Electronic Invoicing in the UK Public Sector, post Brexit – how close are we to achieving a digital government?
It has been over 4 years since the UK Government’s enquiry into electronic invoicing (‘e-invoicing’) in the public sector, and the report that was published shortly afterwards. But where are we today? Are the benefits to e-invoicing fully understood? Have the enquiry’s recommendations been implemented by policymakers to encourage greater adoption in the UK public sector? Has the Government delivered on its promise to support SMEs, stimulate economic growth throughout the regions, and champion the UK as a global leader in digital governance?
As Stephen McPartland, the MP responsible for the enquiry, said at the time: “Electronic invoicing could save the public sector and its suppliers a minimum of £2 billion per annum, by streamlining UK government administrative processes at a stroke. By enabling government to use its immense purchasing power, e-invoicing could open up new markets throughout the country and help drive innovation and economic growth.”
The good news is that McPartland’s rallying cry appears to have been heard. One of the biggest electronic invoicing initiatives – the implementation of an interoperable, common standard for public sector trade in Europe – is set to come into effect in April 2019, and is set to be rolled out, or, at very least, replicated across the UK, post Brexit.
While the UK still has some way to go to match the most efficient countries, in the use of e-invoicing in the public sector, there is no doubt that we live in a country that is increasingly driven by digital innovation. Where efficiency and productivity benchmark new standards and expectations for many organisations, the public sector appears to have followed suit. In fact, in some cases, the public sector currently appears to be moving and innovating at the same pace, if not quicker than the private sector.
Prompt payment at the heart of digital transformation
We have seen a significant growth in e-invoicing in the UK public sector and it’s easy to understand why. Both suppliers and buyers save time and the associated costs, while the average days payable outstanding (DPO) reduces through the efficiency gains; users across Government are seen to be ‘walking the walk’ with their Prompt Payment Code targets.
Originally conceived in 2015, the UK Government’s biggest suppliers signed up to a strengthened Prompt Payment Code in July 2017, with the aim of helping small businesses to be paid on time. 32 of the government’s biggest suppliers voluntarily committed to pay 95% of outstanding invoices within 60 days of being submitted – and agreed to work towards adopting 30 days terms as the norm.
Undoubtedly, the PPC and the European eProcurement Directives on Public Procurement, Utilities Procurements and Concessions Contracts have helped to provide a focus for an increased pace of change in the UK public sector; and the likes of Account NI and the Scottish Government have already embraced the opportunity to drive efficiencies and meet their PPC obligations.
Without doubt, prompt payments support economic growth by supporting the longevity and growth of SME’s and increases the chances of them participating and thriving in public procurement. Earlier this year, the first edition of the UK Government's new ‘name & shame’ report on late supplier payments was published. While no public sector organisations made the list, some of the Government’s biggest suppliers did. Reports estimated that the UK’s small and medium-sized enterprises (SMEs) are collectively owed more than £26 billion in overdue payments.
While many organisations appreciate the problem of late payments, and the knock-on effects it can have on their supply chain; many are still hamstrung by their current systems, practices and processes, and struggle to make any changes in the short or medium term that could help to erase late payments. This is a global problem, but there are simple solutions out there that could provide a solution.
Could PDF e-invoicing be the solution?
Let’s start with the basics, e-invoicing is an automated process of submitting and processing an invoice in a digital format. Integrating the supplier’s accounts payable (AP) solution with the buyer’s accounts payable (AP) solution for exchanging invoice information electronically, in an automated way.
Using e-invoicing to connect organisations and enabling them to trade electronically is a modern, innovative solution to late payments, as well the paper problem. It’s been estimated that paper consumption per office worker ranges between 10,000 & 20,000 sheets a year, with a higher figure likely for accounting and finance industries. Organisations can save 1-2% of turnover by replacing paper invoices with electronic invoices and optimising their supply chain.
The public sector is no different, however, any e-invoicing solution needs to be as simple as possible for a supplier to use, if we want to ensure high adoption. Historically, this has not been the case, and, as a result, supplier participation has been impacted. However, recent technical advances have enabled more and more public sector organisations to connect and trade electronically.
To ensure a standard approach and high adoption, the UK public sector needs to adopt an approach to e-invoicing that is non-disruptive to suppliers. An approach that takes advantage of methods and tools, which are already ubiquitous and second nature to every organisation - PDF invoicing.
There are many organisations around the world that have realised the benefits of PDF e-invoicing. But it’s clear that high adoption of the suppliers that matter is one of the most important factors to a successful public sector e-invoicing project. The more electronic invoices your organisation receives, the less paper remains in your back office. The quicker you can get your suppliers on-board, the sooner you can pay them. The sooner you pay them, the more likely they are to trade with you, and the foremost barriers facing SMEs in public procurement disappear.
There is no doubt in my mind that e-invoicing can still deliver significant benefits to the UK economy and the benefits can be shared with both suppliers and buyers of all sizes. So, let’s take Stephen McPartland MP at his word and adopt innovation to increase productivity. The early adopters have embraced e-invoicing and are moving their organisations forward, with the resources they have released. It’s time for everyone else to follow with confidence. You are living in the past and you will be left behind, if you don’t.
This article was published by FinExtra.