Electronic invoicing: what it is and its challenges for SMEs in Europe

The digital transformation of businesses in Europe is well underway, and one major aspect driving this change is electronic invoicing (or e-invoicing). To promote efficiency, transparency, and tax compliance, the European Union is actively pushing for a unified e-invoicing framework.

For SMEs in Europe, this shift can be both an opportunity to innovate and a challenge to adapt. Discover the differences between electronic and digital invoices, the key benefits of adopting e-invoices, and how European SMEs can transition smoothly to this new system with innovative solutions.

What is e-Invoicing? 

Electronic invoicing, or e-invoicing, refers to the process of creating, sending, and receiving invoices in a structured, machine-readable digital format. Unlike traditional paper invoices, e-invoices are not simply PDF files or scans but are designed to integrate seamlessly with software like accounting or ERP systems. 

This structured format often uses standards such as XML, UBL, or EDI, ensuring that all required information (such as invoice number, payment terms, VAT details, and more) is readily accessible and verifiable without manual invoice processing. 

E-invoicing promises several benefits, including improved accuracy, increased compliance with tax regulations, and faster payment cycles. It’s an essential step toward digitization, but it’s important to note that it comes with legal and technical prerequisites. 

European laws regulating e-Invoicing 

Regulations surrounding e-invoicing vary widely across Europe, but the shift is guided by the overarching Directive 2014/55/EU, which mandates e-invoicing for government contracts across EU member states. Countries like Germany, Italy, France, and Spain are now enforcing e-invoicing requirements for B2B (business-to-business) transactions. 

Spain and the Crea y Crece Law 

Spain’s Crea y Crece Law mandates e-invoicing for all companies engaging in B2B transactions. Large companies are already required to comply, and SMEs will need to adopt it within the next few years, with exact dates varying depending on their size and turnover. 

Staying compliant with these mandates is not just about adopting a tool. Businesses must ensure their e-invoicing systems meet local tax authority requirements and handle evolving invoicing standards specific to their industry and region. 

Electronic Invoice vs. Digital Invoice 

The terms “electronic invoice” and “digital invoice” are sometimes used interchangeably, but they are fundamentally different in functionality and format. 

Digital Invoice:

• A scanned copy or PDF of a paper invoice. 
• Often unstructured, meaning data must be manually entered into accounting or ERP system. 
• Sent as an email attachment or uploaded online. 

Electronic Invoice (e-Invoice):

• Created and sent in a structured electronic format such as XML. 
• Integrated seamlessly into accounting software for automated processing. 
• Designed for error reduction, compliance, and smooth workflow. 

For SMEs, understanding these distinctions is vital. While digital invoices might be easier to generate, they don’t fulfill legal e-invoicing requirements or offer the full range of benefits that structured e-invoices provide. 

How does e-Invoicing work? 

The e-invoicing process typically follows these key steps: 

1. Invoice creation: the supplier creates an e-invoice using invoicing software that adheres to the required format (XML, UBL, etc.)
2. Transmission: the e-invoice is transmitted electronically to the buyer via secure networks. 
3. Validation: the buyer’s system validates the invoice against predefined criteria (e.g., VAT compliance, purchase orders)
4. Approval & Payment: approved invoices trigger automated payment workflows, expediting cash flow and minimizing delays. 

Key benefits of electronic invoicing system for SMEs 

• Improved efficiency: reduce time spent on manual invoice handling, increasing productivity. 
• Cost savings: eliminate paper, postage, and storage costs, leading to a reduction in invoicing costs. 
• Faster payments: automation accelerates processes, ensuring quicker payments. 
• Tax compliance: meet local tax authority requirements and avoid costly penalties. 
• Error reduction: minimize human errors through standardization and automation. 

What are the challenges of e-Invoicing for European SMEs 

While the benefits of e-invoicing are clear, the transition can be daunting, especially for SMEs that may not have the resources or technical expertise of larger enterprises. When adopting electronic invoicing, these are some of the main challenges SMEs might face: 

• Initial setup costs: procuring and integrating e-invoicing software can be costly upfront. 
• Compliance complexities: navigating country-specific laws and ensuring VAT compliance can be overwhelming. 
• Workflow adjustments: transitioning from paper-based processes to electronic systems requires retraining staff. 
• Customer and supplier resistance: some partners might still rely on traditional invoicing, causing delays in adoption. 
• Data security concerns: handling sensitive business data digitally requires strong cybersecurity measures. 

Understanding these challenges is the first step in overcoming them. With the right tools and strategies, SMEs can turn these challenges into opportunities for growth and innovation. 

How to transition to e-Invoicing? 

Transitioning to e-invoicing doesn’t have to be complicated, especially with solutions like fiskaly SIGN. In Spain, SIGN ES offers an efficient, secure solution tailored for European SMEs looking to adopt e-invoicing without the hassle of managing complexities, complying with multiple fiscal regulations. 

Why choose fiskaly's SIGN ES? 

• Compliance made easy: ensure your e-invoices meet the legal requirements according to Crea y Crece Law.
• Seamless integration: integrates smoothly with existing ERP and accounting systems. 
• Cost-effective: a budget-friendly solution for businesses of all sizes. 
• For all industries: whether retail, gastronomy, or crafts, our solution is suitable for all POS systems in all industries.
• 100% cloud-based: our solutions are in the cloud and will always be. Data security is guaranteed by our ISO 27001 certification.

Future-proof your SME with e-Invoicing 

The move towards e-invoicing is not just about compliance; it’s a strategic step in ensuring your business remains competitive in an increasingly digital market. By adopting e-invoicing, European SMEs can streamline their operations, reduce costs, and position themselves as forward-thinking enterprises ready to tackle the challenges of tomorrow.