By Kevin Summerhays, Connected Accountants Director
Electronic invoicing (e-invoicing) has recently arrived in New Zealand and Australia.
How ready is your business to reap the benefits of this government-backed innovation?
What is e-invoicing?
E-invoicing is the smooth, fast, and secure exchange of invoice data between two accounting systems.
Those familiar with paper and email-based invoicing will know that these are manually intensive and prone to human error, which causes increasing processing costs and payment times for businesses. Many will have already eliminated their paper invoicing, preferring to send their invoices via a PDF e-mail attachment or directly from their accounting software online.
E-invoicing takes precision to another level, bringing the direct electronic exchange of invoices between the suppliers’ and buyers’ finance systems. By implementing e-invoicing, your business no longer needs to generate paper-based or PDF invoices that have to be printed, posted or emailed. Customers won’t need to manually enter the details into their accounting system either and these efficiencies mean that E-invoicing is a clear opportunity to speed up cash flow by improving accuracy, security and processing time.
On top of it all, e-invoicing is super simple to use. It’s secure, fast, and works even if two parties use different financial or accounting
software. The New Zealand government has backed the success of the initiative by committnig to have all of its central government
agencies able to receive e-invoices by March 2022! So, if the government is a customer of yours then you should look to switch to
Why is the government involved?
Back in 2018, the New Zealand and Australian governments decided to work together to create a framework, constructing a stand-alone platform to enable e-invoicing to happen. The result is that all e-invoicing in Australia and New Zealand is based on the successful international PEPPOL (Pan-European Public Procurement Online) platform, which is what allows e-invoicing to work in a secure, speedy, and accurate way.
The motivation behind this framework was to bring about improvement in digital inclusion, productivity, and international trade. The idea
was to empower digitally enabled businesses to directly transact with one another in an efficient, automated and standardised way.
How e-invoicing improves your business (and the environment)
E-invoicing is a sure cost and environmental saver — it requires less energy, less paper, and doesn’t need any physical storage space. In fact, the benefits are numerous — the New Zealand Government’s dedicated e-invoicing website lists the following:
- Faster payment. The reduction in manual processing, errors and delays should lead to an improvement in your cash flow.
- Reduced admin. You’ll still need to follow your usual approval and control processes but you won’t need to waste time on re-work, chasing missing details and correcting errors. This means more time to focus on the strategic tasks that’ll improve your business.
- Cost savings. It costs businesses approximately $26 to process a paper invoice, or $23 for an emailed PDF invoice. Compare this to a cost of less than $10 to process an e-invoice! The saving is due to the removal of manual processes.
- Direct and secure. E-invoices are impossible to lose, minimise the risk of fake or compromised invoices, and reduce the chance of paper or PDF invoices being intercepted. Sender and receiver details are validated, audit logs kept, and strict protocols are followed to ensure invoices remain secure while they are sent across the network, for greater accuracy, security, and peace of mind.
- Universal connection. The government-backed PEPPOL standards mean that the invoices and data travel seamlessly between different financial systems and different countries.
- Better financial visibility. E-invoicing allows lots of detail on each invoice to be retained. This provides better visibility through the invoicing process and supports analysis, forecasting, planning and budgeting — improving financial management in your organisation.
- Available to all organisations. Any businesses or government agency can access and benefit from e-invoicing, regardless of their size and the systems they use. An e-invoicing framework can be accessed by ‘in-house’ systems, which are often used by large businesses. Small businesses meanwhile can access e-invoicing capability through their accounting or financial software provider, or through a number of free e-invoicing solutions.
- It’ll be great for our economy. With over 280 million business to business invoices exchanged in New Zealand each year, savings to our economy through e-invoicing adoption are estimated to be $4.4 billion over 10 years. Other benefits include a faster, smoother, more connected economy, which helps individual businesses perform better.
How do I get started?
You can find a list of software providers (both free and paid) here.
Once you’ve established an e-invoicing enabled software, you’ll then need your New Zealand Business Number (NZBN) and the NZBN for each of
your customers (you can find those details here). Your NZBN number is the unique
global identifier that ensures your e-invoices end up in the right place.
At Connected Accountants we use Xero (an e-invoice enabled software) and we are definitely looking forward to implementing e-invoicing more into our approach. Xero have also published a helpful ‘how to guide’ on how your business can benefit from this new software. If your business uses already uses Xero then simply follow the steps on the guide to improve your own e-invoicing efficiency.