As digital tools become more widespread across industries in India, small and medium businesses are embracing solutions like e-invoicing to streamline and strengthen their operations.
With the most recent change introduced in August 2023, every business registered under the GST Act having a yearly turnover of more than Rs.5 crores is required to generate e-invoices. This marks an important step toward increasing the use of e-invoicing among small and medium-sized businesses in India.
E-invoicing is emerging as a powerful tool for small and medium businesses, as it helps improve cash flow and achieve greater financial accuracy. Let’s understand what e-invoicing means and the advantages it offers.
What is E-invoicing?
E-invoicing, also known as electronic invoicing, is a system under the Goods and Services Tax (GST) framework in which business-to-business (B2B) invoices are digitally verified by the GST Network. After verification, the system generates a unique Invoice Reference Number (IRN) and QR code, which are then attached to the invoice.
This system helps in recording and tracking the B2B transaction systematically. It also helps to easily integrate with the GST return filing system, leading to reduced errors and better transparency.
How is E-invoicing Beneficial to Small and Medium Businesses?
Now, let us understand the various benefits of e-invoicing to Small and medium businesses in detail:
- Better Accuracy and Reduced Errors
Manual invoice entry often leads to errors such as incorrect GST numbers or tax mismatches. E-invoicing helps eliminate these issues by enabling real-time validation and direct syncing with accounting tools.
By limiting manual input, businesses ensure consistency in invoicing and lower the chances of GST notices or ITC rejections caused by faulty invoice data.
- Improved Cash Flows
As e-invoices are digitally verified, your clients will have more trust in them, which leads to quicker approvals and timely payments. This improves your business cash flows. Also, various banks and financial institutions can review your e-invoices, making it simpler to apply for invoice financing or a working capital loan.
- Prevention of Tax-related Frauds
As all the transactions are recorded and traced through e-invoices, no business can cheat on taxes or pay less tax. This leads to a timely and correct amount of tax payment, resulting in a better legal identity of the firm.
So, if you are using e-invoices, more clients and partners can trust you because of your commitment to tax rules and regulations and proper transaction records.
- Simplified Input Tax Credit (ITC) Claims
One of the key advantages of e-invoicing is its easy integration with the GST portal. Since invoices are posted and reviewed in real-time, suppliers’ invoice information automatically appears in the recipient’s GSTR-2B, allowing for faster and more accurate Income Tax Credit claims.
This not only simplifies GST matching but also ensures that you can claim eligible tax credits without delays or discrepancies.
- Reduced Costs and Better Savings
By just implementing an e-invoicing system into your business organisation, you can save the costs of more employee salaries, the cost of errors, cost of not receiving Input Tax Credit. This way, using e-invoicing can reduce your expenses and result in better savings.
Avalara and the Center for Economics and Business Research (CEBR) found that fully adopting e-invoicing in India might generate Rs.32035 crore in yearly economic value. Individual firms can save an average of ₹1.09 crore per year through greater productivity, less fraud, and faster payments, which is especially beneficial for MSMEs and SMBs.
- Simpler Audits and Lower Risks of Penalty
The e-invoicing system maintains a consistent format, ensuring uniformity across industries. This improves internal auditing and financial tracking. Government audits are also simplified because verified information is already available through the GST portal.
Businesses that maintain a clear digital audit trail can maintain a more open and transparent business environment while lowering their risk of fines.
Indifi: Supporting your Business Financially
Although e-invoicing improves business operations, small and medium businesses may still face liquidity issues, particularly when expanding or managing late payments from clients. That’s where Indifi can be helpful.
Indifi is a digital lending platform that provides small and medium businesses with customized loan products according to invoicing data, business cash flows, and past transaction history.
With quick approval, minimal documentation, and disbursement within a day or two, Indifi simplifies access to working capital and financing. This helps businesses handle cash flow constraints more easily, with both speed and transparency.
Important USPs of Indifi:
Indifi’s unique abilities make it stand out as a financing partner who fully understands the demands of small and medium-sized businesses. Here are some of its main advantages:
- Provides credit solutions suited for the retail, travel, restaurant, and e-commerce sectors.
- Makes data-driven lending decisions through insights from business transactions.
- Offer quick funding with less documentation.
- Uses GST data for more efficient loan processing.
Conclusion
E-invoicing is more than just a regulatory compliance for India’s small and medium-sized businesses; it is a strategic growth tool. It clearly offers several benefits, ranging from fewer manual errors and improved cash flow to simpler audits and faster financing.
Small and medium-sized businesses that adopt the change to digital technology early will not only simplify operations but also gain a competitive advantage in today’s fast-paced business environment.
FAQs
- Is e-invoicing compulsory for all Small and medium businesses in India?
No, e-invoicing is mandatory only for businesses with an annual turnover of ₹5 crore or above. However, smaller enterprises can still adopt it to take advantage of its benefits.
- What type of software is needed to implement e-invoicing?
Businesses can use accounting software that supports e-invoicing or connect with GSTN-approved technologies via APIs. Many ERP and billing platforms already have built-in e-invoicing features.
- Will e-invoicing increase my chances of receiving a business loan?
Yes, e-invoicing provides verified, current information about your business transactions. Lenders may utilize this information to quickly determine your company’s profitability and credibility, which causes faster approvals and less paperwork for loan applications.