News & Insights

E-invoicing: a game changer for SMEs

Many European Union (EU) countries are introducing mandates for business-to-business (B2B) e-invoicing, following the lead of Italy which did so in 2019. For example, mandates will come into force in both France and Belgium in 2026. As a result, small and medium-sized enterprises (SMEs) will be required to use software solutions for e-invoicing. This creates significant potential for e-invoicing providers such as vendors of accounting software, order-to-cash/procure-to-pay software and enterprise resource planning (ERP) software. 

Data availability and accessibility fuels embedded lending

Delivery, invoicing and payment are decoupled in time in B2B trade interactions, with payment typically due after 30 days. This can create cashflow problems for sellers, for example in sectors with seasonal demand. Therefore, effectively managing working capital is one of the most pressing concerns for SMEs. 

Financing solutions such as factoring and supply chain finance can help SMEs to manage their working capital needs to some extent. These traditional financing solutions – which are more relevant for the sell side of the business – also present significant disadvantages for SMEs. For instance, access to factoring and supply chain finance is often limited due to complex creditworthiness assessments and high fees. Additionally, these solutions require substantial administrative effort and can lead to a loss of control over the SME’s relationships with buyers and suppliers.

The increased availability of standardised data resulting from e-invoicing offers a promising opportunity to address these disadvantages with embedded lending (see figure). After all, e-invoicing improves the authenticity of invoice data – particularly in countries like France, where government-certified e-invoicing providers (PDPs) must be used. Additionally, new relevant data will become available, including invoice status (accepted/rejected), payment status (approved, paid), transaction history and customer preferences. 

Individual invoices can become high-quality collateral when there is minimal uncertainty about their existence and payment status. To facilitate embedded lending, this ‘golden data’ obtained from e-invoicing providers can be leveraged for risk assessments, for example.

Traditional players need to redefine their position and offering 

Ultimately, SMEs will seek the most convenient ‘one-stop-shop’ solution for e-invoicing – one that encompasses all services related to B2B interactions, including contracting, ordering, shipping, invoicing and payment (see figure). As the opportunities for embedded lending grow, e-invoicing providers are well placed to expand their financing options beyond traditional solutions, and offer SMEs improved solutions for managing working capital for both the sell side and the buy side of their business. Meanwhile, traditional financing providers such as banks and factoring companies will thus be facing increased competition. This could disrupt their existing relationships with SMEs. 

To remain competitive, traditional players should consider the following actions: 

1.Explore strategic partnerships

Identify potential collaborations with e-invoicing providers to enhance their relevance, value add and reach to SME clients. E-invoicing providers benefit from this strategic partnership as it provides opportunities to become the one-stop-shop solution for their customers, by seamlessly integrating lending propositions into their software solutions. 

2.Improve financing products

Innovate existing creditworthiness assessments and minimise the administrative burden for SMEs to onboard for financing products.

3. Expand their role in the ecosystem

Consider diversifying their role in the e-invoicing ecosystem to strengthen their position in SME financing. For example they could move beyond strategic partnerships and establish themselves as an e-invoicing provider.  There are numerous examples of banks that are integrating e-invoicing solutions through M&A or strategic investments (e.g. Credit Agricole & Kolecto or BPIFrance & iPaidThat). 

Are you curious about how e-invoicing can unlock new opportunities in embedded finance and payments? Reach out to Mounaim Cortet and Jorrit Penninga to learn more.