The operations of businesses are being dramatically transformed by a range of digital technologies. One area that is set to change is how businesses send and receive invoices. Whilst e-invoicing is just starting to roll-out in Australia, now is the time to understand what e-invoicing is all about and how can prepare yourself and your business for this change. So, let's start by taking a look at what e-invoicing is all about.
What is e-invoicing?
Electronic invoicing (or e-invoicing) is the new way for businesses to send invoices electronically between a buyer's and supplier's accounting software systems, without the need for manual data entry.
With the introduction of e-invoicing, businesses will no longer need to generate paper-based or PDF invoices that must be printed, posted or emailed - reducing costs and improving payment times.
Is e-invoicing mandatory?
The ATO has mandated that all Australian Federal Government agencies must have implemented and be using e-invoicing by 1 July 2022.
The Government is currently consulting on options for mandatory adoption of e-invoicing for businesses, but it is not currently mandatory. So for now, you can still choose how you want to invoice your customers, however there are significant benefits to using e-invoicing if you want to reap the rewards earlier.
For more information about the rollout of invoicing, visit the ATO website here.
What are the benefits of e-invoicing?
E-invoicing promises to make life easier for small business owners and bookkeepers who spend time managing invoices and bills. Let's look at some of the benefits that e-invoicing is set to bring:
- Reduction in processing costs - It's estimated that by implementing e-invoicing, businesses could save up to 70% in processing costs compared to manual PDF invoice processing.
- Faster payment times - The ease of e-invoicing means faster invoicing and faster payments. Buyers are paying on average up to 7 days faster with e-invoicing. The Federal Government and NSW Government have applied a 5-day payment turnaround for contracts up to $1 million via e-invoicing.
- Reduced errors - Invoice data travels from system to system, removing the need for manual data entry. This reduced the risk of manual processing errors and mitigates risk of misplacing invoices in transit.
- Greater security - Invoices are exchanged through a secure e-invoicing network, with no human intervention, reducing the risk of fraud. This gives you peace of mind that an invoice will reach the right customer safely.
- More data-driven decisions and actions - e-invoicing delivers faster, more accurate and more complete data to your business. And that means that you can make faster, more accurate and more complete decisions in terms of your cashflow, invoicing, procurement and operation management.
Getting ready for e-invoicing
E-invoicing is a little like sending an email. For it to work, both parties need to be signed up to a provider and connected to the internet. Instead of an email address, however, you will use your ABN. Yes, the same one that’s on all your invoices already. Since it’s early days for e-invoicing, you’ll need to wait until other businesses register to the Peppol network before being able to send or receive invoices with your usual business contacts. However, you can register for e-invoicing in the meantime to ensure that you are ready for the e-invoicing revolution.
Using Xero for e-invoicing
Xero are making getting onboard with e-invoicing easy! Learn how e-invoicing works in Xero and how to register your business in just a few clicks. Click here for more information.