E-invoicing: A Better Way to Do Business
“Australian businesses are owed around $26 billion in unpaid invoices at any given time” – Martin Mane, Assistant Commissioner, Australian Taxation Office.
As a franchise owner, I bet you’ve been owed money in unpaid invoices at one point or another. The existing challenges of keeping your business running is time-consuming without the added burden of chasing overdue invoices.
With the many hats you wear in your business, it’s not uncommon to be flat out keeping up to date with your paperwork when you consider that currently over 1.2 billion paper and PDF invoices are being manually processed and exchanged annually in Australia.
Shockingly, Australian businesses are owed around $26 billion in unpaid invoices, at any one time. For small business owners, this can be the difference between keeping afloat or going under.
The current economic climate has led many businesses to look for ways to improve productivity and streamline manual processes to ensure their profitability over the long-term.
Transformations in digital technology are already providing substantial benefits to the Australian economy through innovations such as mobile payments. E-invoicing is set to deliver further benefits by streamlining invoicing for business in Australia.
E-invoicing offers a ready-made solution that can improve cash flow for businesses and government agencies. Digitisation can help businesses, particularly smaller players, become more financially sustainable over the longer term.
From 1 January 2020, Federal Government agencies capable of receiving e-invoices are committed to paying e-invoices to eligible businesses within five days or paying interest on any late payments.
So what is e-invoicing?
You might think you are already e-invoicing because you’re emailing PDF invoices to your suppliers. But I'm here to tell you; this isn't what e-invoicing is.
When we talk about e-invoicing, we mean the automated direct exchange of invoices between the supplier's and buyer's accounting (software) systems. E-invoices can be sent between different (accounting software) systems as long as both are enabled to use e-invoicing.
Paper-based or PDF invoices will be a thing of the past—no more printing, postage or emails. Trading partners will no longer need to enter or scan paper invoices into their accounting system manually.
In Australia, the common e-invoicing standard is Peppol, an internationally established standard.
Peppol enabled e-invoicing, standardises how invoices are sent and received. It uses agreed common standards that allow the seamless exchange of invoices.
1. Save money
It is estimated that paper invoices cost businesses around $30 per invoice to process and emailed PDF invoices around $27 per invoice. E- invoices cost less than $10 to process. This is mainly due to the time saved, not having to handle each invoice manually.
When a sender and receiver use an e-invoice, it equates to around a $20 shared saving each time an e-invoice replaces a paper invoice, and slightly less than $20 when it replaces a PDF invoice.
2. Less time and fewer errors
E-invoicing helps businesses save time by not having to re-key or scan invoices, make corrections or chase missing information. No re-keying of information means fewer mistakes, and as invoices are stored in the system, they don't get lost in the mail or the office. Data is also more accurate and complete as it travels from system-to-system.
The time saved in administration provides opportunities to focus on higher-value activities and growing the business.
3. Reliable and secure
The e-invoicing network provides a safer and more secure channel than email. As e-invoices are received directly into a business's financial systems and sent through the e-invoicing network via approved and authenticated participants, the risk of fake or compromised invoices is lower. The only parties that will see the e-invoices are the respective digital service providers, buyers and suppliers. E-invoices will not go through or be viewed by the ATO.
E-invoicing accreditation in Australia requires digital service providers to do appropriate validation checks and apply integrity measures, such as checking Australian business numbers (ABNs) to ensure they are active and valid for use in the e-invoicing environment.
4. Reduced payment times
The Australian Government is supporting small business by offering improved payments times. Australian Government agencies who are e-invoicing enabled are now paying eligible e-invoices from suppliers within five days. This applies to eligible contracts up to $1 million where both the buyer and supplier use PEPPOL e-invoicing systems.
5. Connect once, trade with many
Businesses can open their networks and trade with multiple partners, regardless of the software they each use. This also ensures that all businesses, in all sectors, can access and benefit from e-invoicing, and trade with each other on the same level regardless of their size and financial software.
6. Environmentally friendly
E-invoicing eliminates paper and requires less energy, resources and physical space. Using e-invoicing also saves on material costs by not using paper, printing or delivery.
In Australia, e-invoicing is being progressively rolled out. To access e-invoicing, your business, your suppliers and your buyers will need to be e-invoicing enabled.
Some accounting and financial management software already have inbuilt supports for e-invoicing, and many others are adding it soon. Talk to your software provider about what options suit your needs.
Supporting economic stability through the use of digital interactions is one of the drivers facilitating e-invoicing adoption in Australia. Businesses can reap the benefits and thrive in the market by focusing on their business rather than on labour-intensive manual processes.
You can stay up to date by subscribing to the ATO’s newsletters and updates from your software provider.
Visit www.ato.gov.au/e-invoicing for more information
Martin Mane is Assistant Commissioner at the ATO leading the ATO's partnership with the Digital Service Provider community, the ATO's Digital Strategy and the Australian Government's e-invoicing initiative.