By Andreas Mjelde, co-founder and CEO, Two

This week, the UK Government’s consultation on e-invoicing came to a close, a significant moment that could shape the future of how businesses transact across the country. The consultation sought input on how to increase adoption of e-invoicing across both public and private sectors. For small businesses, this isn’t just about digitising paperwork – it’s about survival.

According to QuickBooks, three in 5 (62%) UK SMEs reported overdue invoices in the past year, with an average of £21,400 owed. Many SMEs operate on extremely tight margins, and a delayed payment can significantly exacerbate cash flow and liquidity issues – feeding into the late payment epidemic currently plaguing the UK. These aren’t isolated incidents – they’re systemic failures tied to outdated invoicing processes that no longer meet the needs of a modern economy.

E-invoicing – particularly structured, interoperable formats like those based on the Pan-European Public Procurement On-Line (PEPPOL) network – could well be a game-changer when it comes to unlocking SME growth in the UK.

The real cost of legacy invoicing systems

Traditional invoicing – often reliant on paper or unstructured PDFs via email – is a major driver of delayed or unpaid invoices, and is significantly slowing businesses down. While PDF invoices sent by email are technically “electronic”, they lack the automation and interoperability that define true e-invoicing systems, such as PEPPOL or other national platforms. These legacy systems are:

• Slow: Paper invoices sent by mail can take days or even weeks to arrive, while PDFs often get buried in inboxes or filtered as spam
• Prone to error: Manual entry leads to mistakes, delays, and disputes
• Lacking visibility: Paper/PDF invoices don’t provide real-time status updates, or seamless integration with accounting tools
• Labour-intensive: Reconciling data manually wastes time and resources

What’s more, these inefficiencies disproportionately affect SMEs. When payments are late or missed, cash flow dries up, suppliers go unpaid, and growth grinds to a halt. With administrative errors like failing to log invoices or input mistakes accounting for nearly a quarter of late payments, it’s clear that the current system is no longer fit for purpose.

E-invoicing: more than a digital upgrade

E-invoicing allows invoices to be created, sent, received, and processed in structured, machine-readable formats. These invoices travel through standardised networks like PEPPOL, enabling seamless, secure exchange between businesses and governments, while reducing administrative overhead, cutting down on human error, and accelerating payment cycles. For SMEs, it’s a powerful way to stabilise cash flow and free up working capital.

The benefits are tangible. One NHS Trust implementing e-invoicing saw invoice processing times drop from 10 days to under 24 hours. Payments followed almost twice as quickly, and supplier queries fell by 15%.

For SMEs, faster payments mean stronger liquidity. More cash flow on hand allows them to reinvest in growth, hire more staff, or increase inventory without relying on short-term borrowing.

Furthermore, automating invoices unlocks valuable time for business owners and their teams, allowing them to focus on more higher-value tasks, instead of getting bogged down in fixing clerical errors and chasing invoices.

A proven model: lessons from Europe

E-invoicing isn’t a theory – it’s already delivering results across Europe. In the Nordics, Benelux, and increasingly Germany, Austria, and France, e-invoicing is the norm thanks to government mandates and widespread use of networks like PEPPOL.

Norway, a pioneer in this space, developed its national format, “Elektronisk Handelsformat” (EHF), based on PEPPOL specifications. Mandates from the Norwegian government requiring public sector suppliers to use EHF invoices significantly boosted adoption. Today, PEPPOL adoption in Norway spans not just the government but much of the private sector, helping businesses large and small benefit from faster, more reliable payments.

For years now, the Nordics and other European countries have demonstrated how national infrastructure, regulatory clarity, and interoperability can transform invoicing from a liability into an asset – and it’s time for the UK to follow suit.

A national opportunity

The UK has an opportunity – right now – to bring invoicing into the 21st century. The government’s e-invoicing consultation could be the catalyst for real change. But it will require leadership, policy support, and industry-wide commitment.

E-invoicing shouldn’t be a luxury for larger firms with deep IT budgets. It should be a baseline standard – accessible, automated, and secure – for every business in the country.

Because when SMEs thrive, the economy strengthens as a whole. And in a climate where resilience and agility are more important than ever, faster, smarter invoicing is not just a good idea – it’s a national imperative.