Peppol is a global standard and network embraced by the government of Australian and New Zealand to electronically exchange invoices and other procurement documents. This framework is widely used in Europe and acts as the foundation to back the global digitization of procurement.
Australia and New Zealand made the switch to ensure that they still keep in lock-step with global trading partners, despite their location, and enjoy the benefits this network offers, especially in the area of e-invoicing.
E-invoicing delivers efficiencies, enhances compliances, lowers costs, and improves business relationships.
But what exactly is the Peppol network, how does it work, and is it mandatory? This article will discuss Australia’s transition to Peppol and why its benefits might be crucial for your business:
- What is Peppol e-invoicing in Australia?
- Is e-invoicing mandatory in Australia?
- What are the e-invoicing requirements in Australia?
- How to send Peppol e-invoiced in Australia
- Why transition to Peppol e-invoicing in Australia?
- Challenges of transitioning to Peppol
- How to get started on Peppol using a trusted provider
Do you need help with e-invoicing compliance in Australia? Schedule a free demo with one of our e-invoicing experts.
What is Peppol e-invoicing in Australia?
Pan European Public Procurement On-Line (PEPPOL) is a set of standards and specifications that eases the electronic exchange of documents between various countries. The framework was created for countries under the European Union but is currently an international standard.
Australia adopted the network as of 2019, enabling all private companies and public administrations to bill through PEPPOL.
In 2018, the country signed the “Trans-Tasman e-Invoicing Interoperability Framework” agreement. The main goal of this agreement was—and is—to establish a universal framework for implementing electronic invoicing in Australia.
This agreement was also intended to advocate industry-wide adoption of e-invoicing, developing a straightforward electronic invoicing system.
Australia maintains strong trade relations, and e-invoicing has been positioned as:
- A cost-saving tech;
- Booster of productivity;
- Accelerator of payments;
- And a tool to lower expenses.
This transition is a necessary boost for the country, considering how economies have taken a hit in the past couple of years.
Australia exchanges over 1.2 billion invoices annually, so Peppol is estimated to save the economy $28 billion for over a decade.
Covid19 and 2020’s economic fallout have brought fresh urgency to Australia’s framework’s rollout. As a result, the country has mandated that all Commonwealth agencies adopt e-invoicing through Peppol by July 2022. 80% of the agencies were expected to change to e-invoicing by 1st July 2021.
This means that data is exchanged via the Peppol network between business finance systems.
With Peppol’s electronic invoicing, data doesn’t have to be extracted from a paper or digital document. Users also don’t have to manually feed the data into a finance system or via Optical Character Recognition (OCR) technology.
So, it arrives complete and ready for processing, which lowers the cost of processing, hastens payment times, and reduces the risk of fraud.
Is e-invoicing mandatory in Australia?
E-invoicing is not yet compulsory in Australia. As part of the 2020-2021 Federal Budget, the government declared that it would take further action to quicken Peppol e-invoicing for the private and public sectors.
The government will mandate electronic invoicing for all Commonwealth government agencies by the 1st of July 2022 and promises to pay suppliers who use e-invoicing within five business days.
In cases where Commonwealth agencies fail to pay within the stated 5-day terms, they will be expected to pay interest to the supplier. This interest isn’t likely to be financed from any special or additional appropriation to the agency.
Also, the mandated e-invoicing for Commonwealth government agencies is anticipated to encourage a considerable rise in e-invoicing uptake by suppliers to The Australian government.
The Treasury has consulted on alternatives for compulsory e-invoicing adoption by businesses. The government has noted these three options to mandatory e-invoicing:
- Option 1: The government should instruct all businesses to receive and send Peppol eInvoices, starting with big companies.
- Option 2: The government should instruct only large businesses to receive and send Peppol e-invoices.
- Option 3: The government should utilize a non-regulatory technique for Peppol e-invoicing implementation by the business. Treasury is presently supporting agencies to achieve their obligations, communicating with them, and offering a range of templates and tools. They should then report to the government when the consultation process ends.
What do you need to start e-invoicing in Australia?
Here’s everything it takes to transition to e-invoicing:
- Market scan- Check the countries, buyers, and vendors in your ecosystem to assess if you’re ready for e-invoicing.
- Access Point- Choose an Access Point Service Provider to integrate the Peppol access point with accounting software. Then, integrate the Access point with accounting software, including Accounts Receivable Processes and Accounts Payable (such as Vendor Invoice Management).
- Cleanse- Good governance recommends that you cleanse master data regularly. As you prepare to transition to e-invoicing, you should contemplate a one-off cleanse inclusive of the business readiness checklist.
- Spend analysis- Review your business spending more broadly. Spend analysis can recognize cost savings, enhance supplier performance, and help in streamlining operations.
- Payment methods- Check your payment methods and, for example, choose the optimal policy and blend of invoice and corporate cards.
- Review - Check and standardize business systems and Processes. You should review the Accounts Receivable solution to ensure it can send credit memos, for example, invoice duplication, and how to report and track e-invoices and collect supporting documentation. Finally, think of how you will identify buyers and suppliers who are electronic-invoicing enabled that will transition to e-invoicing.
- Liquidity - How will your liquidity and cash reserves be affected if paying invoices may be automated?
- Communication - How communication changes to internal staff, customers, and suppliers.
How to send Peppol e-invoices in Australia
Businesses need a sender access point to send and receive invoices. Companies can use various sender access points based on the needs and structure of their firm. However, you can only connect to one buyer access point for receiving invoices.
The Peppol network is created in a four-corner model, allowing enterprises to choose between varying (or similar) service providers for sending and receiving invoices. This lets you select solutions that are best suited for your requirements. The main alternatives for access point providers include:
• Buying an ERP system that is Peppol compliant (suitable for small and medium-sized enterprises).
• Directly integrating Peppol into your current accounting system by getting an Access Point As a Service independently from the ERP system (suitable for large businesses).
• Getting access to a ready-to-use Peppol Access Point as a white-labeled Service provider (suitable for VAN-operators / service providers and ERP vendors).
Why transition to Peppol e-invoicing in Australia?
The benefits for the Australian government and businesses to use Peppol to conduct e-invoicing include:
- Reduced processing costs
- Accelerated payments and enhanced cash flow
- Improved network security
- Fewer manual processing errors
- Reduced cases of invoice fraud
- Assured reliability and security
Transitioning to e-invoicing across all government levels helps the government support small businesses and enhances their internal processing. This makes it faster and easier for companies that supply them with goods and services, improving relationships. It can also lower payment issues and administrative delays.
Other benefits of e-invoicing for both government and business include better record keeping due to more outstanding timeliness and accuracy of budget and financial reporting.
It also improves cash flow due to lowered accounts receivable periods and promotes strategic spend management.
Challenges of transitioning to Peppol
Due to linked change management costs, medium to bigger-size businesses will be apprehensive about switching to PEPPOL. The cost and complexity of transitioning from paper-based manual processes for smaller companies will likely prevent them from adopting this framework.
Medium to large-sized enterprises in Australia has already adopted and automated their own procurement processes. This allows them to adapt to an existing electronic invoicing platform that works well.
However, due to linked change management costs, these businesses will have to be persuaded that the benefits of the transition outweigh the cost.
The perceived expense and complexity of transitioning from a paper-based manual procurement system for smaller businesses is likely a significant barrier. This is if they don’t have any level of existing exposure to electronic invoicing.
Transitioning To Peppol Using A Trusted Provider
E-invoicing is surging globally, and your business has to move with the times to enjoy the benefits of Peppol e-invoicing. If you are interested in a Certified Peppol Access Point provider that suits your business needs, Storecove specializes in global electronic invoicing and compliance.
Sources: Deloitte, Australian Taxation Office, Australian Treasury
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