What is the Impact of the Mandatory B2G e-Invoicing on B2B Transactions?
Every year, around 14% of GDP is spent by public authorities in the EU. In the most significant sectors such as energy, transport, waste management, health, and education services, some of the key buyers are from the public sectors. Most of the “big players” are also the major suppliers of the public sector (around 70%). This, along with coherent transactions, was one of the main reasons governments in various parts of the world have been pushing to make e-invoicing mandatory. And now, as many of you already know, numerous companies all over the world are working towards achieving higher levels of interoperability and improved trade conditions by becoming compliant with the new B2G e-invoicing regulations in their respective countries. But that’s not all.
We can see that both governmental entities and companies have started moving towards introducing digital B2B transactions. According to CEF Digital (2021), 26 countries, including 23 member states, have deployed an e-invoicing B2G solution, which allows them to exppand to B2B in the future. This is no coincidence. This is how it works in a competitive business environment – every company wants to gain an advantage. Today’s businesses know that they can get a head start if they decide to automate their supply chain processes. Getting an e-invoicing platform is one of the ways to do it.
What does B2G e-invoicing mean for B2B transactions?
The benefits of B2B e-invoicing are commonly known. They include fewer human errors, higher-quality data, increased business efficiency, and complete transparency in processes and business relationships — no wonder why more and more companies are interested in B2B e-invoicing.
The impact on B2B transactions can already be seen in countries where the B2G document exchange is mandatory today. Providing access to an electronic portal for public administration procurement already gives companies a chance to think of how it pays off, which convinces them to implement e-invoicing for B2B without paying attention to any specific obligations.
For example, 2020 showed that there is a growing need among today’s companies to develop paperless supply chain processes; thus, the number of electronic B2B transactions has started to grow. When governments saw the benefits of B2G e-invoicing, they started the debate on how the introduction of B2B platforms can be beneficial for the entire document exchange experience. The best example of a country that gains benefits resulting from the mandatory B2G e-invoicing (as well as the non-obligatory B2B document exchange) is Latin America, where the implementation has helped more than 4 million micro-enterprises to grow and improve the accuracy of tax reports.
Another big movement moving us towards interoperable digital transactions is PEPPOL. A common format like EN 16913 has caused many companies to adopt one global e-invoicing standard and get into eProcurement. Currently, there are 379 Open PEPPOL members in 34 countries. PEPPOL is slowly going global, being introduced in countries such as Australia, Singapore, and Malaysia. The open network is used to promote one common format and digitalization in B2B transactions, creating an incentive for building a single digital market.
B2G e-invoicing – how does it work in European countries?
One of the first countries to adopt B2G and B2B e-invoicing (now moving towards B2C) was Italy. In May 2014, B2G became mandatory for all administrations. Only three years later, B2B became mandatory for taxable persons. In 2019, however, both B2B and B2C became an obligation in the country, giving an example to other European countries on how to introduce e-invoicing at scale. This has increased state revenue by 2 billion euros in the past year.
Furthermore, there has been an increase in B2B orders, thanks to companies adapting to digitalized processes. Thus, the adoption of e-invoicing in Italy for B2G, B2B, and B2C has had a massive impact on the digitalization of other processes that are part of the supply chain and procurement activities. In 2020, Italy also introduced mandatory electronic orders for the public administration in the healthcare sector.
But it is not just Italy that has changed in terms of how electronic documents are exchanged. Spain and Finland have fully adapted to B2G e-invoicing, while Germany has made B2G e-invoicing mandatory as of 28th November of last year, enhancing collaboration between sectors, improving procurement, and giving an example to other member states.
What does it all mean?
With the development of electronic document exchange processes and the growing need for a more unified procurement network, today’s companies think of e-invoicing as an opportunity to improve their business efficiency and reduce costs. With B2G e-invoicing becoming so popular, we’re convinced that B2B regulations will follow, as not only will this help improve communication between trading partners, but it will also lead to new, previously unavailable business opportunities.