• New Wave Accountants

Our Guide to E-Invoices: What They Are & Why Are They Important?

Using invoices can become quite a struggle for many small businesses, mainly because many do not see the importance of this one small document. While big businesses have systems and processes in place to avoid confusion, small businesses tend to struggle with the rudimentary handwritten hard copies. This particular process handled by hand can cause multiple issues with the final result—be it through misfiling an invoice, wrong number input, or even an erroneous recipient.

Luckily for SMBs, the Australian Tax Office (ATO) is pushing for the use of e-invoices all throughout Australia.

What is an e-invoice?

In a cursory glance at its name, an electronic invoice is a digital invoice issued to a buyer from a seller. E-invoices have been around for quite some time, mainly in the form of portable document formats (PDFs).

More than just the basic PDF, what the ATO is trying to implement is an automated direct exchange transmission of invoices between the software systems of buyers and suppliers. It would negate the need for paper receipts and PDFs, as well as the extra work involved in documenting and filing them.

Through this process—which includes validation of invoice information and acknowledgment of receipts, among other things—one merely processes the e-invoice, while simultaneously integrating the supplier’s accounts payable solution with the seller’s accounts receivable solution. They can immediately be sent to a customer’s software—for as long as it is compatible with the standards—even if it’s different to the system being used by the supplier.

These invoices are automatically sent to the business’s financial systems, making things faster, safer, and with no room for minimal error. This process results in no more messy paper transactions, no more fake or compromised invoices, and more room to breathe and relax for businesses.

Why is an e-invoice important?

The ATO’s goal is to make this process if e-invoicing not only a reality but a necessity. According to statistics, Australian small businesses are collectively owed $26 billion in unpaid invoices. In terms of late payments, 20 per cent are due to errors in invoices, and 20 per cent of that is due to being sent to the wrong recipient.

E-invoicing will cut down on that delay and that issue, making it a wiser choice for everyone. Furthermore, the ATO estimates a savings of almost $28 billion over ten years merely by improving and streamlining the invoicing system. Meanwhile, the benefits to businesses will be reduced payment times and improved cash flow.

This migration to e-invoicing is currently in production. The ATO is working with the local software industry to use the Pan-European Public Procurement On-Line (PEPPOL) standard to help all Australian businesses take advantage of this process. The PEPPOL standard is an internationally established and proven approach, which many believe is the best possible option at the time.

To get ahead of this highly anticipated change, contact your software provider to see if your current system can accommodate an e-invoicing process. If your current system won’t hold, inquire immediately on how to start migrating to a system that can.

Looking for an end-to-end accounting and bookkeeping service that can help scale and grow your business on the Gold Coast? Contact us now and see how we can help you.

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