What is e-invoicing?
E-invoicing is a new process of business-to-business (B2B) invoicing that is being promoted by the Australian Government for all businesses. Much like when single-touch payroll (STP) was brought in, e-invoicing is designed to streamline and simplify the invoicing process for small to large businesses, eliminate error, and most importantly, significantly improve security and reduce vulnerability to scams.
The process of e-invoicing isn't just using an email to send an invoice. It is sending invoices directly from one business’ accounting system into another via a secure e-invoicing network called PEPPOL which stands for Pan-European Public Procurement OnLine. PEPPOL is an international e-invoicing network that allows you to safely send e-invoices to companies and governments worldwide.
The PEPPOL network has been globally adopted because it is so heavily encrypted, reliable, and safe. Rather than using a businesses name, it uses a PEPPOL identification number, which is recognised system-to-system. Thanks to these unique identification numbers, there are no more misunderstandings about the identity of the senders and recipients of invoices. Because of this, ghost invoices and typing errors are no longer possible.
Businesses will no longer need to generate paper or PDF invoices that must be printed, posted, or emailed to their customers. Similarly, the invoice recipient will not have to manually enter or scan invoice information into their accounting software once they receive it. Even if the buyer and supplier use different accounting software, e-invoices can be issued between them as long as both are connected to the same e-invoicing network.
Why does my business need it?
E-invoicing saves time, effort, paper and money for both the vendor and the customer because the opportunity for error is dramatically reduced. With less data entry required at both ends of the transaction, businesses do not waste valuable time re-generating invoices to resolve an error.
Data entry isn’t the only place where human error occurs in the typical invoicing process. Another part of the procedure where delays can happen is in the delivery. Miss-spelled email addresses, invoices being sent to the wrong department or person, emails going straight to the spam-folder and email security breaches are all factors that frequently hold up payments, costing small businesses valuable cash flow.
Perhaps one of the most important benefits of e-invoicing is the level of security it offers to those who use it. Businesses who use e-invoicing are less likely to encounter a breach of security because e-invoicing removes the need for emails entirely. Emails are risky because they can be intercepted, copied, imitated or otherwise compromised.
Businesses are protected from phishing scams and other fraudulent online activities when using e-invoicing because the transfer of invoice data happens on the secure PEPPOL network. In addition, because both sender and receiver need to be registered with the Peppol encrypted Network, providing their ABN and business details – small businesses are less likely to be scammed by suppliers providing false or expired ABNs.
But of course, businesses looking for increased cyber security from using e-invoicing must also have basic cyber safety in place in their business or they will remain at risk. Check out our handy cyber security checklist here to see if your business is adequately protected.
The benefits of PEPPOL e-invoicing include:
- more accurate invoices, resulting in less mistakes to chase up and correct
- reduced time and costs dealing with manual processes including fixing invoice errors
- no more lost invoices - save time by getting the right information to the right contact on time
- confidence in the security of the PEPPOL network – less chance of invoice fraud or scams
- faster payments
- better business decisions, based on correct, real-time financial information.
- as a supplier, you will no longer need to create paper or PDF invoices to print, post or email
- as a buyer, you won’t need to scan and manually enter invoices into your software
- you can automate processing of invoices through e-invoicing
- you can save on material costs and reduce your environmental impact through less paper, printing and delivery costs.
One of the main benefits aside from those listed above, is the savings to your business. Deloitte estimated these to be around $11k per business per year, or a time saving of a whole week.
Generally, paper and emailed PDF invoices costs between $27 and $30 to process. Using e-invoicing, the processing cost is less than $10 an invoice. This cost saving is due to not having to manually handle each invoice.
While you still need to apply your internal checks and assurance processes before paying your invoices, you may see cost savings due to automation of administrative tasks. As a result, payments may also be made faster helping improve your cash flow. Some federal government agencies are already paying eligible e-invoices within five days.
How do I get started?
Setting up PEPPOL e-invoicing for your business is easy. It doesn’t matter how you currently manage invoices, there’s an option that will work for you.
Most major accounting software products can already e-invoice. If you already use accounting software such as Xero, MYOB or Reckon One to invoice, they are PEPPOL ready. Other services are partnering with PEPPOL accredited providers to create a plug-in for their software, these include Intuit, Sage, Saasu and Rounded.
If you create invoices manually or use a mix of manual and digital invoicing, talk to your Digital Ready Coach about how to get your invoicing systems online and what systems are best for you and your business.
Most major online accounting software is designed to be simple and intuitive to get started with, and provide support and training. Of course make sure you talk to your accountant and/or bookkeeper about changes to the way you invoice.
What does this mean for my business?
With approximately 90 per cent of invoice processing still fully or partly manual, and over 1.2 billion invoices being exchanged in Australia annually, there are significant productivity and cost‑efficiency benefits for all Australian businesses if e‑Invoicing is adopted more widely.
In December 2019, the Commonwealth Government implemented the PEPPOL framework, and established the Australian Taxation Office as the Australian PEOOPL Authority to develop and administer the framework in Australia. It is worth noting that the ATO has no visibility of your invoicing in this role.
The Australian and New Zealand governments signed a Trans-Tasman agreement in 2018 to implement e-invoicing and commit to a standardised approach to exchanging invoices over the secure PEPPOL network. Australian Government departments will implement the PEPPOL system by July 2022, which means if you do business with government agencies, you will be transacting using e-invoicing.
OK, I'm ready to e-invoice - what now?
To help you get on board with e-invoicing, here is a check-list of actions for you to take
- Talk to your accountant/bookkeeper regarding your current invoicing process
- Check your accounting software is e-invoicing ready
- If you are using a manual or hybrid invoicing system, look at options for moving to an online system with e-invoicing integration
- Review your business processes and requirements to understand your current state of invoicing
- Understand and manage changes in business processes within your organisation
- Get training in how to use e-invoicing in your accounting software
- Get your trading partners ready for the upcoming change and ensure they are also e-invoicing ready
- Progressively onboard your trading partners focussing on those with most benefit to your business, for example, high volume suppliers or high error rate invoices
- Book a session with your Digital Coach to help with any areas you want support with