August 16, 2022 | By Lee Bourke
E-invoicing has existed for a while, following the trend of activities moving online.
Nevertheless, the digitisation of procurement has not gained expected popularity due to e-invoicing platforms not finding a common ground by adhering to a specific framework.
PEPPOL is a European Union standard used to exchange electronic documents among registered members within the network.
With the Australian and New Zealand governments'’ adoption of PEPPOL, along with other non-European countries, the standard is now being referred to as a global one.
With this standard, Australasian business owners can adequately maintain a productive business relationships with international trading partners.
E-invoicing, also referred to as electronic invoicing, is a billing method where a buyer and supplier exchange an invoice electronically through the use of fixed structured data exchange. This is in contrast to the traditional paper invoices sent via mail.
B2B (Business-to-business) trading partners operate e-invoicing in two ways. The first is through a point-to-point connection between buyer and seller.
Another option is through a network like PEPPOL which connects a web of buyers and sellers. Here, the invoices are electronically exchanged between members of the PEPPOL network via a secure portal.
There are many e-invoicing platforms today, numbering hundreds. Each has its own format for storing information.
As such, existing e-invoicing platforms do not necessarily benefit businesses because of the lack of a standard.
This makes it frustrating, time-consuming, and costly for trading partners to exchange electronic business documents.
The inconvenient route to facilitate this would be that a seller convinces every buyer to download and install the electronic invoicing platform they use or visa versa.
This is unsustainable for both parties where they have significant B@B business relationships that need this service implemented.
An enabler for successful e-invoicing is that both the buyer's and sender's computing systems need to be able to read the electronic business document.
While it is easy for humans to read an e-invoice regardless of the format, e-invoicing platforms are often programmed to only read the invoices generated on their platform.
This poses a problem when both business partners on either end of the exchange use different platforms. It is, therefore, pertinent that there be a standard for e-invoicing.
PEPPOL is short for Pan-European Public Procurement Online. It is a European Union standard designed to simplify electronic transactions.
Many companies across Europe and the world have adopted the PEPPOL standard. Such countries include Canada, New Zealand, Singapore, and the USA.
Australia adopted PEPPOL in 2019. Although PEPPOL e-invoicing is not yet compulsory in Australia, the federal government directed that the PEPPOL framework be adopted by all commonwealth government agencies by July 2022.
As of the 1st of July, these agencies were expected to pay their suppliers, who also use e-invoicing, within 5 business days. Failure to fulfil this would mean that they pay interest to the suppliers.
The goal of the mandatory adoption of PEPPOL e-invoicing by commonwealth government agencies is to fast-track its widespread use among private companies, especially those that are trading partners with the government.
PEPPOL is an international network that gives companies the room to conveniently trade electronic business documents with individuals registered in the PEPPOL network.
39 countries worldwide use PEPPOL, including the Australian and New Zealand government agencies and the private sector.
Like other procurement documents, PEPPOL invoices can be used to exchange electronic documents, confirm orders, catalog goods, and shipping documents.
This standard makes it easier for companies to trade internationally without the restriction that comes with country-specific standards.
Right now, business trading partners can choose either PEPPOL specifications or the national standard of the country they are operating in/sending an invoice to.
However, clear indications show that the latter may phase out soon.
The European Union sets a regulation that e-invoices must follow in order to qualify to be sent via the PEPPOL network.
All public authorities and private companies in the network can accept it as long as it follows the standard. PEPPOL facilitates data exchange between business finance systems.
Unlike traditional methods, business documents like PDF invoices need not be manually uploaded into a finance system or scanned with Optical Character Recognition (OCR) software solutions.
If you wish to receive or send electronic invoices and other documents using PEPPOL standards, you need to be connected to an Access Point.
PEPPOL Access Points are available for you to be certain that your invoices are sent correctly.
PEPPOL Access Points are your direct link to the PEPPOL network.
As a buyer, you need to choose an Access Point service provider that is suited to your kind of business.
All service providers operate under the PEPPOL network, so buyers and sellers need not necessarily use your exact PEPPOL service providers.
Your recipient would receive e-invoices that are ready for processing on arrival.
There are over 200 certified Access Points worldwide to pick from. Private businesses can choose one of the three options suited to them.
You could procure an ERP system that operates within the PEPPOL network. This allows you to create and send invoices directly in your usual set-up. This option is most suited for small businesses.
Another option is to directly integrate PEPPOL with whatever accounting software you are using. This can be done by getting an Access Point as a service provider. Large businesses would benefit more from this.
VAN operators and ERP vendors can obtain access to a ready-to-use PEPPOL access point as white-label service providers.
PEPPOL invoicing operates a four corner model. This process involves 4 parties: your business, your access point, your recipient's business, and your recipient's access point.
Here is how it works:
You send an e-invoice or electronic document to your Access Point.
They transfer the document to your recipient's Access Point. In turn, your recipient's access point service provider forwards it to them.
A PEPPOL Authority helps to ensure that an access point provider meets the service technical specifications. They set national standards for the design and content of PEPPOL documents.
They align with OpenPEPPOL, an international non-profit organization that develops and disburses PEPPOL specifications to Europe and other countries across the world.
There are 13 PEPPOL authorities across 13 different countries worldwide.
Businesses that adopt electronic invoicing find that the automation that comes with this method makes sending electronic business documents more convenient and fast.
In addition, adopting the PEPPOL framework would simplify your business procurement processes, reduce administrative delay, limit errors typical of manual processing, and increase the accuracy of budget and financial reporting.
A ripple effect is that payments and order resolution would happen faster. It would also significantly save costs.
Hence, the importance of PEPPOL e-invoicing for businesses cannot be overemphasized.
We are experts in PEPPOL adoption. Feel free to contact us for further help with this.
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