Late payments are the scourge of small businesses. Every year, close to $115 billion worth of invoices are paid late, amounting to $52,000 for every small business in Australia. Research has also shown that 53 percent of all invoices are paid late and are 23 days overdue on average; creating significant cash-flow impacts for businesses.
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Get paid faster and reduce risks of fraud: Unlocking the benefits of eInvoicing
Fortunately, eInvoicing can help
eInvoicing is the ability to send invoices directly from one organisation’s financial systems to another. It’s a quick, cost-effective way to ensure invoices are approved, processed and paid in an accurate and timely manner. It doesn't involve emailing invoices, nor is it a PDF invoice, but rather a direct electronic transmission of data between systems.
The advantage of eInvoicing is that it helps businesses get paid faster, while simplifying their processes and reducing manual data entry. To help raise awareness and increase its adoption, the Federal Government announced in the 2021-22 Budget that it would invest $15.3 million to promote the benefits of eInvoicing for businesses.
With more than 1.2 billion invoices sent across Australia each year, Deloitte Access Economics has estimated that widespread adoption of eInvoicing could deliver $28 billion in savings to the national economy over 10 years.
How is the government driving the adoption of eInvoicing?
With the rapid growth in e-commerce and digital business processes accelerated by the COVID-19 pandemic, the Federal Government and Australian Taxation Office (ATO) have been undertaking a significant program of work to drive the adoption of eInvoicing.
The ATO has been working to drive the uptake and deliver the benefits of eInvoicing across the Australian economy, particularly in the government space and larger businesses. As at 1 July 2022, federal government agencies were mandated to adopt eInvoicing.Once adopted, they will then have to pay all eligible eInvoices received within five days. A list of these agencies can be found at ato.gov.au/eInvoicing
Last year, the NSW government mandated its agencies to prepare to receive eInvoices by 1 January 2022. To date, more than 60 agencies are able to do this. The NSW Government also launched the Supplier Hub Invoicing Portal, a centralised hub to support SMEs with submitting and reviewing the status of eInvoices.
Meanwhile, South Australia is also making rapid progress in this area while other states are progressively coming on board. Some local government agencies are now eInvoicing-enabled, with more considering the move.
At a recent Intuit QuickBooks webinar, Mark Stockwell, Director of eInvoicing at the ATO, said how pleased the ATO is to see the efforts that the state governments are making to help businesses enjoy the benefits of eInvoicing.
“NSW and South Australia are leading the charge, but the other states and territories aren’t far behind. We’re also seeing local government agencies enabled with eInvoicing which is really pleasing. There are currently more than 17,000 businesses already eInvoicing-enabled across Australia, with many more coming on board as they see the benefits,” Stockwell said.
The ATO worked initially with large businesses – such as Bunnings and BOC – to get them eInvoicing-enabled.This is because enabling larger businesses first tends to have a flow-on effect to smaller businesses that they in turn work with.
However, while the focus has been on larger businesses, small businesses are increasingly using eInvoicing, and the ATO has recently begun ramping up its communications to SMEs about the benefits.
The ATO is also working with stakeholders, including software providers such as Intuit QuickBooks, eInvoicing solution providers, business advisers, tax professionals, and peak bodies to encourage their networks and members to get onboard, and raise both awareness and education across the business community.
This increased focus will continue in coming months and years, making now the ideal time to talk to your small-business clients about the benefits of eInvoicing.
Benefits of eInvoicing for small-business clients
There are many advantages to making the move to eInvoicing. eInvoicing is up to three times more cost-effective than manual processing, and those savings are shared between buyers and sellers, as well as their accountants and bookkeepers.
Manual processing of invoices can also have hidden costs such as late fees and missed discounts for early payment. These financial penalties chip away at hard-earned small-business profits. eInvoicing helps avoid these costs, while delivering significant efficiency gains through removing the need to rekey or scan invoices, make corrections or chase missing information.
eInvoicing also assists local businesses who want to transact globally, most notably with New Zealand through the Trans-Tasman Electronic Invoicing Arrangement, which sets out how both nations have agreed to pursue common approaches to eInvoicing.
Australia currently has an agreement to work with Singapore on eInvoicing and will soon be able to work with other countries using Peppol (an international eProcurement framework that enables cross-border digital exchange of procurement documents and data).
What's in it for accountants, bookkeepers and their clients?
Another benefit of eInvoicing is that it significantly reduces the risk of paying fraudulent invoices, because all Australian businesses using the Peppol network are registered and identified using their ABN. This is important, given the high costs associated with fraud. The Australian Competition and Consumer Commission estimates businesses lost $227 million to payment redirection scams in 2021, a 77 percent increase on 2020.
Faster payments is another key benefit associated with eInvoicing. Sending invoices straight from one financial system to another removes the risk of them getting lost in the post, overlooked or inadvertently missed in an inbox. It’s also a more environmentally friendly option as it eliminates the need for paper invoices and to physically transport them in the mail.
eInvoicing also presents small businesses with significant new growth opportunities that, as their adviser, you can help them explore. It allows them to more easily supply larger organisations, or to more seamlessly transact across international borders using the Peppol standard.
Finally, since eInvoicing helps clients get paid faster and therefore improves their cash flow – a key pain point for many small businesses – as well as making transactions with larger and global organisations simpler, while also protecting them from fraud, it’s an important and effective way to build and deepen client relationships.
Getting started
Intuit QuickBooks supports sending and receiving e-invoices by giving advisors and their clients a choice of app store partners to connect to the Peppol eInvoicing network.
QuickBooks Online is integrated with a number of eInvoicing solutions, including Link4 and LUCA Plus, allowing advisors and their clients to choose the best solution for their particular needs.
Watch the recording of this webinar, held during eInvoicing Week 2022 which covers the benefits of eInvoicing for Bookkeepers and their small business clients.This webinar features Mark Stockwell, Director of eInvoicing at the ATO and Shaye Thyer, Head of Accounting at Intuit QuickBooks, and Robin Sands, CEO of eInvoicing solution Link4.
We’ve also produced an eBook to help accountants and bookkeepers understand the benefits of eInvoicing, featuring tips on how to get started from the team at eInvoicing solution provider LUCA Plus. Download the eBook now.
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