PEPPOL in a nutshell
In 2019 the Australia and New Zealand government adopted the PEPPOL e-Invoicing standard to facilitate trans-Tasman trade and economic growth. e-Invoicing significantly reduces invoice processing costs and times, equipping businesses to do more with their working capital. Ultimately, this helps to create jobs.
The pandemic and economic fallout of 2020 brought a new urgency to PEPPOL’s roll out in Australia and New Zealand. As a result, the Australian Government announced a mandate that all Commonwealth agencies must transition to e-Invoicing by 1 July 2022, with 80% of them to do so by 1 July 2021. To encourage suppliers to e-Invoice, the Government committed to paying all e-Invoices of $1 million or under within five business days or pay interest on them.
What will the roll out look like in Australia?
While these short payment times provide a compelling incentive for businesses to transition to PEPPOL, it’s not yet known what the level of take up will be across the nation. Indeed, the Government wants to capitalise on the digital progress the country has made under COVID-19, as most organisations increased their use of technology to enable business continuity.
PEPPOL e-Invoicing can only drive productivity and growth in the Australian economy if companies can trade with numerous businesses on the network. If companies can only do business with a few trading partners, they may not feel that it’s worth the effort and cost of transitioning.
Therefore, the Government is currently consulting on mandating the adoption of electronic invoicing and is considering three options:
- A phased-in approach for all businesses, allowing small businesses more time to plan.
- A mandate for large business only, with the size definition and timeframe to be confirmed.
- A non-regulatory approach to promoting PEPPOL e-Invoicing.
Benefits of transitioning
For businesses that transition to electronic invoicing, data is exchanged via the network between finance systems. Therefore, it arrives complete and ready for processing, delivering the following major benefits:
- Lower processing costs
- Quicker payment times
- Reduced risk of fraud
With PEPPOL e-Invoicing, data does not need to be extracted from a digital or paper document and entered into a finance system manually or through Optical Character Recognition (OCR) technology. The resulting increased efficiency and accuracy mean there are less exceptions to manage, which leads to quicker payment times and a higher rate of straight-through processing.
Further, as all trading partners need to be registered on the network by their access point provider and authenticated through their ABNs, there is significantly less chance of fraudulent suppliers or invoices. This is very important as fake email invoices cost Australian businesses $132 million in 2019 alone!
Challenges of transitioning
With a new system there are always challenges to overcome.
For many organisations, the most significant issue will be that not all trading partners will come onto the network at the same time. This means sellers may need to switch between e-Invoicing and traditional invoicing, according to whether their customer is registered with an access point provider to receive PEPPOL e-Invoices. Likewise, buyers may have to continue to manually process invoices from suppliers that have not joined the PEPPOL network. This reduces electronic invoicing’s efficiency dividend in these businesses.
To address this, companies could delay joining the network; however, they will miss out on immediate and ongoing savings on the costs of transacting. Sellers will not benefit from being paid quicker, and buyers will not profit from lower processing costs, early-bird discounts and not paying late fees and charges.
Further, with only a limited number of PEPPOL access point service providers currently operating in Australia, these companies could face capacity issues with many businesses transitioning at the same time. Therefore, if firms delay it could take them longer to connect to PEPPOL than they anticipate, disadvantaging them versus their competitors.
Choosing an access point provider
Another challenge is choosing the right PEPPOL access point provider for the business.
Organisations can use several sender access points, according to the needs and structure of their firm, but can only connect to one buyer access point for receiving invoices. The PEPPOL network is structured in a four-corner model, which allows companies to opt for different (or the same) service provider/s for sending and receiving invoices. This allows businesses to opt for the solutions that suit their requirements.
The main options for access point providers are as follows:
- Web portal – a standalone PEPPOL solution
Pros: This is a low (or no) cost solution that is suitable for businesses sending or receiving a small number of invoices.
Cons: As this interface is not integrated with company software, there could be duplication in inputting data into the portal and other systems. This somewhat negates the benefits of e-Invoicing.
- PEPPOL integrated into ERP
Pros: Many software providers are currently updating their software to offer PEPPOL e-Invoicing in 2021. This functionality may come at no additional cost to the existing subscription.
Cons: Most companies that process a volume of invoices have strict compliance requirements, needing invoices to meet certain thresholds for straight-through processing or go through an exception management and approval process prior to payment. As ERPs are not specialists in accounts payable, there are likely to be gaps in their invoice processing capability. This could leave organisations exposed to compliance breaches.
- Accounts payable / accounts receivable providers
Pros: Providing PEPPOL access point services, these companies can typically meet firms’ current and future needs, offering a solution that navigates this period of transition with some trading partners on the network and others continuing to invoice as they have done previously.
Further, some business documents – such as purchase orders and credit notes – are not yet available on the PEPPOL network and need to be handled by other workflows. An automated accounts payable or accounts receivable solution will also be able to process these documents with minimal manual intervention.
For invoice receivers, accounts payable providers can configure their automated solutions (which use OCR to digitise data) to enforce the same business rules on an invoice whether it enters the organisation via e-Invoicing or traditional means. This ensures compliance standards are met and payments are validated before they are made, certifying the business pays what it owes, while also maintaining accurate and accessible records.
Cons: A new solution typically requires a business case to be approved and hands-on stakeholder management. There are also short-term costs to absorb: the outlay for the solution, as well as time and resources spent on implementation, changing processes and upskilling personnel.
What value can the access point provider add?
Each software company should compete on the value it can add the business beyond connecting it to the PEPPOL network as an invoice sender or receiver.
For example, an automated accounts payable solution immediately saves an organisation invoice processing costs. It does this by reducing manual data entry by a whopping 92%, not only saving time and staff costs, but improving accuracy and compliance. This results in a high return on investment, usually delivered within 18 months.
With a built-in PEPPOL access point for invoice receivers, an automated solution will not just facilitate e-Invoicing, but ensure that the organisation’s approval process is robust, its business rules are adhered to, and that it pays the correct amount for the goods and services it receives.