Although SMBs may not have been initially keen on adopting technology for generating their invoices, with the new mandate in place under GST, small business owners will need to relook at their digital accounting practices.
By Rajesh Gupta
Over the past few years, technology has rapidly changed how accounting is managed. Using advanced software, digital accounting has simplified complex processes and rendered them more efficient, user-friendly and error-free. A common accounting process that has recently been digitized is invoicing. Invoices comprise a crucial aspect of business that helps companies track their sales and maintain a record of finances efficiently. Subsequent to going digital, e-invoicing has, thus, proven to be a game-changer.
While till now e-invoicing had been mandated for all B2B transactions in large enterprises, the decree has now been extended to companies with a much smaller turnover and hailing from remote areas. Therefore, small- and mid-sized businesses (SMBs) stand to benefit immensely from the new invoicing process in manifold ways.
Limitations to overcome
Although mandating businesses to generate e-invoices is a welcome move, it can pose a serious challenge in cases of micro and small businesses as they do not invest much in technology and owners often lack digital literacy.
Most SMBs also face the challenge of being ill-equipped technologically. Thus, they are required to assess their existing digital accounting systems and ensure that they are updated in accordance with the new requirements for e-invoicing. Most of the time, consumers aren’t willing to embrace tech-based ways of conducting business. For this, it’s necessary that companies communicate the benefits of digital invoicing to customers and take them in confidence.
How e-invoicing is helping small businesses enter mainstream
E-invoicing tends to offer many advantages to SMBs. It can eliminate many hassles that small businesses usually suffer after supplying to large businesses as the details recorded are indisputable. With the recorded transaction details, small companies can build transactional history and access trade financing details as and when required. Besides, even the government can easily keep a track of the transactional value of domestic supplies as against imports.
In addition, the e-invoicing system can help small enterprises obtain instant loans as banks will be able to assess requests based on the invoices. E-invoices also help generate invoices in a standardised format that is readable by any system and make possible the reporting of e-invoices to a centralized system.
Apart from these, other major benefits that e-invoicing offers to small businesses from remote areas are:
-It enables a faster invoice delivery time.
-It mitigates the possibility of data duplication, errors in data entry, and reconciliation issues by eliminating manual entry.
-It ensures GST compliance.
-Helps make invoice data easily available and accessible to the consumer.
-With e-invoice, businesses can easily track invoices in real-time, leading to swift availability of input tax credit.
-The real-time data access leads to reduction of fraudulent GST invoices. As e-invoicing ensures genuine filing of ITC, it helps cut down tax evasion and frauds.
-E-invoices can be automatically generated and made available to buyers in real-time, thus eliminating the need to courier invoices.
-Irrespective of the ERP software, e-invoices can be easily read and reconciled with it without any hassle as e-invoices are highly interoperable.
-It also helps taxpayers automatically generate GST returns as there’s a full record maintained of net sales and purchase under the latest GST system.
Although SMBs may not have been initially keen on adopting technology for generating their invoices, with the new mandate in place under GST, small business owners will need to relook at their digital accounting practices. Accordingly, they must adopt practices and invest in a tech-driven way of conducting business. This is further helping businesses hailing from remote areas to connect and do business with larger enterprises in the mainstream market. Despite being daunting at first, e-invoicing can bring in more benefits to the table rather than challenges. Connectivity, standardization and convenient access to data has proven helpful not only to the government but even suppliers and their consumers.
(Rajesh Gupta is the Co-founder & Director, BUSY Accounting Software. Views expressed are the author’s own)