A bold move with great potential

In Sweden, we are so accustomed to talking about digital disruptors. About those start-up companies who change the way we are accustomed to doing things. About those iZettles, Klarnas, Lendifys and Spotifys.

But stop for a second and ask yourself whether there is anyone you’ve forgotten. That’s right – the government. Well, the Swedish government has made a move. A bold move. A move with the potential to change the Swedish economy more than all the private players could do together.

What is about to change?

EU Directive 2014/55/EU (the so called eInvoicing Directive) requires that, beginning in November 2018 but no later than November 2019, all authorities – central, regional and local – in all Member States be able to accept and process electronic invoices. The Swedish government has taken this up to another level, and in the latest draft law (Ds 2017:31) it has proposed not only that government entities be able to receive e-invoices but also that government suppliers send only electronic invoices to government purchasing entities. In order to be valid, these invoices must be issued in a structured machine-readable format.

What are the practical implications?

The new law will result in a few very fundamental practical changes:

  • Paper invoices will no longer be recognised as valid invoices.
  • PDF invoices will no longer be recognised as valid invoices.
  • Only structured XML or UBL-based formats will be accepted.
  • All e-invoices are to be submitted through the same technical platform.

If a supplier does not meet these requirements, not only will this prevent it from doing business with government entities but penalties may be levied upon such suppliers.

Why such far-reaching change?

The Swedish government could have settled for the minimum requirements of the eInvoicing Directive, but it did not. Why is this so?

There are several potential reasons. Let’s consider a few:

  • Promoting further digitisation: The Nordic countries in general are at the forefront of digitisation processes. From a global perspective, Sweden has a high level of e-invoice penetration (54%). However, when compared to Nordic neighbours like Finland (70% of B2G invoices are electronic) and Denmark (99%), we lag behind. Experience shows, though, that such development often requires some kind of push by government. The Swedish government’s initiative may be an attempt to get closer to the e-invoicing levels of our neighbours.
  • Closing the VAT gap: Even though Sweden has the lowest VAT gap among EU Member States (1.2% or EUR 489 million as per 2014), invoice digitisation will help to further close this gap. Some countries with more significant VAT gaps (e.g. Spain: 9% or EUR 6,214 million, France: 14.5% or EUR 24,477 million and Italy: 27.5% or EUR 36,855 million) have already mandated B2G e-invoicing for government suppliers.
  • Optimising costs: E-invoicing is a much cheaper alternative to paper invoicing. You save on paper, envelopes, stamps, the effort of manually stuffing envelopes, etc. According to calculations by Swedish NEA (Nätverket för Elektroniska Affärer), the cost of an e-invoice is often less than 10% that of a paper invoice. Something few are aware of is that e-invoicing also helps to optimise the company’s working capital; effectively it shortens the AR days outstanding.
  • Improving data analytics: Even though approximately half of all invoices to public authorities in Sweden are “electronic”, most of these are PDF invoices. According to the requirements of the upcoming regulation, PDF invoices will no longer qualify as valid e-invoices. Only structured formats cater for real AR and AP analytics: e.g. who are my suppliers, what do I spend most on, do I really pay what I’m supposed to for my goods, do my customers pay on time, etc. This type of analysis will bring further cost improvements.
  • Single access point to all government entities: Historically, whenever a government has come with a B2G mandate, it has provided a single technical platform as well – a so called “access point”. So it has been in Spain with FACe and in France with Chorus Pro. The great added value of such platforms is that any supplier can access any government buyer via the same catalogue and infrastructure.
  • Environmental benefits: The use of paper invoices will be eliminated throughout the public sector.

Are you ready to embrace digitisation?

Pagero can help you make the best use of digitisation. At present our platform Pagero Online already fulfils all the regulatory requirements and provides you with the necessary analytics framework to get the maximum advantages from the new digitised economy. Do not hesitate to get in touch for more information!