Meant for business-to-business transactions, eInvoicing (or electronic invoicing) lets you exchange invoices digitally through shared software, eliminating the need to print or email them. While it’s still optional right now, it’s set to become the new industry norm.

Over 130,000 Aussie businesses are currently registered for eInvoicing, with adoption growing as more software providers integrate it. The recent Federal budget also allocated $23.3 million to help small businesses adopt eInvoicing.

If you’re feeling a bit overwhelmed by the shift, we shall break it down and show you how this change can be a win for your business.

The right software support

eInvoicing works through standard, secure networks, allowing invoice data to be exchanged between different software systems. In Australia (and many other countries), this standard is the Peppol network. To use eInvoicing, both your business and the recipient’s business must use software that connects via Peppol, where Australian Tax Office-approved service providers securely deliver invoices.

The Australian eInvoicing system is designed to integrate easily with your accounting software. Many small-business providers, like Xero, already offer eInvoicing. So, start by checking if your current system supports it. If not, it might be worth switching to avoid a complicated setup.

When choosing new software, remember to look for:

• Ease of use
• Good integration with your existing systems
• Local customer support

A good invoicing solution will help you stay compliant, streamline your process, and reduce errors.

Slashing scams and late payments

The recent Pursuing Payments Report by GoCardless revealed that one in five Australian business owners are losing between $6,000 and $30,000 each year due to late payments, and more than half expect the problem to get worse this year. eInvoicing automates the invoicing process to facilitate more timely payments.

eInvoicing also reduces the number of late payments and builds better business relationships by encouraging prompt, reliable transactions. It can help to prevent delays and miscommunications, allowing everyone involved to move forward smoothly and avoid any financial hiccups.

eInvoicing’s advanced security features, like encryption and secure transmission, protect your data from scams and unauthorised access. Plus, by storing everything electronically, it cuts the risk of losing or damaging physical invoices and makes it a breeze to manage and find your documents when you need them.

What to do with the money saved

Traditional invoicing often comes with high administrative costs, including expenses for paper, printing, postage, and manual processing time. eInvoicing helps cut or eliminate these costs by automating many of these tasks. With digital invoicing, you can lower your operational expenses, boost efficiency, and allocate resources more effectively. Plus, reducing errors and rework from manual invoicing can lead to even more savings both financially and in human resources. 

With late payments dramatically reduced, your cashflow will also become more secure, giving you more cash on hand to reinvest in your business. According to the Pursuing Payments Report, if customers paid on time, 31 per cent of business leaders would use the extra funds to grow their business, 30 per cent would pay suppliers sooner, and 28 per cent would invest in other areas. This creates growth opportunities even in a sluggish economy, allowing you to explore marketing, new products or services, and even hiring more support.

Switching to eInvoicing is a chance to remove pain points in your invoicing process and boost your business’s efficiency. You’ll not only keep up with the new invoicing standard but also improve relationships, reduce late payments and increase cashflow. 

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The move has been lauded by various parties.

“This funding is very important for SMEs and provides the ability to adopt eInvoicing that would enable better cashflow management and ensure timely payments,” said Robin Sands, CEO of Link4, a leading eInvoicing solutions provider.”

Currently, while government agencies are already paying eInvoices within just five days, thus dramatically improving cashflow for countless businesses, this is not yet the case for B2B transactions.

Sands pointed out that eInvoicing can significantly reduce payment delays. “Digitising the invoicing process streamlines payments, providing clear, accessible records of transactions,” he said. “If an invoice comes into the accounting system in an efficient way, it is easier for it to be paid faster.”

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) previously reported that one in four large businesses takes over 120 days to pay small business customers, with only 30 per cent paying within 30 days. As such, small businesses are experiencing late payment rates three times higher than larger corporations.

In response, the Federal Government implemented the ‘Payment Times Reporting Scheme’, which sought to address the late payments issue by mandating large businesses to report their payment times to small businesses and improve payment performance. 

“For SMEs, overdue invoices are more than just a hassle; they severely hinder growth,” Sands said. “Cashflow is the lifeblood of any business. Disruptions can stifle expansion and day-to-day operations.”

Sands pointed out that delayed payments impact not just individual businesses but the broader Australian economy. “When SMEs face payment delays, their ability to invest, hire, and grow is constrained. This stifles innovation and job creation,” he explained.

Sands further remarked that large businesses may see delayed payments as a financial safeguard, but this overlooks the broader impact. “Lengthy payment cycles can harm reputations and lead to higher future costs as suppliers raise prices to cover risks. Ultimately, this cost-saving measure can become more expensive over time,” Sands added.

“The problem of delayed payments is complex, but eInvoicing offers a clear solution. By embracing eInvoicing, businesses can improve efficiency, transparency, and standardisation, leading to faster payment cycles and healthier cash flow. For SMEs, this can mean the difference between stagnation and growth,” Sands concluded.

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“There are real opportunities for small business in engaging with eInvoicing,” Billson shared. “It’s a great way of sending invoices in a secure way, with improved cyber protection, simplicity and efficiency. Cashflow is the oxygen of enterprise, and this is a more secure and efficient way of dealing with what is a vital part of getting paid, replacing what can be a tendinous, mundane and error-prone activity.”

Billson explained that eInvoicing allows a business to exchange invoices through a secure network using existing business software, making it easier and safer to send and receive invoices digitally with other businesses, such as suppliers, contractors or government.

“The process is entirely digital and eInvoices are not PDF invoices that need to be printed, posted or emailed,” he said.

The Ombudsman pointed out that small businesses have long been particularly vulnerable to invoice substitution scams, also called payment redirection scams or business email compromises, wherein cybercriminals can intercept emails to customers and insert different bank account details for payments. The details sent out to the unknowing small business look legitimate enough and reflects a bill they were expecting for the small business unknowingly pays it. The money then goes to the criminal’s bank account and is quickly shifted, usually to cryptocurrency, where the chances of recovering the lost money become slim, if not none at all.

“Scamwatch data shows small businesses lost millions of dollars in such scams last year. Using eInvoicing can reduce this risk,” Billson said, adding that eInvoicing can also help streamline business operations.

“No one wants to spend all their life sending out Invoices. Imagine if that system was connected with your customers and your suppliers, he said. “You can send the information off, you validate that it’s the right people with all the critical information to execute the payment.”

The Federal government has already taken steps in pushing eInvoicing, as it has committed to spending $23 million of the Federal Budget for its adoption among small businesses, alongside efforts to incentivise its use with faster payment times by its suppliers, both of which have been acknowledged and commended by the Ombudsman.

In addition, Billson also commended the efforts of finance software providers in offering eInvoicing in their platforms,

Billson concluded with reiterating the call towards a shift to eInvoicing, saying, “For small and family businesses, I urge taking up the eInvoicing option to really streamline their dealings with other business and government customers, expand the use of eInvoicing across a growing network of users and increase the benefits to individual businesses and the economy that the technology offers.”

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The research has been released to coincide with the ATO’s eInvoicing Week (15-21 August 2022) which is designed to persuade small businesses to embrace eInvoicing.

The feedback from the study confirms invoicing is a significant component of an SME’s administrative tasks, with 83 per cent spending up to 20 hours a month issuing invoices. Three-quarters of respondents issue invoices at least weekly and one in 10 say invoicing takes between 20 and 49 hours of their time every month.

When asked what they viewed to be the benefits of eInvoicing, the top advantages listed by survey respondents were faster processing (58 per cent), a reduction in admin time (51 per cent) and a reduction in time to payment (44 per cent).

“Saving just five of the hours spent invoicing every week is equivalent to 260 hours – or 10 full days – each year,” MYOB Chief Employee Experience Officer Helen Lea said. “That’s a lot of time SMEs could be spending on other activities that’ll grow their business.

“We’re delighted to see awareness of eInvoicing has raised significantly since we last took a temperature check in January 2021,” Lea added. “Sixty-four per cent of SMEs had heard of eInvoicing this July, versus 43 per cent 18 months ago. However, now’s the time to turn that awareness into action and take advantage of this huge cost and time saving opportunity.”

MYOB has partnered with access point provider MessageXchange to provide its ATO accredited eInvoicing solution, with send and receive capability now live and available to MYOB customers at no additional cost as part of their software subscription.

John Delaney, Managing Director of MessageXchange, said eInvoicing Week represents an opportunity for businesses who don’t feel they know enough about eInvoicing to learn more and give it a try.

“For more than half (55 per cent) of those who are yet to make the switch to eInvoicing, it’s because they don’t feel they know enough about it,” Delaney said. “eInvoicing Week is all about the small-business support community coming together to offer information and advice that will demystify eInvoicing and make the process of getting online as simple as possible.

“eInvoicing takes no more than a couple of hours to explore the options and get set up,” Delaney added. “Using eInvoicing Week as the moment to find those handful of minutes to give eInvoicing a try, could end up being one of the best business decisions a small business can make this year.”

The Australian Small Business and Family Enterprise Ombudsman Bruce Billson said he enthusiastically encouraged small businesses to adopt eInvoicing.

“It is a great way to enable faster payment, it cuts the administrative burden and is more secure than posted or emailed invoices, so it reduces the chance of invoice fraud or scams,” Billson said. “About 1.2 billion invoices are exchanged in Australia every year but 20 per cent are sent to the wrong person and 30 per cent have incorrect information. It costs around $30 to process a paper invoice while an e-invoice costs less than $10.”

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In the study 48 per cent of the more than 500 small businesses and sole traders surveyed said they would consider registering if high-invoicing government agencies such as ASIC, the Australian Taxation Office (ATO) or state transport agencies sent eInvoices. It also found that 46 per cent of respondents would be more likely register for eInvoicing if their frequent big-business suppliers (e.g. Telstra, Officeworks, Woolworths) sent eInvoices directly into their accounting system.

“eInvoicing reduces administration and errors while accelerating payment for Australia’s small businesses, but they need lots of entities on the eInvoicing network to make registering worthwhile, Simon Foster, GM Product – eInvoicing at Xero, said. “This is a terrific opportunity for governments to use the volume of invoices it sends in a way that helps cut red tape, speed up payment times and increase security for small businesses.

“Government can lead the way with registrations by replacing multi-step processes like ASIC annual review fees, ATO payment plan statements and state vehicle registration fees, with eInvoices sent directly into the software of the small business, as we have seen in leading digital economies overseas,” Foster added.

Despite the numerous benefits it offers over manual invoicing (being more accurate, efficient and secure), eInvoicing is not yet widely adopted within the Australian small-business community. The study reveals 62 per cent were unable to define eInvoicing or not know what it is at all. The research also found that the top barriers to adopting eInvoicing included small businesses not knowing enough about it (41 per cent), feeling as though their existing processes are fine (28 per cent), and not enough of their suppliers using it (27 per cent).

To help encourage the uptake of eInvoicing in Australia, the ATO is launching eInvoicing week which will provide small businesses access to more education, resources and information on eInvoicing.

“Over the last few years, small businesses have accelerated their digitisation journey to keep pace with a changing world,” Foster said. “We know small businesses are time-poor, but they have the willingness to adopt new technology. We hope that eInvoicing week will give small businesses access to subject matter experts so that they can understand the positive impact it could have on their invoicing processes.”

The study shows the importance of eInvoicing, with 22 per cent of small businesses surveyed identifying that the time it takes to get paid is the top pain point for manual invoicing. And 26 per cent also said they often feel stressed about overdue invoices, while 63 per cent of respondents saying they would be more likely to register for eInvoicing if it proved to facilitate faster payment times. These cashflow issues are being compounded by problems of inflation and increasing living costs, as noted by 81 per cent. A recent Xero Small Business Index report identified that 92 per cent of Australian small businesses experience at least one month of negative cashflow per year.

“While invoice management is key to healthy cashflow, it can be overwhelming for small-business owners and sole traders to get on top of,” Foster said. “eInvoicing allows businesses and government departments to electronically exchange invoices between accounting software systems without the need for manual data entry.

“This has the potential to facilitate faster payment times, help boost cashflow, and reduce stress for small-business owners,” Foster concluded.

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