Peppol einvoicing in Australia

EInvoicing is the digital exchange of invoice information directly between the software systems used by buyers and suppliers. It provides a standardised way for businesses to manage their invoicing processes digitally.

The Australian Taxation Office (ATO) explains that with einvoicing, suppliers don't need to print, post or email paper-based or PDF invoices. Similarly, buyers don't need to manually enter or scan invoices into their software. eInvoicing removes the need for manual data entry and intervention for both buyers and suppliers.

The adoption of einvoicing aims to help businesses modernise their invoicing processes through digital technology. It has the potential to deliver significant productivity improvements and cost savings for Australian businesses.

How E-Invoicing Works

eInvoicing uses a standard framework called Peppol to exchange invoices and other documents digitally between suppliers and buyers.

Peppol stands for Pan-European Public Procurement Online. It was originally developed in Europe as a way to standardise business-to-government procurement processes.

The framework consists of:

• A set of specifications for how invoice data should be formatted so it can be exchanged digitally between different software systems.
• A secure network operated by accredited service providers that facilitates the exchange of invoices and other documents between supplier and buyer.
• Governance arrangements and legal agreements that ensure the framework operates properly.

The key steps involved in the einvoicing process under Peppol are:

1. The supplier's software produces a digital invoice with the required data formatted according to the Peppol specifications.
2. The supplier's software sends the einvoice data file to an accredited Peppol service provider, also known as an access point. This access point handles the sending of invoices through the Peppol network.
3. The access point transmits the einvoice through the Peppol network to the buyer's own access point. The buyer chooses their own access point which handles receipt of einvoices.
4. The buyer's access point delivers the einvoice data into the buyer's software. The einvoice appears as a digital record which can then be managed through the buyer's normal workflows and processes.
5. Once received, the buyer can process the einvoice for payment using their normal internal controls. Appropriate checks and verifications are still required before paying einvoices.
6. The buyer may send back messages like confirmations or disputes digitally through the Peppol framework if required.

The exchange of data occurs directly system-to-system through the Peppol network. Organisations only need to connect once to the Peppol network through an access point. They can then transact einvoices with any other organisation connected to Peppol, regardless of the software being used.

The Role of the ATO

The ATO has been appointed by the Australian Government to administer the Peppol framework in Australia.

In this role as the Australian Peppol Authority, the ATO:

• Sets Australian-specific customisations to the Peppol specifications and documents to meet local requirements. This includes adjustments like specifying the use of ABN and GST fields.
• Accredits and monitors service providers to ensure they comply with requirements to operate as access points in Australia.
• Promotes adoption of Peppol einvoicing across government and industry.
• Provides support, education and guidance resources about einvoicing for businesses.

The ATO has also been given responsibility to support Australian Government agencies to implement einvoicing.

It’s important to note the ATO does not have access to view or receive copies of the einvoice information exchanged between buyers and suppliers. It manages the framework but is not directly involved in actual einvoice transactions.

Software and Service Providers

To be able to create and send einvoices, suppliers need some form of software that can:

• Generate invoices in the right digital format according to Peppol specifications.
• Transmit the einvoice files through an access point to the Peppol network.

Many commonly used business management, accounting and enterprise resource planning software systems have either been updated or developed new modules to enable einvoice capabilities.

Software providers that meet the technical conformance requirements are listed on the ATO's eInvoicing Ready product register. This register lists over 400 software products that support einvoicing, from major providers such as MYOB, Xero, Sage and others.

Alternatively, rather than using accounting software, businesses can use einvoicing web portals and services offered by service providers. These let businesses manually create einvoices through a web form which are then sent through Peppol on their behalf.

To receive and ingest einvoices, buyers also need some form of digital system capability. eInvoices received from the Peppol network via an access point need to flow into the buyer's financial or procurement software in an automated way.

Common methods that buyers use to receive and manage einvoices include:

• Using accounting software that can automatically receive and load einvoice information.
• Using specialist accounts payable automation software which scans and extracts invoice data from sources like email or Peppol.
• Integrating a Peppol access point directly with their ERP or financial systems.
• Using web parsing tools which scan and collect key details from received PDF invoices.

Adoption Expectations in Australia

The Australian Government has mandated that all government agencies implement einvoicing capabilities. Compliance with this requirement is being phased in, with federal agencies required to be einvoicing-enabled by 1 July 2022.

State and territory governments are also adopting their own einvoicing mandates and transition timelines. NSW was the first state to mandate einvoicing for its agencies from January 2022. Other states are expected to follow.

These government mandates aim to drive einvoicing take-up amongst their respective supplier bases. By having government agencies adopt einvoicing early, their suppliers that wish to do business with government are compelled to follow.

Government agencies committing to pay einvoices faster provides a further incentive for suppliers. Under the Australian Government's supplier pay-on-time policy, agencies are expected to pay einvoices within 5 calendar days.

Outside of government, einvoicing is generally voluntary for private businesses. However, industry groups predict that large businesses will increasingly use their influence and procurement power to drive adoption across their supply chain.

Key organisations expected to drive take-up include large corporates, shared service providers, major banks and other financial institutions, educational institutions and healthcare providers.

For small to medium enterprises (SMEs), adopting einvoicing may be more of an optional business decision. However, industry groups believe that as einvoicing gains wider adoption across government and large corporate buyers, many SMEs will implement einvoicing capabilities to remain competitive.

Who Does Einvoicing Impact?

Einvoicing involves changes to systems and processes by both buying and supplying organisations within a business relationship.

Suppliers

For suppliers, issuing einvoices instead of paper or PDF invoices involves:

• Having accounting or billing software capable of generating einvoices. This may require an upgrade or enabling a particular module or add-on.
• Integrating the software with a Peppol access point to transmit einvoices into the Peppol network.
• Changing processes around invoice creation, management and record keeping.
• Ensuring customer master records include the correct business identifiers needed to route invoices.
• Learning new procedures and providing training to invoicing staff as required.

Suppliers also need to communicate with their customers to confirm readiness and discover any specific requirements for transacting via einvoicing.

Buyers

For buying organisations, changes are needed to be able to receive and process einvoices including:

• Having financial software, ERP or accounts payable systems that can automatically ingest einvoice information received via Peppol.
• Integrating their back-end systems with a Peppol access point to facilitate einvoice receipt.
• Modifying workflows, business rules and master data to support einvoice receipt and processing.
• Training accounts payable staff in new einvoice handling procedures and exception management.
• Obtaining customer master data like ABNs from suppliers in order to route einvoices correctly upon receipt.
• Updating procurement policies, processes and templates to reflect einvoicing capabilities.

Buyers also need to collaborate with suppliers to onboard them onto einvoicing and provide clear guidance about information required on einvoices.

Service and Software Providers

Providers of digital business services enable organisations to adopt einvoicing. This ecosystem includes:

• Einvoicing-enabled software vendors that develop or configure their products to be Peppol compliant.
• Peppol access points that provide the infrastructure to connect business systems to the Peppol network. They manage the secure exchange of einvoice transactions.
• Specialist consultants that can advise on einvoicing adoption from a business change perspective, covering people, process and technology elements.

These providers develop in-house expertise on Peppol standards and specifications. They ensure their solutions interoperate correctly so that businesses can exchange einvoices seamlessly via Peppol.

Some of the factors service providers need to accommodate include:

• Meeting accreditation requirements to provide access point services within the Australian environment. This includes specific security and testing prerequisites.
• Supporting Australian customisations of the Peppol specifications like use of ABN, GST etc.
• Having suitable commercial and pricing models for their target customer base.
• Integration of access point services with a wide array of accounting software, ERP systems and other business platforms used by their customers.
• User support services and customer assistance to help businesses onboard and transition to einvoicing.
• Strong understanding of Peppol network operations, standards evolution, legal agreements and governance processes.

Broader Impacts

At a whole-of-economy level, widespread adoption of einvoicing is expected to lead to aggregate productivity gains, cost savings and other benefits for Australian businesses.

The government has stated that transitioning to einvoicing is a vital part of its digital business plan and a key priority of its modernisation agenda.

Einvoicing is estimated to provide around $28 billion in gross economic benefits to Australian businesses over 10 years. Time savings from automation and processing efficiencies provide the biggest contribution.

The use of einvoicing across Australia also supports digital capability and growth. Moving business-to-business interactions like invoicing to more automated digital channels enables reinvestment and innovation.

As businesses become einvoicing enabled, they develop capability and capacity to adopt other digital ways of transacting. Einvoicing helps companies modernise and creates opportunity for further improvement.

For small businesses in particular, einvoicing removes barriers and minimises manual handling. It provides access to the same standardised digital processes used by larger trading partners. This supports greater SME participation across procurement and supply chains.

At an environmental level, transition from paper to digital invoicing provides sustainability benefits through reducing waste and energy consumption. Einvoicing's contributions to a lower carbon economy align with many businesses' environmental goals.

Timeline of Key Developments

Some of the key steps in the development and adoption of einvoicing in Australia have included:

• September 2019 - The Australian Data and Digital Council agreed to develop a whole-of-economy einvoicing framework to drive widespread adoption.

• February 2020 - The government formally announced plans to implement the Peppol standard for einvoicing in Australia and mandated adoption for federal government agencies.

• September 2020 - As part of Australia’s economic recovery plan, the government reiterated einvoicing as a priority initiative and allocated funding to accelerate roll-out.

• December 2020 - Legislation passed authorising the ATO's role as administrator of einvoicing in Australia.

• February 2021 - The ATO commenced the accreditation of Peppol access points to provide einvoicing services in the local market.

• July 2021 - The government mandated that all federal agencies must adopt einvoicing for procure-to-pay processes by 1 July 2022.

• September 2021 - The first 30 software products were registered on the ATO's eInvoicing Ready register, with many more added since.

• January 2022 - NSW became the first state to mandate einvoicing for its government agencies.

• July 2022 - The federal government supplier pay-on-time policy was updated, requiring 5-day payment terms for agencies receiving einvoices.

• September 2022 - South Australia began onboarding suppliers to transact einvoices with government entities.

• October 2022 - Western Australia commenced an einvoicing pilot within government as part of its digital strategy.

The timeline demonstrates that einvoicing has rapidly gained priority and momentum within both federal and state government settings over the past few years.

Government-led adoption aims to stimulate the broader take-up of einvoicing across industry. As more public and private sector organisations implement einvoicing capabilities, levels of adoption and transactions are expected to steadily increase.