HMRC have released a research paper, ‘Electronic invoicing: Quantitative research into small and medium-sized enterprises’ usage and attitudes’. The analysis found that only 59% of SMEs were broadly familiar with e-invoicing as a concept.
HMRC undertook the analysis, prepared by IFF Research, to help design and deliver an e-invoicing policy that accounts for Small and Medium-sized Enterprise (SME) competitive needs.
An electronic invoice (e-invoice) is an invoice issued, transmitted and received in a structured format. This allows for automatic electronic processing, providing easy access to transaction and tax information. E-invoicing systems can integrate with accounting software, making it easier to manage and access financial records and submit accurate tax returns.
Findings
How many SMEs understand what an e-invoice is?
- Around three-fifths (59%) reported that they were familiar with the definition of e-invoicing used in this research.
- Of those surveyed, a higher proportion of medium-sized businesses were familiar with e-invoicing compared to smaller companies (70% vs 58%).
- A higher proportion of surveyed SMEs in the manufacturing and construction sectors were not at all familiar (33%) compared to the other sectors analysed.
What is the prevalence of e-invoicing use in the SME population?
- Despite a large proportion of respondents indicating that they understood what e‑invoicing was, only 29% used it.
- Of those surveyed, a higher proportion of medium‑sized companies used e‑invoicing compared to smaller companies (36% vs 29%).
- Of those surveyed, fewer SMEs sent e-invoices (15%) than received them (24%), with only 10% of SMEs reporting both sending and receiving e-invoices.
For SMEs not using e-invoicing, what systems do they currently use?
The most common invoicing method used by SMEs for both sending and receiving invoices was PDF or email, followed by paper or physical mail.
- PDFs or emails were the most commonly used method of both sending (95%) and receiving (98%) invoices.
- The second most commonly used invoicing method was paper or physical mail. The proportion of SMEs receiving these (78%) was considerably higher than that of those sending them (36%).
- Among those surveyed, a higher proportion of SMEs in the transport, retail and accommodation sectors sent paper invoices (47%), compared with the manufacturing and construction sectors (31%) and the business services sector (28%).
Software
On a positive note, HMRC reported that only 5% of SMEs said they did not use any accounting software. Of those that did, the most common software used was Sage (48%). The ‘Other’ category includes 89 other accounting software types.
Of those surveyed, a higher proportion of SMEs in the manufacturing and construction sectors (9%) did not use any accounting software compared to the transport, retail, and accommodation sectors (3%).
Follow-up qualitative research will be conducted by an external contractor to further understand perceptions of e-invoicing.
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E-invoicing consultation
HMRC and the Department for Business and Trade (DBT) have launched a consultation, 'Promoting electronic invoicing across UK businesses and the public sector'. Views are sought on standardising electronic invoicing and increasing its adoption in the UK.
External links
HMRC Research and analysis: Electronic invoicing: Quantitative research into small and medium-sized enterprises’ usage and attitudes