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e-Invoicing is the next area of disruption for small business and many bookkeepers and accountants will be affected within six months. But what is it, who is using it now, what is the government doing and how will you be affected?
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e-Invoicing: What is it and how can it can affect you?
19 October 2018
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12 minute read
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Here’s a simple overview of the basics of e-Invoicing and we will cover all the above points in this series of articles about e-Invoicing in Australia.
e-Invoicing stands for electronic invoice delivery. The word itself is currently evolving. Just as electronic mail went to e-mail and was shortened to email, e-invoicing is being written with and without a dash. Both versions are currently acceptable, and you will see those in the Southern hemisphere dropping the dash faster than those in the north.
But does e-Invoicing mean an invoice is delivered through an electronic device like a fax machine or email server? Sadly businesses do use the term to refer to those things, but true e-Invoicing is designed to benefit both sides of the transaction at the same time. An invoice should be delivered from the point of creation to the final destination in a seamless transaction and in real time.
Let’s use a wine maker as an example. A family run business that uses MYOB AccountRight as their cloud accounting system. On Wednesday morning, they send wine out to 20 different restaurants and bars. Later in the morning, the winemaker creates the invoices for the stock. He clicks “record” in the accounting system and the invoice is sent directly into his customers cloud accounting system. Five of the restaurants use Xero, and the invoice appears instantly in the Draft folder of Xero. Others use QuickBooks, Reckon, Sage or others and the invoices are delivered directly to them. A couple of the venues don’t use cloud systems, and so the invoice is delivered as a PDF via email to meet their needs. This means all of the invoices the winemaker created are delivered on Wednesday morning, and some may even be paid by Wednesday afternoon. This is true e-invoicing with both sides benefitting at the same time.
While the invoice is sent electronically, the PDF of the invoice can also be attached to the record. But the PDF doesn’t have to be there. Many people think of an invoice as a document. Reality is, the document just holds the information. It can be an effective way to transmit the details, but the document itself isn’t required.
Let’s put that into an example that you may be able to relate to better.
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When I was a teenager, we used to go to the video store Friday night and hire a movie to watch. But some years later a new service was available where the movie was delivered on a DVD to my letterbox. BigPond, Quickflix and a few others provided this service. How convenient – you no longer needed to go to the shop, the movie was delivered direct to the letterbox.
But how many people go to their letterbox to get a movie these days? None. Why not? We have something better. Streaming. Services like Netflix now allow you to watch a movie from the comfort of your lounge room. So you can decide to watch Bridget Jones Diary on a Friday night, you can select it, start streaming it and watch the movie right where you want to. It’s instant and much more convenient.
But note, you do not need a physical copy of the movie to watch it. You just need the data. It streams to your device and you get your movie.
This is the same with an invoice. We used to rely on the physical version. Then we had them emailed to us. And now we can have them streamed. Much more convenient.
But don’t we need to keep a physical document for 5+ years to meet the Australian Taxation Office regulations? No. An e-Invoice meets all the requirements. You don’t even need the PDF version.
Their official stand is: “A tax invoice does not need to be issued in paper form. You can issue a tax invoice to a customer by means of e-Invoice. This is not limited to, for example, issuing a tax invoice in a PDF format. What is important is that the electronic record transmitted to the customer contains all of the information required for a tax invoice and is readily accessible and easily convertible to English.”
This means invoices can be created and delivered direct to a business in real time, and we don’t need to store boxes of tax records for years.
Robin Sands, chief executive, Link4
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