eInvoicing in its most basic form has been around for many years.
An eInvoice – short for electronic invoice – can be as simple as an emailed PDF. While it’s probably the most common way to send a digital invoice today, true eInvoicing can be so much more, says Matthew Addison, the Deputy Chair of the Digital Business Council
For example, a business can create an invoice in its accounting software and hit send. The invoice data would then be transmitted by the accounting software via a secure internet channel to the recipient. The recipient’s own accounting software will receive the data, decrypt, interpret it and turn it into their record of the purchase invoice.
Rather than emailing invoices, the information is electronically transmitted via software.
The business software will interact with eInvoicing “access points”. The Access Point looks up the recipient’s digital address using the centrally provided “digital capability locator”. That locator will give the digital address where the invoice needs to be sent. That access point will then send the invoice to the recipient’s access point which will receive it, turn it into readable data, and pass it onto the software of the purchaser.
“In this future world, I still see that PDFs may also be transmitted with this data because people still want to see a PDF and still store that PDF, but that’s really a comfort factor rather than a necessity going forward,” says Addison, who is also Executive Director of The Institute of Certified Bookkeepers
Making eInvoicing a reality came a lot closer at the start of February, when the National Australia Bank and Xero announced
NAB business customers would be able to make payments from within the accounting platform rather than through its internet banking site, paving the way for more seamless invoicing and remitting.
Big cost savings
The Digital Business Council has worked to make e-invoicing a reality by developing a common set of standards and an interoperability framework. The standards will overcome the difficulty of different accounting systems used by businesses being unable to interact.
Established in November 2015 to support and facilitate the open exchange of digital transactions in Australia, the Council includes government departments such as the Australian Tax Office (ATO), Australian Small business and Family Enterprise Ombudsman, the Department of Finance, and the NSW Department of Finance.
Addison says it costs about $30 per page to receive and process a PDF invoice compared with $5 or less for an electronic invoice
Other members include industry association such as the Chartered Accountants Australia and New Zealand and the Chartered Institute of Procurement and Supply in addition to the Institute of Certified Bookkeepers, as well as many accounting software providers including MYOB, Reckon and Xero.
Addison says the ATO has committed to accept that an interchange of data is an acceptable proof of the transaction. “They’re happy that, for record-keeping purposes, as long as your software has an appropriate record of that data and what it was for, that will meet the compliance obligations of the business,” he says.
The primary advantage of the new system will be increased automation of accounts and reduction of the need to re-key data. Addison says it costs about $30 per page to receive and process a PDF invoice compared with $5 or less for an electronic invoice.
“On the receiving side, it’s coming into my purchasing dashboard electronically. I’ll be able to set rules. If I had an order in my system, maybe you would match the invoice to the order rather than me doing it manually. The software needs to provide me with an appropriate approval and authorization process. I hit the OK button and that puts it in my accounts payable list, ready for payment. It’s far more efficient processing,” Addison says.
Government and big business to drive adoption
Addison is hoping this will be the year that e-invoicing takes off in Australia. “I’d love to see that it becomes the most common way of interchanging invoices,” he says.
But a couple of things need to happen first.
The digital capability locator
– essentially a digital address book so accounting software programs will know where to send invoices – is scheduled to be built in 2018.
As government departments and large national businesses adopt the system, they will also drive other smaller businesses to use it, says Peter Strong, Chair of the Digital Business Council and also Chief Executive Officer of the Council of Small Business Australia
“The big change will come if one level of government mandates that you must lodge your invoices with them using e-invoicing compliance software,” he says. “And then, as soon as that happens, then the software developers know they have a market – then they can really go to town on it.”
Strong says small businesses in particular will benefit, because not only will it cut down on the time they spend preparing invoices, it should also facilitate faster payments, in part because it would reduce many of the small errors that result in small business invoices being sent back unpaid.
This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY.
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