?

by | Jul 29, 2024 | E-invoicing

Delaying the switch to e-invoicing can expose companies to several risks from a compliance perspective. Let’s dive into the topic to understand the importance of implementing an electronic invoicing system.

At SPS Commerce, we encourage companies to digitalize their document exchanges, but why? Because companies are facing 7 recurring risks when using traditional paper invoices. Let’s have a closer look at those risks to better avoid them.

Regulatory Penalties and Fines

First reason is the one that hits the wallet: fines for not being compliant are usually the most severe penalties. We have here 2 use cases that can lead to extra payments:

Non-Compliance Penalties: Governments worldwide are increasingly mandating e-invoicing to improve tax compliance and reduce fraud. In fact, Europe already counts many countries with mandatory e-invoicing rules. Non-compliance can result in hefty fines and penalties.

Interest Charges: Delayed or incorrect tax filings due to manual invoicing processes can attract interest charges on unpaid taxes.

Operational Disruptions

Second reason is human related. As they are more prompt to make mistakes, it can lead to operational disruptions and delay the whole invoicing process. Also, it is highly recommended to switch to e-invoicing the earliest possible, and this to avoid:

Last-Minute Scramble: Companies that delay the transition to e-invoicing may face a rushed implementation process when regulations become mandatory. This can lead to operational disruptions and increased costs.

Audit Challenges: Manual invoicing can make it difficult to maintain accurate records, leading to challenges during audits and potential legal issues.

Competitive Disadvantage

Because yes, your competitors are most certainly switching or already using e-invoicing methods. If you fall behind, this can lead to:

Efficiency Gaps: Competitors who adopt e-invoicing early can streamline their processes, reduce costs, and improve cash flow, gaining a competitive edge.

Market Reputation: Customers and partners may prefer to work with companies that demonstrate compliance and efficiency through e-invoicing. The relationship with business partners who are already using e-invoicing solutions are also going to be privileged.

Increased Operational Costs

In regard to competitive advantages, it also saves your company money, for 2 main reasons:

Paper-Based Processes: Continuing with paper-based invoicing incurs higher costs for printing, mailing, and storage. All of those costs would be eliminated with e-invoicing.

Error Management: Manual invoicing is prone to errors, leading to additional costs for error correction and dispute resolution.

Security and Fraud Risks

Did you know that most supply chain attacks occurs through e-mail exchanges? Automating your document processes is also securing your processes!

Data Breaches: Manual handling of invoices increases the risk of data breaches and fraud. E-invoicing systems often come with enhanced security features to protect sensitive information.

Fraudulent Invoices: Delayed adoption of e-invoicing can leave companies vulnerable to fraudulent invoices, which are harder to detect in a manual system.

Missed Financial Advantages

If your invoices are not automated, you will most certainly lose money because of:

Delayed Payments: E-invoicing speeds up the invoicing process, leading to quicker payments. Delaying the switch can result in slower cash flow and missed early payment discounts.

Inefficient Use of Resources: Manual processes require more human resources, which could be better utilized in strategic areas of the business.

Technological Lag

Finally, none wants to be behind in 2024, especially not in technology!

Outdated Systems: Companies that delay e-invoicing adoption may find themselves lagging behind in technology, making future transitions more challenging and costly.

Integration Issues: Late adoption might require more complex integrations with existing systems, leading to additional implementation challenges. The earlier you prepare, the smoother the transition.

All those risks are intertwined and can be mitigated through the implementation of e-invoicing. Having a 100% digitalized supply chain makes the difference, check out our customer cases.
Still not convinced? Contact one of our e-invoicing experts to understand better how SPS Commerce can help you.

Aleksandra Vovchenko
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