The federal government has invested nearly $20m to encourage widespread adoption of e-invoicing. Despite the potential efficiency, plus cost and productivity gains, business awareness remains low.

    Australian businesses exchange more than 1.2 billion invoices each year and the Australian Taxation Office estimates almost 90 per cent of SMEs still operate in a manual invoice environment, with paper and emailed PDF invoicing costing $27–$30 to process.

    Deloitte Access Economics estimates that every time an e-invoice replaces a traditional paper or emailed-PDF invoice, the businesses involved can share up to $20 in cost savings per invoice. Under a proposal to eliminate paper-based systems being trialled by the federal and NSW governments, a Business e-invoicing Right (BER) would enable businesses that issue e-invoices to legally require their trading partners to do likewise.

    Under the new regime, invoices would no longer be sent from supplier to buyer on paper or PDF. Rather, they would be generated from one accounting system to another as a digital exchange. E-invoicing allows the direct digital exchange of invoices between a supplier and buyer via software using a secure network. The move would improve data matching alongside reduced costs and improved efficiency as debtors wouldn’t need to scan and enter invoices into company software.

    Zero paperwork

    Accounting software providers such as Xero and MYOB have been advocating for a federally mandated switch for years. Acknowledging they would profit from such a mandate, they also say the domino effect of reduced payment terms could bolster the economy.

    Xero has been sharing late payments data with the government to draw attention to the inequality between large and small businesses when it comes to payment timeframes. Recent studies show small businesses are waiting 23.4 days on average for invoices to be paid. E-invoicing could help small businesses with the longstanding issue of late payments, says Xero managing director Australia and Asia Joseph Lyons.

    But for the potential of e-invoicing to be realised, it must involve a full spectrum of the business landscape, including big enterprises. “These delayed payments have flow-on effects, hindering cash flow and opportunities for growth,” he says. “In fact, there could be a net positive benefit of $2.54b for Australia over the next decade if large businesses paid small businesses on time. We’re already seeing an improvement in payment times thanks to e-invoicing. Among small businesses working with federal government suppliers, 62 per cent had their e-invoices paid within five days in 2020–21.”

    Meanwhile, a MYOB survey of Australian small businesses in January 2021 found that 38 per cent admit it would save them the equivalent of a working week each year to shift to e-invoicing. CEO Greg Ellis hopes the mandate will provide some good momentum for larger-scale adoption. “We see an opportunity for bigger organisations to lead the way in rapid expansion of e-invoicing,” he says. “By offering e-invoicing, which can be supplementary to the company’s existing invoicing frameworks, they open the floor to SMEs and the rollout can really gather pace.”

    The price is right

    Treasury says Australian businesses exchange more than 1.2 billion invoices each year and the Australian Taxation Office (ATO) estimates almost 90 per cent of SMEs still operate in a manual invoice environment with paper and emailed PDF invoicing costing $27–$30 to process. The ATO says e-invoicing reduces that cost to less than $10 an invoice.

    To facilitate e-invoicing, the data needs to be shared in a standardised format. Australia and New Zealand have adopted the Pan-European Public Procurement On-Line (PEPPOL) interoperability framework. This international e-invoicing standard is used in more than 34 countries and is run by non- profit association OpenPeppol.

    According to Deloitte research, e-invoicing is being adopted in varying levels in countries, with France, Greece and Norway mandating it. E-invoicing will force SMEs to upgrade their practices and systems, reducing payment times and manual processing errors. Aside from improved efficiencies, lower business costs and improved payment terms, it also creates an audit trail.

    Revenue authorities around the world are shifting to more digitised ways of collecting and assessing taxation information. Some of these have used e-invoicing to conduct data-matching exercises between the amount of VAT reported by both supplier and buyer to the revenue authority.

    Change is coming

    As part of the Digital Business Plan, all Commonwealth agencies are mandated to adopt e-invoicing by 1 July this year, investing $3.6m to facilitate e-invoicing adoption across the public sector. It involves a commitment to pay within five and 10 days respectively. More than 80 per cent of Commonwealth invoices are able to be received electronically. Australian and New Zealand governments are also strongly encouraging the adoption of e-invoicing across all levels of government and business.

    While there is no current mandatory rollout for e-invoicing for non-government entities, Deloitte anticipates that the ATO will eventually implement a rollout similar to the Single Touch Payroll to mandate the use of e-invoicing for large companies. Companies should be prepared for changes ahead.

    Goodbye paper receipts

    The decline of the traditional paper receipt is also in train, thanks to a raft of competitors building products around digitised receipts.

    In Australia, the four big banks have invested in Slyp — founded by former PayPal and ANZ executives Paul Weingarth, Spiro Rokos and Mike Boyd — which has built a system to deliver digital receipts into bank apps. NAB launched Slyp smart receipts via its mobile banking app in late 2020, allowing customers to opt in to receive receipts digitally and others are working on integration. Participating retailers include Chemist Warehouse (which prints around 2.2 million paper receipts a week), Harris Farm Markets and General Pants.

    Fintech DiviPay, backed by ANZ, has combined with Slyp to offer an end-to-end digital process for employee expenses to send receipts straight to the cloud on payment. Slyp estimates customers receive an average of two or three paper receipts per day, 93 per cent of them non-recyclable.

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