FINANCIAL LITERACY • 15 DECEMBER 2022 • 5 MIN READ
An introduction to eInvoicing for business owners
What is eInvoicing?
Back in the good old days, I remember printing out invoices, stuffing envelopes and mailing them out and not only that, but walking sizeable dollar cheques to the bank every week when they were paid. This was pretty normal for the time but when I reflect back, it was super inefficient and somewhat risky!
Thankfully, in the digital age we live in, this no longer has to be the case. When you first hear about eInvoicing, you may think that this is simply about sending your invoices via email in an electronic format (e.g., PDF). However, eInvoicing is more than just that, it allows you to send and receive invoices digitally with other businesses such as your suppliers, contractors or government via Peppol’s secure global public network. It doesn’t apply to business-to-consumer transactions. It’s a government initiative designed to make invoicing and doing business more efficient.
Who should use eInvoicing?
The New Zealand central government agencies must be able to receive invoices in an electronic format from 31st March 2022. And the government is committed to the adoption of eInvoicing. Although eInvoicing is not mandatory for all businesses in NZ, it’s encouraged to do so. There are 6,863 businesses registered with eInvoicing as we speak. If businesses don’t adopt eInvoicing, they may encounter delays in invoice payment, higher costs, and risks of errors and fraud.
A business or government agency can receive an eInvoice if they are registered for eInvoicing. Both senders and receivers need to use accounting software that's connected to the Peppol network. You can check if they are registered in the Peppol directory here.
How do I connect to Peppol?
To access the benefits of the network, you need to connect to a certified Peppol Service Provider (SP). The SP connects your company to the network so you can send eInvoices and other e-documents in the correct format. To receive eInvoices, you must obtain a Peppol ID. The ID is a unique identification number which the SP can usually provide.
A list of the available service providers is listed here.
If you think eInvoicing might work for you, getting started is easy:
- Check with your software provider to see if your software is eInvoicing enabled and follow their steps to get started. If you don’t use software, there are free and low-cost options available to help you start eInvoicing now.
- Talk to your trading partners to see if they’re already connected. If not, encourage them to connect and start exchanging eInvoices with you.
With any change in a business process, it’s important to go through proper change management. Identifying your stakeholders and reviewing how it will impact people, processes and systems is important. As with anything, planning and preparedness is vital when you run a business. Beany can be there to help support you through this change.
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What are the benefits of adopting eInvoicing?
Improved cashflow
- Fast payment. In NZ, currently on average it takes 25.1 days to receive a payment from your customer. By registering with eInvoicing, with less admin and processing, you may get paid quicker than others.
- Less errors and lost invoices also mean invoices can get paid without the to-and-fro. of sorting out incorrect invoices
- Having a more predictable cashflow will help you manage your cash flow forecasts and help you make better business decisions relating to procurement, sales and operations management.
Make less errors
eInvoicing uses standardised data that is validated before the eInvoice is sent through the network to your software. You still need to make sure you do assurance and internal checks but a reduction in manual processes will overall lead to less errors made.
With eInvoicing you don't need to:
- re-type or scan invoices
- make corrections
- chase missing information
Automation of invoices
With 280 million invoices exchanged in NZ annually, the automation of invoicing system will benefit the economy.
If a supplier wants to send an invoice, they have to prepare the invoice, check the invoice and then email the invoice. The recipient then opens the invoice in their email, enters it into their accounting system and then arranges for payment.
With eInvoicing, systems talk to each other and there is a reduction in the duplication of manual processes by both parties.
Reliable and secure
- Those using the Peppol network go through validation checks for e.g. checking that their NZBNs are active and valid as well as requiring a minimum amount of details for the invoice.
- There is no risk of lost invoices
- Reduction in the risk of fake invoices especially sent through email scams or ransomware attacks.
Cost savings
According to this study, eInvoicing is cheaper to process than traditional paper or PDF invoices. It only costs about $10 to process an eInvoice, compared with $26 for a paper invoice, or $23 for emailed PDF invoice. It also reduces processing time.
- As a supplier, you no longer need to spend time creating paper or PDF invoices
- As a buyer, you don’t need to manually enter invoices into your software
- You save on material costs and reduce your environmental footprint
Although you will still need to have some assurance and internal checks, the cost savings comes from reducing the manual processes involved.
One connection with a global reach
All that is needed is for the supplier’s and buyer’s accounting software to be connect via the Peppol network and no matter what size the business is and where it’s located, one business can trade with many others.
What does the future look like in New Zealand regarding eInvoicing?
In June 2021, the central government agencies were set the implementation goals.
- All central government agencies to be eInvoicing ‘receive’ capable by 31 March 2022.
- 90% of business to central government invoices are eInvoices by July 2026.
Your accountant will be able to keep you up to date on any progress on this matter.
How to use Xero for eInvoicing
eInvoicing is available in Xero’s Starter, Standard and Premium plans, so there’s no need to purchase any third-party addons to use this feature.
To use eInvoices in Xero, you need to do the following before sending any eInvoices:
- Register to receive your bills as eInvoices
- Find your suppliers NZBN via Peppol Directory or communicate directly with them
- Review bills received as eInvoices in Xero
For a more detailed guide, visit Xero’s website.
Seek professional advice
Your accountant should provide you with professional advice when you apply eInvoicing to your business. This is because they stay up to date on changes and legislation, and they will guide you through the process. Talk to a Beany accountant to find out more about this topic.
Who are Beany?
We’re an online accounting firm that is always right here for you, your accounting pain relief. The most advanced technology lets us work way more closely with you than a normal accountant world.
We have a dedicated team of certified accountants and a support team to take care of your business no matter where you are, so you can focus on growing your business. We take out the ‘fluff’, break down the barriers and get things done. Looking out for you is what we are all about. Get started for free today.
Cherry Roe
Accountant & Freelance Writer
I started my accounting career in 2012 and obtained my CA in 2015. Outside of work I enjoy hiking and hope one day to complete the Tongariro crossing walk.
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