The Australian government is all in on electronic invoicing (e-invoicing), planning to mandate its use by all agencies by 1 July 2022. E-invoicing revolutionises how businesses work together by removing the paper-based, manual processes around invoicing and, instead, automating the process through secure electronic message exchanges. This makes it a genuine gamechanger for the retail industry, improving security, compliance, accountability, and more.

E-invoicing works by replacing all the manual steps, such as printing and posting or emailing invoices, and receiving and reviewing invoices, with an automated, software-based process. The seller creates an invoice and sends it from their software through a standards-based network called Peppol. The invoice then appears in the buyer’s software, where it can be matched against the original order and approved for payment. As long as each party has the required access points, suppliers and buyers can even use different file formats and connection protocols between their software and their access point. And, there are plans for the network to exchange purchase orders, advanced shipping notices, product catalogues, and more in addition to invoices.

E-invoicing is not the same as emailing invoices because email still requires manual handling. Electronic data interchange (EDI) is another approach to automating invoice exchanges however is conducted through networks governed by EDI providers. This requires a connection with each trading partner’s EDI provider to send messages, which becomes complex and require more mapping (translating or converting one file format to another). E-invoicing only requires an access point to manage one connection protocol and one file format.

E-invoicing offers significant benefits including improved security of confidential documents. When these documents are sent as PDFs via email, they can be intercepted or altered. E-invoicing sends information directly to and from each company’s software, in a pre-defined format with security measures included throughout the process to ensure messages can’t be altered, eliminating the risk of interception or fraud.

E-invoices are also tracked through the lodgement processes, with events like sending and receiving invoices logged in the system for reference. This makes it easier to track the progress of invoices and improve audit trails and accountability. Retailers or suppliers who need to prove compliance can do so more easily, and, because the audit trail is clear and incontrovertible, accountability is also assured.  

Cost savings are also considerable, with e-invoicing up to two-thirds cheaper than traditional invoicing. According to the Australian Taxation Office (ATO), it costs $30 to process a paper invoice and $27 for an emailed invoice but less than $10 to process an e-invoice. This is because the process is automated instead of requiring humans to manually move the invoice through each step.

Automated processes also reduce the chance of errors. Manual systems provide plenty of opportunity for people to make mistakes, from simple typos to more complex errors that can cause delays in payment and supply of goods.

While retailers often have a mature and automated supply chain for the goods they resell, one area they can find savings from e-invoicing is in goods not for resale, or GNFR. This includes store fittings, training, facilities and office space, utilities, professional services, IT and more.

GNFR typically accounts for 20% of a retailer’s spend, and with e-invoicing costing a fraction of paper or PDF invoices, potential savings are large. Moreover, the time spent rectifying errors is time that can’t be spent on more proactive and growth-oriented business activities.

Retailers can also benefit from potentially opening up their business to trade with more suppliers. Using e-invoicing means they can easily trade with many partners without the complexities of setting up new relationships, and invoicing and payment arrangements with each new supplier. Instead, they can simply connect via the e-invoicing access points and begin trading straight away.

Retailers can also look to the other direction, their customers. Small businesses in particular are always looking for cost and time savings, and the time inputting supermarket or stationery store receipts could be better spent elsewhere. Offering to send customers an e-invoice can be a selling point in itself and simply letting customers choose e-invoicing can bring huge benefits, such collection of customer data, to the retailer as well.

Retailers looking to get started with e-invoicing should start by asking their software provider if they are integrating e-invoicing into the software. If so, they’ll be ready to go. If not, they may require an access point to send and receive, and possibly translate their e-invoices. Using an access point service provider is faster and easier than becoming an access point and is usually more cost effective.

E-invoicing will revolutionise all aspects of business in Australia in the next few years. Retailers who get started now will be ahead of the curve, and better able to manage security, compliance, costs and accountability in the business.

John Delaney is managing director at MessageXchange