National governments need more cost saving initiatives: try e-invoicing
Tuesday, 14 Jul 2015
The driver for political election campaigns seems to be the ability to reduce government spending, while needing to leave essential public services largely unaffected.
CEO, Basware Corporation
In 2015, more than 20 government elections are taking place around the world. Whether those campaigns are in Europe, Africa, Asia or South America, many of the same themes come back under the microscope.
We recently looked at the state of e-invoicing in governments around the world – in our white paper: ‘Why are governments not paperless’ – and found many countries hitting numerous barriers. The benefits of e-invoicing can be found in cost reductions and efficiencies, yet they can also be brought to bear in compliance with tax regulations, for instance. So they can reduce spend and increase revenues.
In the UK, for instance, the government could save more than £3 billion per year on the costs of invoicing by making the process automated and electronic. This is a familiar opportunity for many other European countries, such as Germany, as well as the US and Australia.
In Brazil, by contrast, the focus has been on collecting taxes by giving every transaction a unique invoicing number and tracking taxes accordingly. The country has managed to raise its tax revenues as a percentage of GDP by 30% - and can promote other services now that people are using its NF-e system. The journey isn’t complete in Brazil, but it shows other South American countries how they can make more money/budget available to strengthen their economies.
I’m sure you’re asking: If these cost savings are so pronounced, why haven’t they already happened? Well, the answer is complex and does vary from one country to the next. But the summary is slightly disappointing. Often, inefficient processes exist because of a reluctance or fear to change the status quo. Many countries, especially in Europe, North America and Australasia, find that there are process-oriented barriers to wider spread adoption.
One of the other issues that can be overlooked when discussing this topic is the indirect benefit of measures such as e-invoicing. The automation of the invoicing process has clear cost and efficiency benefits. But there is a bigger picture that it can contribute to.
E-invoicing helps speed up the movement of cash, which helps smooth out complications and problems in the economy. Free-flowing capital helps to promote trade, especially amongst smaller businesses, for whom cashflow is a key determining factor in their financial stability. This supports the economy in becoming more effective, and SMBs in growing – something that I think every political party in the world is striving for.
In developed economies, making the flow of capital more efficient will do that. In less developed, or certainly in informal economies, formalising the process and enforcing compliance will affect cashflow in the B2G process.
The success of the transformation towards automation is one that often relies on a handful of people. A strong leader of this project is the most common indicator of success. Someone who can drive the process forward and even influence government mandates where appropriate will help to ensure success.
The benefits are there for everyone to see. Automation and e-invoicing can significantly boost a country’s economy. The road to achieving it has its bumps, but they are worth enduring. A commitment to positive change and open standards will weigh the odds in favour of success.