E-Invoicing, Shortened Payment Time and Improved Debt Collection

Debt collection efforts will be improved significantly following announcement that the Australian government will now be using electronic invoicing (e-invoicing). The federal government will also and begin paying businesses late payment interest. In December 2020, the Department of Treasury officially adopted a fully integrated electronic invoicing solution.

E-Invoicing, Shortened Payment Time and Better Debt Recovery Efforts

E-Invoicing & Efficient Payment Recovery

The Australian and New Zealand governments jointly created the policy, uses the internationally established Pan-European Public Procurement On-Line (PEPPOL) framework. Europe and Singapore are to create a better business environment in the Trans-Tasman area.

“E-invoicing will improve business cashflow through faster payment times and deliver significant benefits and efficiencies to suppliers and the Government by reducing transaction costs and handling errors.”

Sen. Cormann.

E-invoicing will reduce payment time.

Recognising the impact of extended payment terms to small-medium enterprises (SMEs), the Morrison government has been in the frontline in proposing digital invoicing technology. While the new rules currently relate to procurement contracts with the federal government, Sen. Cormann encourages the private sector to follow suit.

It takes 36.7 days for a big business to pay an SME. The Australian Tax Office (ATO) believes use of e-invoicing will reduce payment times especially when the destination is using the same business management software. The small business ombudsman believes e-invoicing will improve cash flow for businesses. Late payments continue to hamper small business viability, with half of all small businesses reporting late payments on 40 per cent of their invoices. Cash flow improves when payment time improves.

Businesses save $21.69 when they switch to e-invoice.

The ATO said a business spends $9.18 to process an e-invoice, while a business will spend $30.87 to process a paper invoice and $27.67 to process a PDF invoice. Further, as e-invoices conform to standards, information exchanged is correct and high quality. E-invoicing reduces manual handling and re-keying of information to make sure that are few incorrect or lost invoices. Consequently, e-invoicing reduces fake or compromised invoices, billing scams, and money loss.

E-Invoicing & Shortened Payment Time

E-invoicing simplifies and automates processing.

By using the digital form of invoice, businesses reduce the time it takes from them to process payments. The ATO said small businesses have to collect $26 billion in unpaid invoices at any given time. Of all late payments, over 20% are due to errors on invoices. Over 20% of erroneous invoices are due to the invoice being sent to the wrong recipient following manual data entry.

Interest payments for unpaid invoices.

One of the features of the new rules is the interest payment. The government will pay interest to those who are not paid within five days from submission. The 5-day late interest payment policy will apply to contracts valued up to $1 million. This policy has a significant positive impact on businesses transacting with the federal government because data from the finance ministry showed that 94.8% of contracts by volume (or 69,611) were below $1 million. The government will also pay interest for every day delayed.

Payments made without e-invoicing will maintain the 20-day term until all government agencies will impose the 5-day term throughout 2020. The 5-day term will also only apply to domestic small-medium enterprises (SME) suppliers and won’t include contracts or standing offers already in place. For businesses to effectively take advantage of the new rules, the ATO though has one advice: Make sure information in e-invoice is correct.

“While businesses will still need to apply their internal quality assurance processes, e-invoicing will provide opportunities for business owners to focus on growing their business, rather than spending time on labour-intensive and costly administrative processes,” ATO e-invoicing director Mark Stockwell said.


E-invoicing is nothing short of revolutionary in the way businesses work. It is a crucial transition that has the welfare of domestic SMEs in mind. Currently, the new e-invoicing rules apply only to government contracts. However, business groups expect the private sector to follow suit. A more streamlined payment process that minimises invoice errors will ensure timelier payments and improved debt recovery efforts.

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