Home Business PEPPOL & e-invoicing explained: What it means for your business

PEPPOL & e-invoicing explained: What it means for your business

PEPPOL & e-invoicing explained: What it means for your business

In this year’s federal budget, the government committed another $15.3 million to the roll out of e-invoicing. This is a key priority for the government in further digitising the economy and reaping the productivity benefits of faster payments.

What’s PEPPOL?

Many small and medium-sized business owners may wonder what e-invoicing is, and what it means to them. The first thing to note is that e-invoicing is not sending a PDF invoice over email. Electronic invoicing (e-invoicing) is the system-to-system exchange of invoices via a common standard called PEPPOL (Pan European Public Procurement Online), which Australia and New Zealand adopted in 2019.

You may wonder why Australia and New Zealand adopted a European standard? The simple reason is that it is a very widely used and well-established standard, currently used in 34 countries worldwide. Many countries in the Asia Pacific region, including Singapore, Japan, and Malaysia, have also implemented PEPPOL or are in the process of doing so. A common international procurement framework facilitates cross-border trade for Aussie companies.

Why e-invoice?

The ATO says e-invoicing could return $28 billion to the economy over the next 10 years. Quite simply, this is because the current method of sending and receiving invoices is incredibly inefficient. With most invoices generated and processed manually, human error on either side can significantly delay payments. Naturally, this has a knock-on effect on the broader economy, putting a brake on growth.   

With e-invoicing, data is exchanged in a structured format so is more accurate and complete. Further, as it arrives direct to the finance system there are fewer human touchpoints, and a higher rate of straight-through processing can be achieved.

Who’s adopting e-invoicing?

The starting point for PEPPOL’s national rollout is business-to-government transactions. In September last year, the government announced a mandate that all Commonwealth agencies would e-invoice by 1 July 2022, with 80% doing so by 1 July 2021.

To encourage its suppliers to start e-invoicing, the government committed to paying correctly rendered e-invoices up to the value of $1 million within five business days or pay interest on them. With the transition well underway at federal level, it’s likely state governments will shortly follow suit.

As e-invoicing gets further traction in the economy, you may find that whether you supply to government or not, your business customers require you to e-invoice them. The upside for you is that you’ll be paid quicker, particularly if you’re invoicing a large organisation; the benefit to your business customer is that their cost of invoice processing will be significantly reduced.

How to e-invoice?

It may depend on which accounting software you’re using as to whether e-invoicing is a no-brainer for your company or requires more work from you. To be able to e-invoice, your company systems need to be integrated with a PEPPOL access point for both sending and receiving invoices. This is because data is exchanged over the network from the seller’s access point to the buyer’s access point. Therefore, it does not matter if trading partners are using different finance systems, providing they are both connected to the relevant access points for the data exchange.

In many instances, the accounting software that companies are already using will incorporate e-invoicing at no extra subscription charge. But this is not always the case, so it’s worth checking with your software provider. Some may, for example, only offer e-invoicing on their latest releases and require an upgrade to access that functionality.

Should you not want to upgrade or change your software, there are various options for you to become PEPPOL ready. These include the following:

  • Add on a third-party application that includes a PEPPOL access point,
  • Engage a PEPPOL access point service provider to integrate your existing software,
  • Use an online portal offered by a service provider to send e-invoices.

Things to consider:

It’s worth considering how e-invoicing will work in your business, and how it will affect business processes and practices now and into the future.

For example, as a small to medium-sized business, your primary driver may be getting paid faster and reducing invoice-related correspondence with your customers, so your focus may be on issuing e-invoices. However, if you also receive a volume of invoices, you may need to consider how to optimise invoice processing workflows to maximise the benefits of PEPPOL.

Naturally, not all businesses will start e-invoicing at the same time. Therefore, even if you are sending and receiving e-invoices, you are likely to continue receiving many non-PEPPOL invoices from your suppliers. How will you manage a manual invoice approval process for these invoices, alongside an automated workflow for e-invoices?

An option could be to get your invoice receiver’s PEPPOL access point through an accounts payable automation solution. This means that you can apply the same rigour to all your invoices, cutting payment times and costs, and ensuring accuracy in company spend.

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