At a glance
- Many Australian businesses still invoice manually, despite e-invoicing having been available in Australia for years.
- Australia adopted the Peppol framework as the common e-invoicing standard in 2019.
- The Australian Taxation Office works with the states and territories to expand the use of e-invoicing.
By Gary Anders
That averages out to about 3.3 million invoices being exchanged every day of the year, covering payments due for goods and services.
If that sounds like a mountain of paperwork, it is. This is because a high percentage of invoices in Australia are still being prepared manually – that is, on paper or PDF – and then printed and posted or emailed for payment.
That is something sellers need not be doing anymore, thanks to advances in digital technology CPA Australias Business Technology Report 2022.
In fact, electronic invoicing (otherwise known as einvoicing) has been widely available in Australia for some time.
Einvoicing is the automated digital exchange of invoice information between the seller and the buyer, using secure business-to-business networks – such as those readily available through accounting software providers.
It can eliminate the need for sellers to create invoices manually and for buyers to scan or key invoices into their computer software.
According to the Australian Taxation Office (ATO), the materials and processing costs involved with creating every paper-based or PDF invoice costs between A$27 and A$30 per invoice.
By contrast, the ATO estimates that process automation via einvoicing typically reduces costs to less than A$10 per invoice.
Government takes the lead in einvoice adoption
In 2019, Australia adopted the international eProcurement Peppol framework as the common einvoicing standard.
Peppol’s use is governed by a multilateral agreement structure that has been widely adopted by governments around the world.
As part of the Digital Economy Strategy, the former Morrison government allocated more than A$15 million in the 2021-2022 federal budget to enhance the value of einvoicing for businesses and accelerate its adoption.
Early work involved working with payment providers (including EFTPOS, Visa, Mastercard and New Payments Platform Australia Ltd) to integrate einvoicing into the main payment methods used by business to help businesses get paid faster.
Work is ongoing to:
- involve educational activities to raise business awareness
- supply chain pilots with large businesses to gain insights
- drive adoption across supply chains
The Australian Government is also working with states and territories to expand the adoption of einvoicing across the public sector.
At the start of the 2022-2023 financial year, all federal government departments and agencies – about 100 in total – were required to have einvoicing capabilities enabled.
A key reason for setting this deadline was to drive the broad adoption of einvoicing by all businesses that supply to government departments and others in their supply chains.
In addition to potentially saving on materials costs – particularly paper, printing and delivery – and administration costs, einvoicing typically leads to faster processing and payments, which can improve cash flow.
Bruce Rossel, former relationship manager, einvoicing project at the ATO, says digitising invoicing helps to modernise the supply chain and reduce the inefficiencies associated with manual accounts payable systems.
“Einvoicing supports businesses to be more efficient, to attain faster payments, and it boosts the economy overall,” he says, adding that it will help greatly with offsetting “account payable inefficiencies, late payments, and market imbalances”.
Growing awareness of einvoicing
Business management platform provider MYOB recently conducted a survey of Australian small-to-medium enterprises (SMEs) and found 62 per cent of respondents believe they could save up to 10 hours every week by adopting einvoicing.
The research confirmed invoicing is a significant component of SMEs’ administrative tasks, with 83 per cent spending up to 20 hours a month issuing invoices.
Seventy-five per cent of respondents issue invoices at least weekly, and 10 per cent say invoicing takes between 20 hours and 49 hours of their time every month.
“Saving just five of the hours spent invoicing every week is equivalent to 260 hours – or 10 full days – each year,” says Helen Lea, chief employment experience officer and government policy lead at MYOB.
“That’s a lot of time SMEs could be spending on other activities that’ll grow their business.”
MYOB’s modelling shows einvoicing allows SMEs to achieve cost savings of A$11,000 every year, by moving away from paper invoicing and through the reduction of manual entry.
“We’re delighted to see awareness of einvoicing has increased significantly since we last took a temperature check in January 2021,” Lea says.
MYOB found 64 per cent of SMEs had heard of einvoicing when it conducted its survey in July 2022, compared with 43 per cent from the survey at the start of 2021.
“Now’s the time to turn that awareness into action and take advantage of this huge cost and time-saving opportunity,” Lea says.
A logical extension of market activity
Alan FitzGerald, founder of Practice Connections Advisory, is a technology consultant specialising in finding software solutions, services and practices suitable for business tax and accounting.
He consults to the accounting sector and says einvoicing is now something that most accounting computer systems can readily facilitate.
“Einvoicing is a logical extension of what’s happening in the market, and it will benefit any organisation that uses it.”
For accounting practitioners, FitzGerald says there are many benefits in helping clients to transition to einvoicing to reduce manual data entry, increase accuracy, achieve quicker payment times, and to minimise the risk of fraud.
“The ATO has calculated that up to A$28 billion can be saved over 10 years through the use of einvoicing systems.”
The ATO has been tasked with managing the Peppol network in Australia as the Australian Peppol Authority. Although it accredits all access point providers, the regulator does not view invoice data or operate as a software service provider in the einvoicing system. It also does not provide any hardware.
John Delaney, managing director of Australian-based B2B integration service provider MessageXchange, which has partnered with MYOB to provide its ATO-accredited einvoicing solution, says many businesses are yet to make the switch to einvoicing because they do not feel they know enough about it.
“Einvoicing takes no more than a couple of hours to explore the options and get set up.”
Delaney says spending some time to give einvoicing a try could end up being one of the best business decisions a small business can make.
Faster payments to suppliers
MYOB’s recent survey found the top three advantages listed by business respondents when asked what they considered to be the main benefits of einvoicing were faster processing (58 per cent), a reduction in administration time (51 per cent), and a reduction in time to payment (44 per cent).
Rossel says the ability to receive faster payments is a major benefit for businesses using einvoicing.
“The Commonwealth has a payment policy of five days for eligible einvoices. These faster payments are facilitated by clean data going straight into accounting systems, and that direct data entry also facilitates faster payment.”
Rossel says the ATO is working with government agencies to help them apply the five-day payment policy to support businesses that are einvoicing-enabled.
He notes that another key benefit is that there is less complexity “because businesses can use their own software to send the e-invoices, such as QuickBooks, MYOB, Xero or others, and there’s no need to log on to various portals or to navigate different systems”.
There is also the aspect of increased security.
“It operates 24 hours a day, seven days a week. The address database is based on the ABN [Australian Business Number] to make sure that the invoices go to the right people, and there’s inbuilt security because it doesn’t rely on email.”
In addition, the Australian accreditation process relies on “stringent security requirements, above and beyond the global requirements”. There is also an ABN validation process.
“All these factors combined greatly mitigate the risk of fraud by using einvoicing.”
Helping clients to adopt einvoicing
Krunal Patel CPA, founder and partner of CountX Business Solutions, was one of the early adopters of einvoicing in Australia and has helped many of his business clients make the switch from paper-based invoicing.
“I rolled out einvoicing to my clients well before COVID-19,” he says. “I like the idea of it because I have seen it working successfully in other countries, like India.
“There is a benefit for every level of government, business and industry.”
For businesses to be able to adopt einvoicing, he says they need to have “all their ducks in a row”.
“Your business name has to be up to date. Your ABN has to be up to date. You can’t send an invoice from one system to another unless you have the ABN, business name and other system identifiers in place.”
Patel says there are significantly more benefits from the adoption of einvoicing, such as greater efficiency and faster payment processing, than there are challenges.
“Practitioners need to take the lead with their clients. I’ve started a program with my clients – because some of them have been frustrated by not being able to relate their old system to the new system – by training them on how to do it.
“It’s important to do some hand holding and to work closely with your clients, right down to the granular level.”