Mandatory e-invoicing for SMEs: What does this mean for my company?

In Germany and the EU, electronic invoicing is becoming increasingly important. Small and medium-sized enterprises (SMEs) in particular must prepare for new requirements, as mandatory e-invoicing will soon affect them as well. The obligation to use e-invoices is intended to standardise invoicing, make processes more efficient, and prevent tax fraud. But what does mandatory e-invoicing specifically mean for SMEs? This article provides a comprehensive overview of the requirements, legal framework, and benefits of e-invoicing.

What is an e-invoice?
An e-invoice is an invoice issued, sent, and received in a structured electronic format so that it can be processed automatically by IT systems. The data is transmitted in formats such as XML or ZUGFeRD, which enable automatic capture and further processing.

Legal basis for mandatory e-invoicing
EU Directive 2014/55/EU (source) stipulates that public contracting authorities must be able to receive and process e-invoices. In Germany, this directive was implemented through the Ordinance on Electronic Invoicing (E-RechV). Since November 2020, companies working with public bodies have been required to use e-invoices. In addition, the Federal Ministry of Finance has announced that e-invoices for B2B transactions could become mandatory from 2025.

Why mandatory e-invoicing?
The aim of mandatory e-invoicing is to increase transparency in accounting and prevent tax fraud through the digitalisation of financial processes. Because e-invoices are machine-readable, they can be checked and processed more easily. This reduces manual effort and the risk of errors. In the long term, this can improve efficiency and accuracy in administrative processes.

Benefits of e-invoicing for SMEs
Switching to e-invoices brings benefits that are particularly relevant for SMEs:

1. Time savings and efficiency: E-invoices enable automated processing, which speeds up the invoice handling process. Manual entries and sending by post are no longer necessary.
2. Cost savings: Printing, postage, and paper storage costs are eliminated. Administrative effort also decreases.
3. Error reduction: The standardised structure of e-invoices minimises transmission errors.
4. Better traceability and transparency: The digital invoicing process allows complete traceability and audit-proof documentation. This enables companies to respond quickly and accurately to queries from tax authorities.

Requirements for SMEs for e-invoicing
To create and send compliant e-invoices, SMEs should consider the following steps:

1. System adjustments: It is necessary to implement suitable software for creating and processing e-invoices. Many ERP and accounting systems already offer e-invoicing features, making integration easier.
2. Choosing the invoice format: Depending on their needs and the type of business partners, SMEs should choose a format that meets their requirements. In Germany, the common formats are the XML-based XRechnung format and ZUGFeRD.
3. Ensuring compliance: Every e-invoice must meet the requirements of the German VAT Act (UStG) to be recognised for tax purposes. Invoice data must be complete and accurate, especially for cross-border transactions.
4. Archiving: E-invoices must also be retained for ten years in accordance with legal requirements. A digital archiving system can help store e-invoices securely and in an audit-proof manner.

Challenges and frequently asked questions from SMEs

1. Integration into existing systems: Implementing e-invoicing can be complex depending on company size and the existing software landscape. Professional advice or support from IT service providers may be advisable to ensure smooth integration.
2. Data protection and security: Since e-invoices contain sensitive business data, SMEs must take appropriate security measures to protect this data.
3. Handling international invoices: Different requirements apply when doing business with foreign customers or suppliers. SMEs should seek legal advice here to ensure that they meet all country-specific requirements.

Conclusion: Preparation is the key to successfully introducing e-invoicing
For SMEs, e-invoicing offers a clear opportunity to modernise the invoicing process and save resources in the long term. However, the transition also requires thorough preparation and adjustment of internal processes. With a suitable software solution and a well-thought-out implementation plan, SMEs can manage the transition to e-invoicing and position their accounting processes for the future.

Questions about e-invoicing?
If you need support with introducing e-invoicing or would like to learn about suitable software solutions, we will be happy to assist you. Benefit from our experience and transition your accounting to digital processes early on!