If paper invoices were to be replaced with electronic ones, Brussels estimates a potential for around €40 billion in savings per year across the European Union.
The savings would be made mainly due to lower paper consumption, elimination of postage cost and better automation of bureaucratic practices.
EU Commission Vice-President Antonio Tajani, in charge of industry and entrepreneurship, said "e-invoicing will boost the overall competitiveness of European companies, especially SMEs" by "revolutionising the way we pay bills".
"E-invoicing has the potential to make a big difference, for businesses, consumers and European trade as a whole," said Internal Market Commissioner Michel Barnier, highlighting "the benefits in terms of saving time and money".
In a communication published yesterday (2 December), the European Commission points out that a massive uptake of e-billing could also have a positive environmental effect by lowering CO2 emissions linked to mail transportation, with overall reductions of one million tonnes per year, according to EU estimates.
Low market share
However, electronic invoices still represent a minor share of total invoices exchanged in the EU, with a penetration rate ranging from 3% to 30% according to the member state, with an EU average of just 5%.
It is estimated that only one million of the 23 million companies operating in the EU use e-invoicing.
The Commission harbours ambitious plans to reverse this trend and wants to make e-billing the most popular method of invoicing in the EU by 2020, in line with a number of other pro-innovation initiatives.
The Commission says it is crucial to involve in its drive public authorities and small and medium-sized companies (SMEs), which represent 99% of all EU enterprises but are also less inclined to switch from paper to virtual invoices.
Public bodies turn virtual
If public administrations massively switched to electronic invoices, the overall impact on the economy would be huge, argues the Commission, as it would force large and small companies to adapt to electronic standards.
In some EU countries, governments have committed to make e-invoicing compulsory in public administrations, such as Italy, Finland and Denmark. In Sweden, an e-procurement system is already fully operational in public administrations.
Other national governments are working on similar e-billing initiatives, while at EU level, the European Commission has launched the PEPPOL initiative (Pan-European Public Procurement On-Line), which sees national administrations cooperate to promote electronic communication between enterprises and public authorities.
To encourage national e-invoicing initiatives, the Commission is requesting member states to set up e-invoicing fora to debate and exchange best practices.
Getting SMEs on board
To make e-billing the common standard, it is crucial to involve SMEs, which are currently prevented from using e-invoices by a number of legal, technical and financial hurdles.
"The cost of acquiring the software or hardware, as well as of the transactions conducted by electronic means, should be guaranteed at an affordable price," underlines the association of SMEs specialised in standardisation (Normapme).
To overcome these, the Commission suggests increasing the interoperability of different solutions. Small companies tend to work with many different suppliers and clients, who may require them to use e-invoicing with different standards.
"The development of interoperable processes and standards along the supply chains, including e-invoicing, will facilitate mass adoption by SMEs," reads the Commission communication.
Legal obstacles also result from varying e-invoicing rules from one member state to another, for example advanced electronic signatures, which do not follow common standards. This represents a serious disincentive to operate cross-border, especially for small companies.
The Commission sees the transposition of the revised directive on VAT as an opportunity to harmonise e-billing rules. The revised text asserts that companies should be free to exchange e-invoices provided that they maintain "business controls which create a reliable audit trail between an invoice and a supply of goods or services".
National authorities "will no longer be allowed to add specific requirements, such as insisting that e-invoices be based on advanced electronic signatures," says the Commission paper. The EU executive also plans to review the E-signature Directive to facilitate cross-border recognition.