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  • Benefits of e-invoicing

    Australian small businesses are collectively owed $26 billion in unpaid invoices at any given time. Of all late payments, over 20% are due to errors on invoices and of those, over 20% are due to the invoice being sent to the wrong recipient following manual data entry.

    The Australian Government is committed to delivering e-invoicing. With over 1.2 billion invoices exchanged in Australia annually, savings to our economy are estimated to be $28 billion over 10 years (as shown in Figure 1).

    Figure 1: Benefits to the Australian economy

    Infographic showing the benefits of e-invoicing to the Australian economy as described above.

    Benefits for businesses

    Below are some of the benefits that business can expect from adopting e-invoicing:

    Improved cash flow and quicker payments

    While e-invoicing brings efficiencies through simplifying and automating the exchange and processing of invoices, the biggest benefits to business will be reduced payment times and improved business cash flow, especially in government purchasing transactions.

    Some states in Australia, such as New South Wales, will be paying businesses in as little as five business days by the end of 2019, as long as their information is correct when using e-invoicing.

    E-invoicing standards will ensure that information quickly reaches its destination to be processed in the business management software. E-invoicing will help connect invoice information and set up business operations for better and quicker payment terms.

    Easier processing and cost savings

    The faster processing and payment of invoices with e-invoicing will result in cost savings.

    It is estimated that it costs businesses $30.87 to process a paper invoice, $27.67 a PDF invoice, and only $9.18 to process an e-invoice (Figure 2). This means it is approximately 70% cheaper to process an e-invoice than traditional paper or PDF invoices, saving businesses time spent manually entering invoices.

    Figure 2: Processing costs

    Infographic showing the estimated processing costs of an e-invoice, compared with a paper invoice and PDF invoice. Details described in paragraph above.

    This equates to estimated shared savings (between the sender and receiver) of $21.69 each time e-invoicing replaces a paper invoice, and $18.49 when it replaces a PDF invoice (as shown in Figure 3).

    Figure 3: Shared transaction savings

    Infographic showing the estimated shared transaction savings (sender and receiver)  as described above.

    The introduction of the common e-invoicing approach will make it easier for businesses on both sides of the Tasman to interact and transact with each other, and with government.

    Fewer errors

    E-invoicing standards will ensure that information exchanged is correct and of high quality. Reducing manual handling and the re-keying of information means fewer incorrect or lost invoices.

    Direct and secure

    E-invoices are received directly into the business's financial systems, minimising the risk of fake or compromised invoices. E-invoices are sent between the sender and receivers chosen service providers and software. The invoice doesn’t transmit via ATO's systems.

    The integrity of e-invoicing will streamline interactions between businesses and with government. It will reduce opportunities of billing scams and money loss, as the transaction is part of a secure and reliable framework.

    Available for every business size

    E-invoicing standards will ensure that all businesses in all sectors can access and benefit from e-invoicing, regardless of their size and the systems they currently use.

    Benefits for digital service providers

    The e-invoicing initiative creates new market opportunities for digital service providers. It enables cost-effective and innovative solutions for different sized businesses. E-invoicing allows for digital inclusion for all digital service providers and presents equal ability to implement software.

    The common approach across Australia and New Zealand will also bring consistency in the way e-invoicing standards are incorporated into existing or new software products. This can lead to an expanding user or client base by offering a digital solution that will be interoperable regionally and globally.

    Benefits for tax professionals

    Tax professionals play a critical role as trusted advisers for small-to-medium sized businesses and are a source of advice on running a business. E-invoicing is an opportunity for tax professionals to differentiate their service offer by providing cutting-edge advice and encouraging their clients towards a digital future.

    E-invoicing doesn’t involve emailing and will not affect the workload of tax professionals. In fact, the automation will provide efficiencies and increase business productivity.

    It will provide tax professionals with the opportunity to redirect their focus onto client services – for example, helping clients improve their record keeping, meet their reporting obligations, get paid quicker and improve cash flow. Ultimately, this will assist them to meet their business objectives more efficiently.

    Last modified: 31 Jul 2019QC 57984