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In December last year federal Treasury began a consultation period for a Business eInvoicing Right (BER). Under this proposed scheme, businesses would be legally obliged to eInvoice if requested to do so by a trading partner.

What is an eInvoice?

An eInvoice is not an emailed PDF invoice (or other file type); Australia has adopted the Peppol (Pan European Public Procurement Online) e-procurement framework and standards to enable the exchange of documents between buyers’ and sellers’ finance systems. Read more on Peppol here.

This new digital infrastructure facilitates automated processing and results in faster payments. Currently, 90% of the 1.2 billion invoices exchanged in Australia each year still involve some manual processing. This is because even when invoices are emailed, data still needs to be extracted, validated, and uploaded to company systems before it can be processed.

    Why switch to eInvoicing?

    Manual processes are time-consuming and therefore expensive to both trading partners, putting a brake on growth. Digital Economy Minister, Senator Jane Hume, said: “It is estimated that every time an eInvoice replaces a paper or emailed invoice, the businesses involved in the transaction can share more than $20 in cost savings per invoice.”

    While eInvoicing delivers cost savings, it also frees capacity for employees to take on other work. This means businesses can achieve more with the same resources, lifting productivity and enabling growth. eInvoicing is one way the government hopes to recover from the economic impacts of the pandemic.

    Benefits of e-invoicing:

    • Reduced processing costs,
    • Faster payment times,
    • Enhanced payment security,
    • Decreased environmental impacts, and more!

     

    When and how to eInvoice?

    Currently, almost 40 countries worldwide have adopted the Peppol framework for e-procurement. In Australia, the NSW government has begun eInvoicing. This means suppliers who issue eInvoices up to the value of $1 million will be paid within five business days or interest will be payable to them. Likewise, all Commonwealth agencies must eInvoice by 1 July 2022, with over 80% already doing so.

    With Peppol legislated in Australia it is not a question of if, but when and how to manage its roll out. Federal Treasury held stakeholder consultations over 2020 and 2021, receiving strong overall support for eInvoicing but with advice from some parties not to mandate its adoption at a time when many businesses are already under pressure.

    The reality is though, companies need the certainty that if they transition to Peppol they will be able to transact with their suppliers and other businesses via the network. If eInvoicing uptake remains low, there is less value in changing business processes and/or adding to or upgrading software systems. For Peppol’s successful roll out there needs to be an expectation that in time all businesses will come onto the network.

      How would the BER work?

      A BER would mean that when a business joins the Peppol network it is able to transact with its business partners who would be legally obliged to eInvoice when requested to do so, if covered under the BER.

      The federal Treasury is currently consulting on how this scheme could work and is proposing a staggered rollout for the BER to come into effect for different size entities (thresholds to be decided), but indicatively:

      • Large businesses (annual turnover over $50 million) – 1 July 2023
      • Medium businesses (annual turnover $10 million to $50 million) – 1 July 2024
      • Small businesses (annual turnover less than $10 million) – 1 July 2025

      Under this proposal, from July next year all businesses would have the right to request and receive Peppol eInvoices from large businesses. Over the next few years, medium and then small businesses would also be covered under the BER and be required to eInvoice if they receive a valid request from a trading partner.

      This approach limits the regulatory burden on small businesses who have some time to find the right software solution for their needs; with this proposal it is not until mid-2025 that all entities covered under the BER would be legally required to provide Peppol eInvoices on receipt of a valid request.

      Conclusion 

      The Treasury is continuing to look at options for mandating the adoption of eInvoicing by businesses and has released its second consultation paper within a year.

      This proposal accelerates the adoption of Peppol eInvoicing for large companies, with other sized businesses not under immediate pressure to join the network. However, should small and medium-sized enterprises choose to receive eInvoices, then large companies covered by the BER would be legally required to issue them from 1 July 2023.

      While all businesses can transition to Peppol at any stage, small businesses would not be covered by the BER until 1 July 2025. This would allow them plenty of time to prepare for the change, and to find the right software product to meet business requirements.

      Large businesses should consider how their accounts payable would work with some suppliers sending Peppol eInvoices, while smaller suppliers may continue to email PDFs until they are covered by the BER.

      For many organisations, a good option may be an accounts payable automation software product that can receive and process Peppol eInvoices alongside traditional invoices, applying the same data validation rules to both inputs before initiating automated processing and payment.

      Find out more about accounts payable automation here. To find out more about the proposed BER and to have your say, check out the consultation paper. Submissions close 25 February 2022.

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