What Is E Invoicing

Along with a more automated exchange and processing of invoices, e-invoicing also promises reduced payment times and better cash flow.

The headline above may give the impression that electronic invoices are a futuristic concept, but of course even today there is a version of e-invoices — think PDFs and other electronic documents that can contain the information that a standard tax invoice is required to display.

What is it?

But what the ATO is working towards, and what it means by electronic invoicing (or e-invoicing) is more than a mere PDF.

It is the automated direct exchange transmission of invoices between the software systems used by buyers and suppliers. E-invoicing removes the need to create paper-based or PDF invoices, scan, post or email them, and manually enter them.

E-invoicing is an automated process of submitting and processing an invoice in a digital format, integrating the supplier’s accounts payable solution with the seller’s accounts receivable solution. This process often includes validation of invoice information, acknowledgement of receipts and some specific business rules.

E-invoices can be sent directly to a customer’s software if both systems are using the same standards, even if the buyer and supplier are using different software. For Australian use, the ATO is working with the local software industry to use what is known as the Pan-European Public Procurement On-Line (PEPPOL) standard, which is internationally established and is a proven approach used in over 32 countries to foster international trade.

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 the ATO’s systems.

What ATO says about it

The ATO says that e-invoicing is more than a discretionary choice, but is rather a necessity, especially given that Australian small businesses are collectively owed $26 billion in unpaid invoices at any given time. Of all late payments, the ATO says that over 20% are due to errors on invoices, and of those more than 20% are due to the invoice being sent to the wrong recipient following manual data entry.

With more than 1.2 billion invoices exchanged in Australia annually, the ATO has estimated that savings to the economy from a better and more efficient invoicing system would be around $28 billion over 10 years.

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.

What you can do

To get your business ready for e-invoicing, you can contact your software provider to see if you are digitally ready and if they plan to offer e-invoicing. You can also ask your software provider about how they will offer e-invoicing and what you need to do. For example, you may need to update to your existing software, or add an additional service. Also remember to find out what support they will offer you in making the transition.

LUCA+ e-invoicing software trials at Electra Frost Accounting

Our accounting software developer friends over at LUCA+ are leading the way in this space and working with the Tax Office to support their product.

Small businesses and large organisations are already adopting e-invoicing and are reaping the benefits of its automated processes, securitisation against fraud and elimination of human error. In their article below, they explore the differences between mainstream methods of invoicing and e-invoicing. They say e-invoicing can help your business succeed, as platforms like LUCA streamline your accounts to give you a better view of your business while removing accounting hassles.

“LUCA+ incorporates Multi-Organisation Functionality, meaning organisations and individuals can now manage multiple accounting streams from a single account. LUCA+ integrates all of the features and benefits of e-invoicing into your existing accounting software.”

Read more about LUCA+ in this article – “why you should switch to e-invoicing”.

We love how automation saves us time to focus on advisory services to help our clients grow successful creative businesses. So we will soon launch trials of LUCA+ with our own software.

Please let us know if you are interested in participating in a LUCA+ e-invoicing trial with us. – click here


This information is only general in nature; it does not take into account your personal or business situation or objectives; it is not intended to replace professional advice and should not be acted upon. For professional advice based on your individual circumstances,  please do not hesitate to contact us.