1. What is the difference between e-Invoicing and emailing invoices?
Globally the majority of business–to–business invoices are exchanged via email. While this is a more efficient way of delivering an invoice than via post, the recipient still needs to enter these details into their finance systems and approval workflows for the invoice to get paid. When this upload is done manually, mistakes are commonplace; errors and re-work slow the approval process and delay payment.
With e-Invoicing, the invoice is created in the supplier’s finance system and transmitted electronically through the network to the buyer’s finance system. This means less human intervention and a higher rate of straight-through processing. With a common e-Invoicing standard such as PEPPOL, trading partners can transact with ease regardless of whether they are using the same accounting software or ERPs.
2. Why have the Australian and New Zealand governments adopted a European standard?
PEPPOL – or Pan European Public Procurement Online – was introduced by the European Commission in 2008 to facilitate cross-border trade with public sector organisations. As such, it is a widely used and well–established standard that is currently used in 34 countries worldwide.
In addition to European countries, Singapore implemented PEPPOL in 2019, Japan has committed to doing so in October 2023, and Malaysia began a pilot in 2020. With many of Australia and New Zealand’s major trading partners using PEPPOL, its local rollout should help enterprises of all sizes trade in these markets.
3. How does e-Invoicing work?
Source: The Treasury 2020, ‘Options for mandatory adoption of electronic invoicing by businesses’
The PEPPOL network sits between corners 2 and 3. The invoice sender’s access point (corner 2) will use the buyer’s ABN on the e-Invoice and the PEPPOL Service Metadata Locator (SML) and Service Metadata Publishers (SMPs) to retrieve the correct destination details to route the data to the buyer’s access point.
The PEPPOL network transforms data into a standardised, computer-readable format called UBL (Universal Business Language). Therefore, the supplier does not need to know what finance system its buyer has in place; as long as the buyer is registered to receive PEPPOL e-Invoices, they will receive the data into their system via their access points. If they are not registered to receive e-Invoices, the sender’s access point will notify the invoice issuer and often provide a back-up option of sending the invoice via email attachment.
The 4-corner model is significant because it allows businesses of all sizes and differing requirements to participate on the network at low cost. Each trading partner can choose the access point solution and pricing structure that is right for their needs. This opens up opportunities for small companies to supply large businesses. Previously they may have had to adopt their electronic procurement systems to do business with them, which may have been prohibitively expensive for them. Further, e-Invoicing can open up new overseas markets for companies in other countries that also use the PEPPOL e-Invoicing standard.
4. What are the benefits of joining the PEPPOL network?
PEPPOL benefits organisations in both a buying and selling capacity. Some of the key benefits include:
With data exchanged between systems and little human intervention needed for invoice processing, approval times are slashed. This means sellers are paid quicker, which helps them unlock cash flow to manage and grow their businesses.
Buyers reduce their costs of doing business as it is significantly cheaper, more reliable and quicker for them to use technology rather than manual workflows to process invoices. These savings can be reinvested back into the business.
PEPPOL is an encrypted network and all trading partners need to be registered and authenticated on it through their approved access point provider. Therefore, there is significantly less potential for fraudulent invoices. On the contrary, it’s relatively easy for scammers to create fictitious PDF or paper invoices.
E-Invoicing helps organisations meet their environmental objectives. The efficiency gains help to streamline operations and lower costs. For example, by minimising paper, printing, delivery and physical storage requirements, businesses can lower their energy and resource consumption and also save money.
– Building relationships
With payments made promptly, PEPPOL enables enterprises to conduct business more effectively, achieving deeper strategic relationships and better business outcomes for both parties. E-Invoicing also makes it easier for companies to buy and sell across borders into other countries that operate the PEPPOL standard.
5. What are the costs of joining PEPPOL?
There are costs associated with connecting to the PEPPOL network, and these will vary according to the access point provider a business uses and the pricing model they adopt. Software companies will compete on the value-add they deliver customers beyond providing access to the PEPPOL network. Therefore, it’s important to choose the right solution and fee structure for business requirements.
Importantly, continuing to manually process invoices may be significantly more expensive than the costs of adopting e-Invoicing. The ATO anticipates buyers and sellers will share in savings of around $20 per invoice by e-Invoicing. They have calculated that it costs many businesses:
– $30.87 to process a paper invoice
– $27.67 to process a PDF invoice
– $9.18 to process an e-Invoice
Most of these costs are attributable to the time employees need to spend manually processing an invoice: entering invoice information into company systems, following compliance procedures, identifying and managing exceptions, gaining approvals, responding to supplier queries and more.
By removing manual processing, many businesses will experience immediate cost savings from e-Invoicing. In many cases, the finance systems that businesses are already using will be upgraded to incorporate e-Invoicing at no extra subscription charge. Therefore, for these companies there may be no additional spend, bar the time spent upskilling staff.
For businesses that send and receive a low volume of invoices – or don’t have software that offers e-Invoicing – there are likely to be low cost and no cost access point solutions on the market. Therefore, e-Invoicing should not impose a significant regulatory cost on small and medium-sized enterprises; certainly not $9.18 per invoice!
6. Can I have a different access point for sending and receiving invoices?
Yes, you can have different access point providers for sending and receiving invoices, or the same provider may fulfil both roles. Typically the access point provider will depend on the software solution that you choose. For example, a business may want to issue e-Invoices from their ERP but receive them into an accounts payable solution that can simultaneously manage e-Invoices and traditional invoice formats. These software solutions may use different (or the same) access points providers.
7. Will I need to change finance systems?
It’s important to consider your business requirements and assess whether your finance systems can continue to meet current as well as future needs. All software providers should be able to advise if and when they will be ready for PEPPOL e-Invoicing. It may be worth changing systems if there is no plan in place to offer this capability. However, another possibility could be to use an online portal offered by an access point service provider. This allows e-Invoicing without requiring integration with company systems.
When deciding whether to change finance systems, the next priority is to map out how e-Invoicing will work in your business. For example, what internal workflows are needed for approvals and exception management? What can the ERP or finance system offer, and where are there gaps? How will the company manage a period of transition with some suppliers continuing to email or send invoices via post?
Now may be the time to invest in an automated accounts payable solution that integrates with the ERP and processes PEPPOL e-Invoices. This would allow organisations to apply the same business rules to all invoices, regardless of how they enter the organisation. Automation affords many of the benefits of e-Invoicing to paper-based invoices: speed, accuracy, security, compliance, visibility, reporting, and more.
8. Will e-Invoicing become mandatory?
The Treasury is currently consulting with businesses on options for mandatory adoption of electronic invoicing. It is considering three main options:
Option 1 – A phased approach, allowing more time for smaller businesses to prepare.
Option 2 – A mandate for large business only, with the size and time frame to be decided.
Option 3 – Non-regulatory options to encourage adoption.
The government is keen not to impose a regulatory cost on business but is aware that for e-Invoicing to be successful, there needs to be significant uptake. The success of the initiative relies on the majority of businesses joining the network. If this happens, the ATO forecasts that e-Invoicing could return $28 billion in savings to the economy over the next 10 years.
It is worth noting that even if the government does not legislate e-Invoicing, a business’ trading partners might require it given the efficiency gains it affords them.
9. How do I ensure that my compliance needs are met?
While e-Invoicing means that data is exchanged between finance systems, an organisation will still have to set the business rules to allow straight-through processing. Therefore, while e-Invoicing enables a higher rate of touchless processing, workflows for approvals and exception management will still be required.
Organisations will have to consider the practicalities of their suppliers potentially transitioning to e-Invoicing at different rates. This means some may continue to email or post paper-based invoices, while others may e-Invoices. Ideally, companies will not want to administer different workflows for different invoice types. The resulting complexity and lack of transparency make compliance breaches more likely to occur.
An automated accounts payable solution ensures that an organisation’s compliance needs are met before an invoice is processed, and that the same rigor is applied to invoices whether they arrive in the organisation via e-Invoicing, email or post. An automated accounts payable solution may be able to provide you with a buyer’s access point for PEPPOL while also meeting your current accounts payable needs.