E-invoicing to free up $115bn: Xero

Electronic invoices are a crucial step in digitising Australia's small businesses and helping them get paid on time, Xero’s boss says.

Trent Innes, managing director, Xero Australia & Asia

Electronic invoicing represents a crucial step in digitising Australia's small businesses and helping them get paid on time, according to the local boss of listed software accounting outfit Xero.

Speaking to The Australian on Friday, Xero managing director Trent Innes told The Australian that COVID-19 has heaped cashflow pressure on small businesses, but e-invoicing represents a chance to ease some of the pain.

Mr Innes said Xero this week became the first major small business accounting software provider to offer e-invoices in Australia and New Zealand. E-invoicing is the automated exchange of invoice information directly between a buyer's and supplier's accounting systems.

In February 2019 Australia and New Zealand's prime ministers announced they'd adopt the PEPPOL (Pan-European Public Procurement Online) interoperability framework for e-invoicing, a framework used in over 34 countries.

Mr Innes pointed to statistics showing e-invoicing will improve small business cash flow by freeing up the $115 billion big businesses pay late to small businesses each year.

It also comes following legislation introduced to parliament last week, the Payment Times Reporting Framework, which would address the enduring issue of late payments from big business to small business.

"Australia is catching up to other parts of the world here," Mr Innes said. "There are going to be some key benefits that e-invoicing brings around the principles of greater efficiency, cost savings and time savings, as well as security.

"I think it will save our economy a significant amount of money, and it brings the cost of invoicing way down."

According to Mr Innes, e-invoicing will only be successful if big businesses also support the technology, but it was likely given government was already starting to do so.

"We've already seen some of the government agencies get on-board," he said. "The federal government has committed to pay invoices of up to $1m within five days, which really helps small business cashflow," he said. "Cashflow is really important and this will bring down payment times.

He added that he expects COVID-19 to accelerate the digitisation of the economy, including a widespread shift to cloud-based services.

"Those businesses that could be called digital laggards who before didn't have a truly compelling reason to go online are now actually finding out it wasn't as hard as they thought, and it's opening up new markets and opportunities for them," he said. "Any time we have downturn or a recession, it does lead to an increase in innovation, because of where people start to focus their energy.

"We will see a new generation of small businesses coming through, and they will be digital in nature."