What is e-invoicing?
- Posted by: David Watters
- Category: Best Practices, Peppol
Over 1.2 billion Business to Business (B2B) and Business to Government (B2G) invoices are exchanged annually in Australia, the majority of those invoices are sent either as paper invoices or as PDF invoices attached to an email. These are costly ways to process invoices with manual data entry or validation usually required. The Australia Tax Office (ATO) estimate that:
- Average invoice processing cost for a paper invoice is $30.87
- Average invoice processing cost for a PDF invoice is $27.67
The majority of the costs are based on the usual manual work required to enter the invoice data into your systems and process it for approval and payment.
Electronic invoicing (or e-invoicing) is the automated process of submitting and processing an invoice in a digital format. Integrating the supplier’s accounts payable (AP) solution with the seller’s accounts receivable solution, for exchanging invoice information electronically in an automated way – removing the need for any manual data entry or validation of the invoice. This process often includes validation of invoice information, acknowledgement of receipts and some specific business rules.
Using e-invoicing to connect businesses and enabling them to trade electronically is a modern, innovative solution to help businesses become more efficient and effective. The ATO estimates that businesses shifting to e-invoicing can reduce the cost of processing an invoice down to $9.18. The NSW Government estimated a shared saving between suppliers and the NSW government of $71m based on the 4.2 million invoices across NSW Government in 2019. So the business benefits are pretty hefty when e-invoicing is adopted between buyers and sellers.
Is emailing PDF invoices e-invoicing?
No, whilst PDF invoicing is more efficient than paper processing it still has a number of flaws that can be overcome by true e-invoicing. At a simple level, PDF invoices are where the PDF file acts as a carrier for the invoice data and a way for people to visualise the content of the PDF. This means instead of supplier needing to print an invoice from their accounting system, pop it in an envelope and mail it to their customer, most modern accounting systems can produce a PDF and have it emailed automatically – most suppliers already do this hence the misconception that they are already “doing e-invoicing”.
PDF invoicing, whilst more effective and efficient than paper, carries with it some big inherent risks and issues that business should be mindful of.
- Data capture is only semi-automated – depending on your OCR solution there is always a need for some manual checks and validation of the data on PDF invoices
- High risk of invoice fraud – PDF invoices can easily be intercepted mid-flight and manipulated before being received by the organisation. Email compromise scams like this are on the rise, a topic we wrote about recently.
- Low data accuracy – as the data captured is only semi-automated the manually entered data is prone to error and with typical OCR data capture accuracy rates at around 80%, this manual data entry can really add up quickly.
- High processing cost – based on the work required the ATO estimates that PDF invoices can cost a business up to $27 per invoice to process, a cost that adds up very quickly if you process a large number of invoices.
The business case is clear for e-invoicing when you consider the risks with PDF invoicing, the question is how to get started. The Australian, New Zealand and Singaporean governments have all agreed on adopting the Peppol framework for e-invoicing, providing a secure, easy to implement and effective way to send and receive Peppol e-invoices.
How can we get started with Peppol e-invoicing?
Enabling Peppol e-invoicing for your organisation should be simple, value driven and cost effective. We offer a range of different solutions to get your business ready for Peppol e-invoicing. If you’re considering Peppol e-invoicing, why not speak with our experts today?