eInvoicing is a recently introduced invoicing method that removes the need to send and receive PDF invoices via email (or post if you’re still doing things that way). It uses something called the Peppol network, which is an eProcurement framework developed and maintained by OpenPeppol, an international non-profit association.
You don’t need to know everything about Peppol, but you will probably come across this name when you set up eInvoicing for your business.
In the past, the sole method for receiving payment for a job or delivery involved generating an invoice and sending it to the client. Subsequently, their accounts payable would input the invoice details into their system and complete a transaction for payment.
The recipient of funds would then have to reconcile the payment in their system against said invoice. This process serves to ensure the alignment of financial records with the transactions reflected in your bank account, thereby facilitating accurate revenue reporting during tax season.
Sending and paying invoices is relatively simple but when you break down the costs it can still add up to around $30 per transaction.
With eInvoicing, you send your invoice directly from your software to your client’s software. There is no need to email a PDF, or to enter the invoice details manually. The client can then click to pay you for your products or services. There is far less need for manual data entry and the cost per transaction is closer to $10.
It only takes a small amount of time for your business to switch to eInvoicing, especially if your accounting software is already eInvoice compatible, like Reckon One, MYOB Business, and Xero Business Edition to name a few.
How to set up eInvoicing depends on which software you are using. The ATO maintains a list of compatible eInvoicing software and registration instructions on each so you can setup eInvoicing.
It’s important to make sure your software has current details for your clients and suppliers as these transactions run off ABNs and you will need those to be entered and correct.
The cost of switching to eInvoicing will vary between software providers, but you should be able to bundle it with the subscription fees you already pay.
Transitioning to use eInvoicing makes sense for the following reasons:
For businesses who work with the Government, using eInvoicing can help your business get paid faster as all Australian Government agencies covered by mandate now have eInvoicing-enabled. In the past, being paid by a Government agency could take weeks. Now, agencies can pay eInvoices in 5 days if both the supplier and buyer use Peppol eInvoicing.
The one challenge around eInvoicing is getting everyone on the same page. If you do introduce it, send your clients some information so they are aware of the new technology and can use it at their end as well.
Need some help setting up eInvoicing at your business or moving to a compatible software? Get in touch with AFS & Associates today.