Getting prepared for e-Invoicing on the Peppol network in Australia and New Zealand
It’s not always easy wrapping your brain around IT concepts when you are brand new to an industry. With my background in design & marketing, I felt very ill-equipped to understand and drive home the benefits of transmitting e-Invoices over the PEPPOL network, but I think I mostly get it now…thanks to Kris!
Kris Elliott from Storecove is happy to chat with ANYONE about e-invoicing over the Peppol network. Be they a potential new client, a government agency, or even a competitor in the industry! Kris is happy to chat and help make it make sense for you. I recently got the chance to interview Kris during one of our ‘Ask the Experts’ live Q&A webinars, and we had many questions for Kris regarding what this whole PEPPOL network thing is, and what exactly e-invoices are (hint- they are not digital PDF invoices!)
For today’s blog post, and in return for Kris giving me so much of his time (and patience!) I have compiled the information Kris shared during the interview on invoicing over the PEPPOL network. Enjoy and feel free to email us any additional questions you may have!
What is Peppol e-invoicing?
Peppol e-invoicing is an exciting new invoicing technology that is rapidly gaining momentum both in Australia and around the world. Peppol began in Europe around a decade or so ago as a project to standardise and facilitate the exchange of procurement documents within the EU, particularly around public procurement and government supply chains. However, since then it has grown to include not just B2G procurement but also B2B with companies e-invoicing each other as well as their government customers. It has also since spread beyond Europe into Singapore, Australia, and New Zealand with many other countries now at various points of adopting Peppol as their national standard.
What is OpenPeppol?
OpenPEPPOL is a non-profit organisation established under Belgian law whose membership is made up of both public and private organisations all over the world. They govern the standards and the network. OpenPEPPOL administers Peppol in multiple countries through the appointed regional authorities that are responsible for the administration of Peppol within each jurisdiction. In Australia, the Peppol Authority is ATO, and in NZ its MBIE. The Authorities in turn runs an accreditation process to validate and certify which vendors can provide access point services to organisations within that jurisdiction.
What is the Peppol network?
The Peppol network is a secure network through which documents are exchanged between training partners. Usage of the Peppol network can only be accomplished by using an Access Point to the network, which as mentioned has to have accreditation from the Peppol Authority for that region. So to use an imperfect analogy that’s perhaps becoming a little overused, the Peppol network is kind of like using a cell-phone. You and the person you are calling can use different handsets, but each of you both need to use the services of a telco before you can call each other. So too with Peppol invoicing in that you and your trading partner can have different finance systems, but you each need to use an Access Point service to e-invoice each other over the Peppol network.
How is e-Invoicing different from digital invoices?
On the Peppol network, there are specific requirements and standards for e-procurement document types, of which e-invoicing is one. The requirements include the structure and rules around how information is formatted and what information it contained. Digital invoices are created to be interpreted by people, whereas e-invoices are created to be ingested by systems. An e-invoice is an exchange of data more than it is a document in the A4 paper sense of the word document. It is structured into fields and designed to be exported by one system and imported by another. They aren’t designed to be human-friendly with logos and nice layouts etc like a digital PDF invoice would be.
Is Peppol e-invoicing an Accounts Payable / Accounts Receivable solution?
No. While Peppol e-invoicing can help enable AP & AR solutions, Peppol is about the format and delivery of e-invoices and not about an organisation’s business rules around how those invoices should be processed. For example, if we look at the relationship between Storecove and ACMO that might make this a little clearer. ACMO’s APAY solution is an Accounts Payable solution. Once it receives invoices, it can help an organisation apply its business rules around how that invoice should be processed. This could include anything from GL Coding to PO matching to routing for Approvals or doing validation checks and stuff like that. What Storecove brings to the table is the Peppol Access Point service so that e-invoices can be fed directly into that solution. So while emailed / digital invoices get run through an OCR process to extract information from a page which is then fed into APAY, e-invoices already exist as data and don’t need to go through that process. It is more accurate because the e-invoice is literally what came out of the senders’ system and not a software application’s attempt to read something on a page.
Once they are inside the APAY solution, both digital invoices and e-invoices are processed the same way with the same business rules irrespective of their format or how they were received.
In short and in the context of Accounts Payable, Peppol e-invoicing is about a new ingestion channel for invoices, it’s not about prescribing new and separate business rules for how you need to process them.
What do businesses need to do to start e-invoicing?
Regardless of whether you are ready to start now or whether this is a project for some time in the future, the first thing you can do is make sure that you have the ABN’s for all your trading partners in your finance or ERP system. I’ve found that when compared to New Zealanders that Australians are already pretty good at this as ABN is both a company number and a tax number, whereas in NZ they are two different numbers.
The next thing to do is to talk to your existing solution providers. If have APAY then talk to ACMO, if you have MYOB EXO then talk to your MYOB partner, if you have TechOne or Oracle or Sage or any one of dozens of other solutions partners then talk to the people you already work with. If they have a plan around Peppol that’s great. If that plan works for you and matches your timeframes, even better. However, if they don’t have a plan or if their plan doesn’t work for you, or even worse they don’t know what you are talking about, then you need to find someone you can trust. I’m happy to talk with anyone irrespective of whether they are a company, a government agency, a software developer, a solution vendor, or even a competitor. If you want a vendor-neutral starting point then the ATO website is another good place to get info.
I think the important thing is to take whatever first step works for you, then take another and another, and before you know it you are most of the way there.
Why should Businesses get e-invoice ready?
I think for businesses that are currently supplying government councils and other governing bodies, the case for faster invoice payment- the proposed 5-day payment guarantee is a major attraction. For other businesses it may just be having the conversation about e-invoicing, and what advantages it can offer in the future for speed and security. If businesses are only at the beginning of their journey to transforming their AP processes, then I would advise them to talk to You at ACMO, as I know you guys can consult on different automation solutions for reading and processing invoices.
Is the Peppol network secure?
For an organisation to transact on the Peppol network you need to have what’s known as a Peppol identifier. This identifier is globally unique and it’s how your trading partners know that they transacting with the real you. In Australia, the Peppol ID is made up of the ABN and in NZ they use the NZBN. Now because you have to use an accredited access point to get information into or out of the network, the access point providers are essentially the bouncers or the gatekeepers for the network. We have various responsibilities such as a Know Your Custom (KYC) obligation to validate that organisations we are connecting are who they say they are. So if you get an e-invoice from someone like BOC Gas, you know that it has been legitimately sent by BOC Gas.
What if you have different software for sending invoices than for receiving them. Does each system need its own access point?
You can use one access point to send e-invoices and another to receive them. For example, if you are a Xero customer and also an ACMO APAY customer, you might want to use Xero’s Access Point to send e-invoices directly from Xero, however when you receive them you want to use APAY access point, which is provided by Storecove so that the invoices are delivered into APAY rather than straight in Xero.
Alternatively, you can use the same service for both sending and receiving.
Much depends on the systems you use and whether the Access Point service is being provided by the vendors you get those systems from. One thing you do need to be mindful of though is that you can only receive from one Access Point. For sending you can as many different ones as you need to, but you can only receive through one. So think of it kind of mail or the postal service. If you want to send someone a letter you can post it in any postbox you like, but you only have one mailbox at the end of your driveway. The key is to identify where you need the incoming invoices to be delivered and which system you need them to be in first. So in the Xero / APAY example, I used just before, you want the e-invoices to be delivered into APAY so that you can apply your business rules to the way they are coded, approved, matched, etc. You don’t want the e-invoices to bypass APAY and go directly into Xero because then they haven’t gone through your business process.
Do we need to engage with an Access Point ourselves?
In a perfect world, the vendors providing the systems you already use will either be an access point themselves or will have partnered with an access point provider to enable Peppol e-invoicing inside their platforms. To my mind, Peppol e-invoicing is very much a feature rather than a stand-alone solution. It should enhance what you are already doing rather than requiring you to do something new. So ideally your current solution partners should be enabling e-invoicing for you. Taking ACMO as an example, they have partnered with Storecove to enable e-invoicing in their APAY solution, so if you already use APAY then you don’t need to deal directly with Storecove, or any other Access Point for that matter, as ACMO will provide the functionality to you. However if your current solution partners can’t deliver this functionality, then certainly we’d be more than willing to help you out.
In Australia who is currently using the Peppol network?
Peppol only went live in AU / NZ about 17 months ago so there is no denying that adoption of Peppol e-invoicing is still fairly early. However, in Australia in particular there is a lot of drive toward adoption. For example, there is a current mandate for Government Agencies to be enabled to receive e-invoices by July 2022, with some of the larger ones being mandated to do it by July this year. This dovetails into the 5-day payment policy whereby suppliers that e-invoice government agencies can get 5day payment terms. All of this was a big reason around why Peppol was adopted by Australia in the first place and these policies were aimed around increasing payment times, especially for a small business where it could drag out to as long as 60 or 90 days, but also to help reduce the costs associated with processing invoices. ATO has some research data that says on average a posted invoice can cost as much as $30 per invoice to process, or as much as $27 for emailed invoices, compared to around $9 for an e-invoice. Now, remember that all of this is also pre-covid. The challenges around payment times and processing costs existed before the lockdowns and work-from-home business models. While I haven’t seen new research on the post-covid figures, anecdotally based on all the different organisations I speak with it seems to have worsened.
There is a consultation process around whether to extend the e-invoicing mandate to the wider economy. Now the outcomes of the process haven’t been announced yet so we don’t know what form such a mandate could take, however, the scuttlebutt in the industry is that there will be some kind of wider mandate in play soon, we just don’t know
In saying that, some agencies are already connected like NSW State Govt, Treasury, etc. So as more and more of these agencies come online, the many companies in their supply chains are getting connected so they can get 5-day payments. On the supplier side of this companies like Xero have sending solutions in the market now so every Xero customer can already send an e-invoice. There are MYOB partners like Exobiz that have plugins in the market now for MYOB customers. Adoption is being driven both by government supply chains and by the SME finance systems providing e-invoicing on their platforms.
Now there is no doubt that for everyone else there is a bit of a ‘Chicken or Egg’ challenge to overcome in that people don’t want to send until there are heaps or receivers, but at the same time, people don’t want to get enabled to receive until there are lots of senders. So just like asking “what came first: The Chicken or the Egg?”, people are now asking “What comes first: Sending or Receiving?”.
I would argue that we need to stop considering e-invoicing in the context of being just an Accounts Payable or an Accounts Receivable project and start framing it as an element of a Digital Transformation project that addresses both. As an organisation, an invoice is conceptually the same document type regardless of whether you are the sender or the receiver. Therefore, when considering the adoption of e-invoicing you ought to be considering both how you send them as well as how you can receive them. If you are suggesting to your trading partners that they adapt their systems to accommodate your processes, then there ought to be some level of digital reciprocity whereby you adapt yours for them. Granted you don’t necessarily have bi-direction trade with all vendors and there is an element of ‘paying it forward, however you can’t expect others to change for you without also considering how you can also help others with their journey.
How many Access Point Partners are there and what are the differences?
The last time I checked ATO’s accreditation list there were 23 organisations with AU / NZ accreditation.
However, the Access Points aren’t all created equally and they aren’t necessarily interchangeable. Very generally speaking, Access Point vendors tend to fall into two groups: those that have proprietary solutions and those that have a more agnostic integration approach. For example, take someone like Esker who has accreditation to be an Access Point.
They would have what I would describe as a proprietary solution because they only really provide that access point service to customers using an Esker solution. So, if you use Esker and aren’t planning on changing systems any time soon, they aren’t an option for you to get on the Peppol network.
The other group is what I’d call the integration vendors. Storecove fits into this category and our focus is on enabling customers regardless of the systems they use. For the most part, we’ll deal with anyone regardless of their systems provided it makes sense of course. Something I mentioned earlier which bears repeating is to talk to your existing solution partners first. If they already can facilitate e-invoicing, or have a plan to provide it in the future, then it’s more than likely going to be better to deal with them. However, if they can’t help then that’s when this stuff becomes more relevant.
Now you can also group the Access Point vendors very roughly by solution maturity. Again, generally speaking, (and I’m sure some of the others may take offense to this) but some Access Points have been doing this for a while and have international experience, whereas other Access Points are newer companies, or at least have adopted Peppol more recently. More often than not, it’s the Access Point providers that have European or Singaporean experience that tend to have more mature solutions; however, I do acknowledge that’s a generalisation, and that not always the case.
What is Solution Maturity?
Imagine you want to send an e-invoice and consider for a moment how the invoice data needs to move from your finance system to the Peppol Access Point. We know that the invoice data needs to be in the correct Peppol UBL format, so we need to ask ourselves how it gets into that state. Most finance systems in this part of the world can export the Peppol format natively, so how does what comes out of your finance system get transformed into the Peppol UBL? A mature Access Point solution will do that data transformation for you. It will take whatever your finance system can provide and transform it to meet the Peppol specifications. However, a less mature solution may push that burden back onto you and require that you provide the Peppol e-invoice correctly formatted in the first instance. Another consideration might be the timing of how the invoice data moves from your system to the Access Point. Storecove advocates using our modern RESTful JSON API so that transactions happen in real-time. Whereas other solutions in the market rely on email or SFTP to move batch files around so that invoices are processed in batches on a schedule.
Think of it this way. If you wanted to ride a bike down a hill, would you rather ride a modern mountain bike or a penny-farthing? On paper they are both bikes, they both have wheels, and they will both get you down a mountain. However, one is a far more technologically mature vehicle that will get you there quicker, safer, and more efficiently than the other. It’s kind of the same with Access Points, you need to look past some of the bullet points because the process matters just as much, if not more, than the outcome.