Recently we covered the news that federal government departments will start paying e-invoices to businesses within five days.
This applies only to contracts valued up to $1 million. If departments do not adhere to this new rule, they will face interest charges on any late payments – as long as both the supplier and agency use electronic invoicing.
A longer maximum 20-day payment term will continue to apply in instances where e-invoicing is not used.
Small Business Ombudsman, Kate Carnell, said in a statement that this is a “game-changer” for e-invoicing small businesses that are “directly engaged in a contract with a federal government agency.”
We wanted to find out further benefits of using e-invoicing for small businesses, so we spoke to Steve Scala who is the Vice President of corporate development at DiCentral, a global provider of B2B supply chain management system.
Discussing the underrated benefits of electronic invoicing, Steve said “There are three main benefits that come to mind. E-invoicing allows the user to control the cash flow and timing of payments.”
“It’s a more cost efficient approach as it expands the EBITDA (earnings before interest, taxes, depreciation, and amortization) margins by eliminating manual labor.
“Finally, e-invoicing creates the opportunity to analyse the data to find more savings whether that be in cell phone bills, garbage collection and energy consumption.”
Considering the potential savings you can make by choosing to switch to e-invoicing, why is that some companies are reluctant to implement the systems?
Steve says that it is a matter of priorities; “Many companies tend to take their scarce investment resources and focus on revenue growth (invoice digitization is an EBITDA and Cash Flow focus)…”
“Bringing about inter-organizational change is hard, especially if you have no leverage. Can a company sending 3 parcels a week realistically call up FedEx and say ‘I need you to invoice me in a particular way?'”
If you are more open to implementing e-invoicing, Steve explains the importance of having practical steps in place. He said, “You need to have a solid plan relative to bringing about the organisational change – what are the benefits of the e-invoicing versus the potential downfalls?”
“A company needs to appoint a maverick or change agent to be in charge of the e-switch project and be able to sell it to vendors.”
We hear that this new rule of government departments having to pay businesses within 5 days is a “game-changer” and Steve agrees to some extent, saying that “the approach taken by the AU government re-enforces the points we are making relative to how difficult it is to bring about inter-organizational changes and the need to think through sticks and carrots, or reward and punishment.”
“Obviously this is a huge carrot the AU government is offering for vendor to adopt E-Invoicing.”
Steve Scala is an expert in B2B Cloud and SaaS based business models with a focus on supply chain collaboration (issues associated with inventory, invoicing, payments, global transport, cash management, implementing new business models such as globalization or adoption of omni-channel strategies and just in time manufacturing).