Author Archives: Rodrigo Martinez

25/11/2019

Traditional invoicing and eInvoicing: A comparison

We’re beginning to see a big change in the way we do invoicing in business. What used to be a very manual, paper-based process is now becoming automated and digital with the introduction of eInvoicing. What is eInvoicing? To put it simply, it is the electronic sending and receiving of invoices in a structured data format directly between software applications. This isn’t sending a PDF and or sending an email, eInvoicing is software to software and 100% automated. By comparing traditional invoicing and eInvoicing we can see just how efficient eInvoicing can be for both buyers and sellers in the following areas:
  • Processing and payment
  • Costs
  • Visibility, transparency and accuracy of information
  • Security

Processing invoices

Traditional invoicing

In traditional invoicing, the process of creating invoices and receiving payments can be lengthy. Often it looks like this:
  1. Create the invoice
  2. Print and post it (or send via email)
  3. Buyer receives and sends it to their accounts team
  4. The invoice is downloaded, reviewed and approved
  5. The invoice is paid
  6. The invoice is archived.
The process involves a lot of manual handling and re-keying of information, causing errors in invoice data, slowing processing and running the risk of invoices being sent to the wrong person or company. Traditional invoicing is also very labour and time intensive, so when staff are working on multiple tasks, the process can be slowed down even further. All these elements can create huge delays in payments and reduce cash flow for sellers, which is especially problematic for smaller businesses. Overall, paper invoices are estimated to take 23 days to process when the process runs smoothly. This can blow out to up to 90 days when they run into errors.

eInvoicing

eInvoicing works a bit differently. It looks like this:
  1. The seller finds their purchase order (PO) in their software and creates an invoice. The information is brought across from the PO. The seller sends the invoice electronically from their software. The invoice is sent, almost magically, through Peppol network directly to buyer’s software.
  2. The buyer’s software matches the received invoice against the PO for payment authorisation.
The process is streamlined through automation for both the seller and buyer. The issues presented by traditional invoicing are eliminated by significantly reducing redundant manual processing. eInvoicing has been shown to be 60-80% more efficient than paper-based processing greatly reducing payment times. One source calculates the average for processing an eInvoices is just 5 days . By reducing processing times with eInvoicing, sellers receive payment faster and buyers streamline their processes and business operations.

Costs

Traditional invoicing

There are a few different costs that are attributed to the traditional invoicing processing. For both buyers and sellers, the main costs are:
  1. Printing: even if using PDFs, invoices may be printed. Costs include paper, ink and even printer maintenance.
  2. Labour: you need people to process invoices and this only increases as your business grows.
  3. Postage
  4. Filing
Overall, costs have been estimated to be $30.87 to process a paper invoice and $27.67 for PDF invoices.

eInvoicing

Costs are much lower when we look at the costs associated with eInvoicing. Many traditional invoicing costs are reduced or eliminated altogether because of reduced manual processing and electronic sending. It’s been calculated that eInvoices are approximately 70% cheaper than traditional invoicing. On top of this, buyers can often stick to the payment terms of their suppliers, reducing late fees and even benefiting from early payment discounts.

Visibility, transparency and accuracy of information

Traditional invoicing

Traditional invoicing can require multiple platforms and software and sometimes complicated physical and electronic filing systems. This can make it very difficult to manage, maintain and retrieve records. This can make reporting harder, which impacts the accuracy of your business performance results and the data used in decision making.

eInvoicing

eInvoicing allows you to use a single piece of software for creating and processing invoices. This makes it much easier for businesses to have visibility and transparency of their payables and receivables. The need for collating information from multiple systems and paper documents is significantly reduced. As well as this, the reduced risk of errors from manual processing increases the accuracy of data.

Security

Traditional invoicing

There are a number of security issues that can occur from traditional invoicing.
  • Fake or comprised invoices: details on invoices can be changed or altered without knowledge from either party.
  • Billing scams and fraud: invoices can be sent to misleading sources, causing money loss.
This is commonly because the formats the documents are sent in allow them to be easily altered. Plus, sending invoices through mail or email means they’re easily intercepted, sent to the wrong person, or send fraudulently.

eInvoicing

eInvoicing uses the Peppol network, which requires buyers and sellers to have a certified Access Point send and receive invoices. The Peppol network adheres to a secure and reliable framework that all parties must comply with. eInvoices are sent in a pre-defined format which can’t be changed or altered. Archiving using eInvoicing is much easier to track, improving your audit trail. Comparing both traditional invoicing and eInvoicing shows significant efficiencies when using eInvoicing. If you’re interested in finding out how eInvoicing could work for your business, request a call from one of our experts today!

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20/11/2019

New eInvoicing legislation has become law. What does it mean for you?

More than 1.4 billion invoices are sent every year in Australia and New Zealand. With that in mind, it is easy to understand why people, especially those in the Australian Government, see eInvoicing as a game changer.

What is eInvoicing?

eInvoicing enables organisations to send and receive invoices electronically, directly to and from their software. It removes the need for unnecessary data entry and inaccurate OCR scanning. The eInvoicing model is based on four-corners, where corners one and four are the supplier and customer two and three are Access Points. These Access Points connect to each other to exchange eInvoices. You might also hear about Peppol in relation to eInvoicing. Peppol is a standard for eInvoicing, developed by OpenPEPPOL, an international standards body. It defines the eInvoice message format, as well as connection protocols and governance. The Peppol network is also able to exchange more than just eInvoices. Purchase orders are being reviewed and localised for Australia and New Zealand with more expected to be launched in the future.

What are the benefits of eInvoicing?

  • Easier invoice processing
  • Cost savings
  • Faster invoice payments
  • Fewer errors
  • Exchange of invoices directly to and from software
  • Secure
  • Available for businesses of every size
  • 60–80% more efficient than paper-based processing
  • Could save Australia and New Zealand more than $10 billion a year
  • The US Government has already seen eInvoicing save them more than US$450 million in processing costs alone.

A round up of developments so far:

  • In March 2018, the Australian and New Zealand governments agreed to look at common approaches to eInvoicing under the Single Economic Market (SEM) agenda. This was formalised on the 25th of October 2018 when the Australian Assistant Treasurer and the New Zealand Minister for Small Business signed the Trans-Tasman Electronic Invoicing Arrangement.
  • In February 2019, both governments announced their intention to adopt the Pan-European Public Procurement Online (Peppol) interoperability framework for eInvoicing.
  • In November 2019, the Australian Government announced that as of the 1st of January 2020, contracts valued up to $1 million will be paid in five days or face interest on late payments, as long as both the seller and the agency use eInvoicing.

What’s in the new eInvoicing legislation?

On the 29th of October 2019, legislation became effective allowing an Australian Peppol authority to be established by the Australian Taxation Office (ATO). The ATO put in their application to OpenPEPPOL to begin the membership process and was announced as a Peppol member on the 31st of October. Around the same time, the Ministry of Business, Innovation and Employment (MBIE) become the New Zealand Peppol Authority. As a result of the new legislation, the ATO and MBIE can now start to certify Access Points in Australia and New Zealand respectively. The ATO has begun working with software and eInvoicing solution providers to get the ball rolling. This is an important development as it means Australian and New Zealand businesses can connect and start to send invoices through the eInvoicing network as soon as Access Points have been certified.

What does this mean for you?

To access the eInvoicing network and start reaping the benefits of eInvoicing, businesses will need an Access Point. Software providers should find their own Access Points, or if your software doesn’t have an Access Point, you can find one directly. You can choose to become an Access Point yourself by going through the certification process with Peppol or you can work with an Access Point provider, such as MessageXchange, to connect you to the eInvoicing network. Working with an Access Point provider is the easiest and quickest way to connect to the network, and in many cases is the most cost efficient. Some Access Points can also translate files into the Peppol eInvoicing format. For software providers: Now is the time to start engaging Access Points to get your customers ready for eInvoicing. For businesses: Speak to your software provider to find out their plans for eInvoicing. If they’re not providing an Access Point, start getting in touch with Access Point service providers to prepare for eInvoicing.

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14/05/2019

Costs of manual vs EDI procurement: A comparison

Placing orders

Think of a company that issues thousands of purchase orders a month. They’ll likely receive at least one invoice for every purchase order issued. Let’s look at the process for this simple scenario:
Buyer manually enters the purchase order in their software Buyer sends order to supplier via email Supplier manually enters the purchase order in their software Supplier manually enters the invoice in their software Supplier sends invoice to buyer via email Buyer manually enters the invoice in their software
Some organisations have put a price on manually processing a single invoice in the ballpark of $30. Some of the costs associated are:
  • Paper
  • Postage
  • Printing
  • Filing
  • Labour – This includes staff working on the processing of the transactions.
  • Error checking costs – Manual processes create errors and these errors can add costs to your business in order to correct them. This isn’t just additional labour hours to correct the issue. If the wrong number of goods to be sent is incorrectly inputted, it could lead you having an under supply or over supply of goods required.
Now let’s compare this process with EDI.
Buyer enters the purchase order in their software Purchase order appears in Supplier’s software Supplier enters the invoice in their software Invoice appears in Buyer’s software
As you can see from the diagram the process is reduced and streamlined because of the EDI automation. The amount of manual inputting is reduced, saving time for your account team. Connecting partners’ ERPs reduces or eliminates the need for postage, filing and printing and paper costs. This scenario is just one of the steps in the procurement process. Other messages can be exchanged to automate other steps, such as:
  • Purchase Order Change – sent by buyer to supplier if the original purchase order has been changed.
  • Purchase Order Acknowledgement – sent by supplier to buyer to acknowledge receipt of the order.
  • Purchase Order Response – sent by supplier to buyer to notify them of any responses or changes to an order.
  • Advanced Shipping Notice – sent by supplier to buyer to let them know when and how goods will be shipped.

Receiving goods

When receiving goods from suppliers, a team is needed in the warehouse ready for the order to be delivered. Using a manual procurement process, it is hard for the receiving team in the warehouse to know what will be in each package sent or how it is packaged. It is also difficult for them to know when it will be sent. Once the delivery comes in, items need to be checked off manually and inspected to ensure no goods are damaged. This is sometimes done with pen and paper on a clipboard. This information then needs to be inputted into the ERP system or sent separately to the accounts team. Costs associated are:
  • Labour costs – accounts team and receiving team.
  • Stationary – paper, pens, etc.
  • Any errors occurred during this process.
With EDI, this process is simplified and more streamlined. Before goods are shipped by the supplier, they can send an Advance Shipping Notice (ASN) to the buyer. This details what is being sent, how it is being sent and when it is expected to arrive. The buyer can then prepare their warehouse with the right personnel and equipment to accept the goods once they arrive. This reduces labour costs and increases productivity. The supplier can also generate SSCC labels on the individual logistic units sent to the buyer (e.g. pallet, carton, container). This can be scanned by the receiving team, automatically sending the information to the buyer’s ERP.

Preparing payments

Once your goods have been received, any discrepancies are raised and need to be rectified before payment is made. This is often done using three- or four-way matching. Some of the discrepancies that may arise in the matching process are:
  • Inaccurate quantities received or invoiced
  • Incorrect prices
  • Received (including damaged) goods.
Typically, matching requires three documents to be reviewed:
  • Purchase order – confirms the order has been made
  • Receiving advice – details what has been received and the condition of the goods
  • Invoice – sent by the supplier requesting payment.
The accounts payable team collects and reviews each of these documents for the quantities, prices, and payment terms. This can be quite time consuming as this information can be in the form of paper documents, emails, faxes and PDFs; all stored in different places. Documents can also be lost or misplaced causing further delays to payment potentially missing discount opportunities. With EDI, the process is faster and more simplified. All required information is sent directly to your software via EDI. It can then be programmed to automatically match the information and identify discrepancies. If an issue is detected during matching it is filtered to be investigated by your accounts team. All successful matches are processed and scheduled for payment; no need for manual processing and paper-based documents, saving you money and time. Interested in implementing EDI for your business? get a free consultation from one of our EDI experts.
EDIRetailersSuppliers

08/04/2019

EDI more than just automating your supply chain

Looking for ways to improve processes is critical to any business, particularly in the areas of efficiency and cost reduction. Electronic Data Interchange (EDI) allows the exchange of business information directly between the software of your business and your customers and suppliers. It automates unnecessary manual processes while streamlining supply chain transactions. Companies commonly implement EDI to:
  • Gain better visibility into the supply chain
  • Reduce errors in exchanging paper or PDF documents
  • Reduce costs
  • Increase information security.
Let's have a look at these benefits in more detail.

Gain better visibility into the supply chain

With a manual purchase order and invoice, can a buyer answer questions like:
  • Can the supplier fulfil my order?
  • When will the goods be shipped?
  • When can I expect my goods to arrive?
  • What is in each package I am about to receive?
In short, no. But all of these questions can be answered through other EDI messages exchanged in near-real-time. Often companies will exchange more than just a purchase order and invoice; they’ll exchange purchase order responses (which tells a buyer if the supplier can fulfil the order), advanced shipping notices (which tells the company how the shipment is packed and when it will arrive) and more.

Reduce errors in exchanging paper or PDF documents

Traditional procurement has many manual processes that are prone to error. Human mistakes occur for a number reasons including:
  • Inputting incorrect numbers or values
  • Missing or skipping key steps in the process
  • Transferring the wrong purchase order information
Here is an example of traditional procurement for a PO to Invoice process:
Buyer manually enters the purchase order in their software Buyer sends order to supplier via email Supplier manually enters the purchase order in their software Supplier manually enters the invoice in their software Supplier sends invoice to buyer via email Buyer manually enters the invoice in their software
With EDI, processes are automated reducing manual errors. For example, when a buyer places a purchase order (PO), it can automatically trigger an acknowledgement to let the buyer know it’s been received, and the order can be put into the supplier’s system. Here is an example of EDI procurement for the same process as above:
Buyer enters the purchase order in their software Purchase order appears in Supplier’s software Supplier enters the invoice in their software Invoice appears in Buyer’s software
When the supplier is ready to ship the order, an advanced shipping notice (ASN) can be created and sent to the retailer to advise them of delivery. This can include information like how it’s packed, when it’ll arrive, the shipping company and more. The supplier can the raise an invoice in their software, which can be sent automatically to their customer’s software. Without EDI, all these processes would require manual creation greatly increasing the risk of errors.Through the use of EDI many areas of the supply process are completed with no additional manual inputting of information. Want to learn more about EDI? Download our introduction to EDI whitepaper.

Reduce costs

In low-margin businesses, reducing costs is critical. Think of a company that issues thousands of purchase orders a month. They’ll likely receive at least one invoice for every purchase order issued. Without EDI, that’s a lot of manual handling. Some organisations have put a price on manually processing a single invoice in the ballpark of $30. You can see how it adds up! EDI vastly simplifies the supply chain process through automation. Some examples of costs reductions are:
  • Manual data entry costs: EDI automates many manual data entry processes, reducing the amount of labour required.
  • Transaction costs: No physical sending of documents to your partners reduces costs related to printing, postage and filing.
  • Receiving and shipping related costs: By receiving shipment information from suppliers prior to delivery, you can prepare in advance for receiving goods. By streamlining the receiving process, you can achieve reductions in labour costs.
  • Error correction costs: Errors in the supply chain can result in extra costs being incurred. With the elimination of manual steps in your processes, errors are reduced. If errors do occur, they can be found and corrected much faster.

Increase information security

In today’s business environment, information security is a prominent issue. Sending sensitive information through unsecure channels can add risk to your business. You could be sending these via email, post or even SMS, which can easily be sent to the wrong person or even intercepted. EDI can send this information more securely than conventional methods. Using secure message communication types such as Secure File Transfer Protocol (sFTP) or AS2 decreases your risk. EDI adds a layer of authentication to the process which is required for the information to be sent. It also limits the connection to specific partners reducing the risk of your sensitive business information being sent to the wrong recipient.

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26/02/2019

Payroll legislation changes now include businesses with under 20 employees

The ATO recently introduced new legislation to mandate Single Touch Payroll (STP) reporting for all business in Australia, after a successful rollout to businesses with over 20 employees. This change in legislation is expected to impact around 700,000 small businesses.

What is Single Touch Payroll (STP)?

STP reporting was brought into place to make interactions between the ATO and businesses more efficient. STP allows employers to send tax and super information to the ATO each pay run. For more information on what STP is about visit the ATO website, click here.

What does it mean for me?

If you’re a business with less than 20 employees you have until the 1st of July 2019 to start reporting through STP. Firstly, check with your payroll software provider to find out if they’re supporting STP. Some software allows you to report through STP seamlessly while processing your pay run, while others require customers to work with a third-party Sending Service Provider (SSP), such as MessageXchange, to send the information to the ATO.

SSPs enable the transmission of data from Digital Services Provider (DSP), in other words your software provider, to the ATO.

The STP compliance process
Your software provider will provide the data required by the ATO Your SSP transforms and sends the data so it conforms to ATO requirements Received by ATO for processing

Our solutions can even send you responses from the ATO for you to keep on top of your reporting obligations.

Want to know how our STP solutions can help you? Speak to one of our experts today or fill out your information here and we will be in touch shortly.
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