12 Aug Why you should switch to E-invoicing
Accounting practices have come a long way – from the dawn of double-entry accounting to today’s cloud platforms, innovative new concepts bring greater efficiency to the field. This is particularly true for invoices and billing, as filling out templates by hand slowly starts to recede into the past. In the last several decades, accounting software has largely simplified this process, with scheduled invoice, electronic formats and delivery via email.
Since these improvements, little has changed the landscape. Both physical and email-based invoicing remain manually intensive and prone to human error. They take the attention of staff, managers and accounting to complete, verify and send. On average, a single invoice makes its way through 15 people and costs $30.87 to process. It is then little surprise that average time till payment is 36 days in Australia.
Small businesses and large organisations are adopting e-invoicing and are reaping the benefits of its automated process, securitisation against fraud and elimination of human error. In this article, we will explore the differences between mainstream methods of invoicing and e-invoicing. E-invoicing can help your business succeed, as platforms like LUCA streamline your accounts to give you a better view of your business while removing accounting hassles.
What is E-invoicing?
E-invoicing is a powerful tool that has the potential to drastically decrease costs, save time and generally increase the productivity of businesses. The concept refers to the “automated direct exchange of invoices between the supplier’s and buyer’s software systems”, as according to the Australian Tax Office. When implemented, e-invoicing reduces common errors and issue that occur during a standard receivables/payables workflow. This method of invoice exchange eliminates the need to scan, post, email or manually fill out paper or PDF invoices.
Although some software can facilitate business to business invoicing through their own infrastructure, cross-platform compatibility is limited due to the competitive interests of these providers. Many third parties have attempted to bridge this gap, but not without compromises on security, speed or accuracy in their delivery. These barriers to efficiency have only recently been resolved by products, like LUCA, where e-invoices can be exchanged directly to a customer’s accounting solution, regardless of provider or setup.
E-invoicing differs to standard invoicing as it does not require the user to scan, upload or manually enter an invoice into their accounting software. Rather, the invoice is sent directly platform to platform, reducing time costs related to entry or accounts maintenance.
E-invoicing is reliable and eliminates errors:
Current digitalised processing methods rely on the use of Optical Character Recognition (OCR) and Intelligent Character Recognition (ICR). These technologies are used to interpret and categorise information from a received invoice. When used in an accounting setting, this information is then filled into the receiving company’s accounting platform, then confirmed by a user. While it beats processing an invoice manually, invoices have a large degree of format variability, meaning that OCR cannot read a field’s information, but rather must determine it. This is an issue we’re more familiar with in search engines and auto-fills, but instead of having to check mundane information, a mistake here can mean a wrong payment. As a result, any competent accounts department must check each invoice anyways, while fixing errors. This means little effort is saved, and an organisation still must deal with the bulk of maintenance and processing costs.
E-invoicing removes this workflow. When integrated into organisations’ accounting platforms, invoices are no longer received, but rather synchronized. In this scenario, e-invoicing works as a layer on top of your accounts, working to reformat and send invoice information directly between platforms. By doing so, e-invoicing removes human and machine error, time to process and the requirement that information is verified.
E-invoicing saves your business time and money:
Manual data entry and verification takes can take a long time. In fact, the average company in the UK receives around 323 invoices every month, of which 15 people then are involved in their fulfillment. If we assume that it takes 2 minutes for each staff member to function in the workflow to send, fill, check and pay an invoice, this is 160 hours a month spent on account maintenance alone. It is no stretch to then see why a standard invoice then costs $30.87 to process. When we contract the removal of this workflow through e-invoicing, the cost of processing is less than a third. This is only $9.18 spent per invoice.
E-invoicing prevents fraud:
Fraudulent invoicing is Australia’s third most prevalent fraud, having caused an estimated economic loss exceeding $489 million in 2018 (according to the Australian Competition and Consumer Commission),
With the increasing uptake of email invoicing and the likewise increase in email scams, it has never been more important for businesses to reduce susceptibility. Energy Australia and Telstra have already warned customers of emails that mimic their electronic bills, however little can be done except not paying. With a survey showing 24% of business have received a fraudulent invoice, and 3% having paid them, the issue is significant.
Because e-invoicing takes away the need to email invoices, fraudulent invoices lose their only delivery method. This also comes as platforms like LUCA use verification and approval systems to filter invoices. Collectively, e-invoicing means businesses can be assured that their bills are authentic and riskless.
LUCA now incorporates Multi-Organisation Functionality, meaning organisations and individuals can now manage multiple accounting streams from a single account. LUCA integrates all of the features and benefits of e-invoicing listed above into your existing accounting software and can be set up at https://www.theblockledger.net/luca/.