E-invoicing, or electronic invoicing, enables an automated exchange of information between buyer and supplier for faster, more efficient transactions. Yet in addition to convenience, it’s important to understand e-invoicing if you do business in Australia. Here’s what you need to know.
What is e-invoicing?
Timely invoicing is key to success for a small business. When invoices go unpaid, cash flow suffers and it’s difficult to pay bills to your own suppliers. Electronic invoicing offers a way to streamline these payments.
E-invoicing is timesaving technology that electronically transfers information between customers and suppliers. An electronic invoice is designed to be readable by machines and humans, for automatic entry into accounting software at both ends of the transaction. However, for this technology to work it’s important for the invoicing software to use the same protocols or standards.
Invoicing in Australia requirements
The Australian Tax Office (ATO) aims to create an e-invoicing software standard to encourage adoption of this practice. It’s all part of the Digital Business Plan, which states the following goals:
E-invoicing will be mandated for all agencies by the beginning of July in 2022.
Over 80% of invoices should be received electronically by the beginning of July in 2021.
The government will investigate mandatory e-invoicing for businesses and all levels of government.
The adoption of e-invoicing software fits into the Digital Business Plan’s main objectives, which is to create a less wasteful, more efficient, paperless way of doing business. To enable countrywide B2B e-invoicing, the common standard used will be Peppol. This solves the problem of customers and suppliers needing the same invoicing software. Peppol is used internationally, which makes it ideal for global transactions.
Benefits of e-invoicing
So, what are a few of the reasons why you should consider switching to the e-invoicing standard? Going paperless with this type of system offers plentiful benefits. Here are just a few.
1. Saving money
If you want to save money, sending an automatic online invoice is far cheaper than processing paper invoices. In fact, according to the ATO it costs $30 to process each paper invoice, compared to just $10 per e-invoice. This is due to the reduction in handling and personnel.
2. Greater accuracy
There’s a high potential for human error with traditional invoice processing. With e-invoicing software, there is no need to make corrections, repeatedly scan invoices, or pursue missing details. The data is transferred automatically between accounting systems. Using a common standard like Peppol means that all required information is entered before the invoice clears the system.
3. Enhanced security
Data is sent via secure channels, transmitted directly from one accounting system to the other. There’s no middle ground where emailed PDFs languish in an easily hacked email inbox before processing. Only the buyer, supplier, and software provider have access to e-invoices. For greater security, Australian service providers are required to verify ABNs and check invoice validity.
4. Faster payment processing
To help encourage the uptake of e-invoicing, Australian Government agencies are now paying e-invoices within five days. They’ll also pay interest for any late payments. There are state governments offering faster payment terms as well for businesses using the new e-invoicing standards.
Get started with invoicing software
Ready to get started? The first step is to find out if your existing accounting software is compatible with e-invoicing. You might need to choose a different service or update to the latest version if you’re not quite digitally ready.
The next step is to review your current invoicing process. Think about how many invoices you receive and submit, identifying your top buyers and suppliers. Do you currently use software like QuickBooks or Xero to process online invoices and scan documents? Discuss switching over to an e-invoicing software standard with your biggest trading partners.
It’s likely this will be mandated in the future, so you could get ahead of the curve now even if you’re not a government agency. As you can see, the benefits are well worth it for all parties involved.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.