This article will examine the unintended effects of eInvoicing; where all invoices are mandated by law to be sent digitally.

The underlying reason for this legislation was an increase in tax compliance; easier to verify records, plus less abilities to create fraudulent invoices. eInvoicing can also be spelled as e-invoicing.

1 Why is a eInvoicing valuable source

All invoices are not just documents to base tax claims on, being sent around the system: They contain valuable information, particularly in bulk about the activities of both parties, when those activities are taking place and their value. A company that sends many small invoices, every month, to dozens of different parties is less likely to become a credit risk than a company that sends only a few very large invoices, at varying intervals, to parties within comparable sectors.

The information within the invoices themselves is of course the real ticket; those analysing them (a piece of AI is likely to do so), will learn exactly what the company is up to and who it deals with. It is precisely such data that helps financiers decide who is the better bet.

2 What is the actual effect of eInvoicing

Since it is becoming legally mandated to invoice digitally, you would think that all of those complying would benefit, this is not so. In reality early adaptors are benefitting more so. This is because those already practicing eInvoicing are getting their records reinforced. The new parties` information is being processed, but as new information; it still has to be verified. There still is a benefit to the newcomers, just to a lesser degree.

There is likely a difference between companies that just used eInvoicing and those that actively used it to attain credit and other potential uses that they came up with. With the latter really getting a boost. This is all because banks have more access to information, by which to assess if a party is likely to default. This results in firms that have their records reinforced, receiving more and/or cheaper credit, such as loans.

3 Potential long term effects of eInvoicing

This still is a relatively new development, so we can only make educated guesses about how things really turn out, here is an attempt:

Things become more equal: Over time the comparative advantage of early adaptors fades away as newcomers also have more data to support their case. Advantages gained from receiving more and cheaper loans did result in a competitive advantage but not enough to distort anything in the long run.

Gained advantages are capitalized on: Having access to more and cheaper credit allowed the incumbent corporation to expand faster, leading to a superior position. Latecomers were not able to compete.

This option is rather unlikely, as it is very expensive: A new system is created, which does not favour early adaptors, resulting in a gain for the companies that only started eInvoicing because it was mandatory. Not having their system wired towards eInvoicing meant that the now in favour companies were able to switch to yet another system with relative ease. Opposed to the already eInvoicing parties who had difficulty in making the change.

4 Types of organizations that benefit

The two biggest benefactors of this new digitalization are governments and banks; both as a result of more information. Banks use it to make better decisions, and the government uses it to increase taxes.

There are more parties with an interest, such as insurers and potential partners. Insurers not only use the data to decide if the party is a profitable client, it can also underwrite more invoices (provide funding on invoices), or increase its clientele with partners of their client. Third parties looking to do business can better investigate if a prospected party is creditworthy, or not a scam.