eInvoicing means no more fiddling about with manual bill entry, PDFs or emails, and it might just herald the end of late payments too. It’s the future of invoicing, and savvy SMEs are already jumping on board. Here’s why.
What is eInvoicing?
eInvoicing is yet another exciting digital upgrade to help streamline the back-end of your business. It refers to the electronic exchange of invoices directly between accounting software systems, and as such offers a simpler, smoother way to manage invoicing and bills.
eInvoices are easy to create and keep track of, and even in large companies and government agencies, accounts payable teams will receive them within minutes. Meanwhile, incoming eInvoices will appear automatically within your own accounting software as bills awaiting approval, minimising manual input.
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Despite these benefits and many others, research by Xero reveals that awareness of eInvoicing remains low among Australian SMEs. In a recent survey of more than 1,000 Australian small businesses and sole traders, nearly half (47%) thought eInvoicing meant emailing a PDF invoice or invoice link. Only 35% knew that eInvoices are sent directly from accounting software to accounting software.
What are the benefits of eInvoicing?
How many times have your payments been delayed because your invoice was stuck in somebody’s inbox? Maybe they’d gone on leave, left the business, or you accidentally sent it to the wrong email address?
eInvoicing ensures your invoice ends up in the right business’s accounting system almost instantly — and that’s just one of many benefits:
1. Save time (and money)
The Xero survey found that invoice management costs the average small business two working days — or 12.4 hours — a month.
With eInvoicing, you can say goodbye (and good riddance) to several time-consuming steps when processing payments, such as manual data entry and accuracy checks. The result? Faster, more streamlined bill management.
Better still, research by Deloitte suggests that every time an eInvoice replaces a PDF or paper invoice, it could save up to $20 between the sender and the recipient.
2. Faster payments = improved cash flow
Late payments are a real source of stress among Australian SMEs and sole traders, the Xero survey found. Nearly two-thirds (63%) of respondents said they deal with customers or clients paying late, and as a result, nearly a quarter have had to delay payments to themselves and/or suppliers.
It’s more straightforward to send and receive eInvoices because — thanks to that system-to-system exchange — they appear automatically in the right business’s accounting software as bills awaiting approval. They’re easier to pay, too, because there’s no longer any need to scan them into your system or input the data manually.
This likely means faster turnaround times to help SMEs get paid faster, which should come as welcome news to the 22% that spends more than five hours a month chasing late payments.
3. Fewer errors
Nearly one in five (19%) of Xero’s survey respondents said they spend more than five hours a month correcting errors in invoices.
With eInvoicing, standard fields ensure all the correct information gets included, reducing admin time and the potential for error.
4. Greater security
Unfortunately, another recent Xero survey found one in five (18%) Australian SMEs has fallen victim to invoice fraud, at an average cost of $15,500.
Because eInvoices don’t rely on email, they’re a safer way to send and receive invoices and bills. Being exchanged via the secure Peppol network minimises the risks of fake or compromised invoices, and as noted already, there’s no chance of invoices going AWOL.
eInvoicing is a big focus of the Australian government, which is investing $15.3 million to raise awareness of the benefits and to increase its adoption among businesses. As well as educational activities and supply chain pilots, this involves working with payment providers — such as eftpos, Visa and Mastercard — to incorporate eInvoicing into the main payment methods used by business.
To show it means business, the government has mandated that federal agencies must make the switch to eInvoicing by July 2022. This is good news for SMEs who work with government, as it means getting paid faster — federal agencies have committed to paying eInvoices within five business days.
The federal government is also working with states and territories to expand adoption of eInvoicing throughout the public sector. Government agencies in NSW, for example, had to make the transition by January 1 2022 and have committed to paying eligible eInvoices within five business days and interest on any late payments.
So, there you have it: registering for eInvoicing offers another exciting opportunity to automate and streamline the back-end of your business. That means more free time, and headspace, to spend doing what you love — and isn’t that something worth signing up for?
Looking for new ways to take your business to the next level? Xero’s Small Business Guides are valuable resources filled with tips and advice on how to take your small business to the next level.
Xero is a cloud-based accounting software platform for small businesses with over 3 million subscribers globally. Through Xero, small business owners and their advisors have access to real-time financial data any time, anywhere and on any device. Xero offers an ecosystem of over 1,000 third-party apps and 300 plus connections to banks and other financial partners.