Rayhan Aleem, Founder and Managing Partner of Alpha Pro Partners
E-invoicing is a significant innovation that has the potential to affect businesses over the coming years, with more governments implementing best practice standards and mandatory frameworks.
For the SME sector, in particular, widespread adoption of automated e-invoicing is an important step to secure faster payments, streamline financial processes, and ultimately improve cash flow.
Australia recently announced that e-invoicing would be mandatory for all government agencies from July 2022, and we expect other businesses will be asked to follow shortly after. India has mandated e-invoicing for larger businesses through a common portal since October 2020 and, in December, Saudi Arabia’s General Authority for Zakat and Tax (GAZT) said that all resident taxpayers must be compliant with e-invoices by December 4, 2021 that would be potentially linked to a central system.
Different countries are at various stages of their e-invoicing journey, but it’s safe to assume that requirements and regulations will increase globally, making it crucial for companies to understand the implications and start preparing for implementation.
E-invoicing explained
E-invoicing is the electronic exchange and receipt of an invoice from one accounting system to another in a prescribed format (usually XML or EDI). More than issuing a digital invoice to a client’s email, every single e-invoice interaction is software-based, from issuing, transmitting and receiving it, to processing and storing the document. From a government perspective, the digital transparency will help to tackle the shadow economy, curb tax evasion, and improve compliance. According to research from Deloitte Access Economics, digitising the financial relationship between businesses through an authorised network will result in significant cost savings and economic benefits overall.
Good news for SMEs
Chasing late payments costs small businesses precious time and money, both of which e-invoicing should alleviate. The main issues with collections are linked to discrepancy between systems and processes, especially when dealing with much larger organisations, as well as the margin for error. Digitising the invoice process from start to finish creates a secure and even playing field where all parties are accountable. Additionally, the accuracy of information is validated and vendors can track and view the status of their invoice in real-time. There’s no relying on a client to enter an invoice into their system, or following up to be told the bill was never received. It will also create a clearer picture of accounts and save time in data entry, freeing up staff and owners up to focus on other areas.
Considerations for moving forward
Now is the time to plan ahead and develop an e-invoicing strategy that examines how new protocols will impact financial management processes and software systems. First and foremost, it’s much easier to manage e-invoicing through the cloud, as opposed to in-house software.
Moving to cloud accounting is an important part of any digital transformation plan. When choosing providers, choose one that is ready for these changes.
Likewise, check that cloud accounting providers are equipped to handle e-invoicing, because migrating to a different system needs careful planning. Most providers intend to support e-invoicing over the coming months and in March, Xero announced its acquisition of Tickstar, which provides e-invoicing infrastructure and expertise to governments and businesses around the world. While a widespread global roll-out is still some time off, e-invoicing developments represent a real opportunity for SMEs to maximise their agility and reap the rewards of a more seamless payment process.
Rayhan Aleem, Founder and Managing Partner of Alpha Pro Partners
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by Staff Writer
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E-invoicing could create a big boost for small businesses
Rayhan Aleem, Founder and Managing Partner of Alpha Pro Partners
E-invoicing is a significant innovation that has the potential to affect businesses over the coming years, with more governments implementing best practice standards and mandatory frameworks.
For the SME sector, in particular, widespread adoption of automated e-invoicing is an important step to secure faster payments, streamline financial processes, and ultimately improve cash flow.
Australia recently announced that e-invoicing would be mandatory for all government agencies from July 2022, and we expect other businesses will be asked to follow shortly after. India has mandated e-invoicing for larger businesses through a common portal since October 2020 and, in December, Saudi Arabia’s General Authority for Zakat and Tax (GAZT) said that all resident taxpayers must be compliant with e-invoices by December 4, 2021 that would be potentially linked to a central system.
Different countries are at various stages of their e-invoicing journey, but it’s safe to assume that requirements and regulations will increase globally, making it crucial for companies to understand the implications and start preparing for implementation.
E-invoicing explained
E-invoicing is the electronic exchange and receipt of an invoice from one accounting system to another in a prescribed format (usually XML or EDI). More than issuing a digital invoice to a client’s email, every single e-invoice interaction is software-based, from issuing, transmitting and receiving it, to processing and storing the document. From a government perspective, the digital transparency will help to tackle the shadow economy, curb tax evasion, and improve compliance. According to research from Deloitte Access Economics, digitising the financial relationship between businesses through an authorised network will result in significant cost savings and economic benefits overall.
Good news for SMEs
Chasing late payments costs small businesses precious time and money, both of which e-invoicing should alleviate. The main issues with collections are linked to discrepancy between systems and processes, especially when dealing with much larger organisations, as well as the margin for error. Digitising the invoice process from start to finish creates a secure and even playing field where all parties are accountable. Additionally, the accuracy of information is validated and vendors can track and view the status of their invoice in real-time. There’s no relying on a client to enter an invoice into their system, or following up to be told the bill was never received. It will also create a clearer picture of accounts and save time in data entry, freeing up staff and owners up to focus on other areas.
Considerations for moving forward
Now is the time to plan ahead and develop an e-invoicing strategy that examines how new protocols will impact financial management processes and software systems. First and foremost, it’s much easier to manage e-invoicing through the cloud, as opposed to in-house software.
Moving to cloud accounting is an important part of any digital transformation plan. When choosing providers, choose one that is ready for these changes.
Likewise, check that cloud accounting providers are equipped to handle e-invoicing, because migrating to a different system needs careful planning. Most providers intend to support e-invoicing over the coming months and in March, Xero announced its acquisition of Tickstar, which provides e-invoicing infrastructure and expertise to governments and businesses around the world. While a widespread global roll-out is still some time off, e-invoicing developments represent a real opportunity for SMEs to maximise their agility and reap the rewards of a more seamless payment process.
Rayhan Aleem, Founder and Managing Partner of Alpha Pro Partners
Follow us on
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