One can't move money without moving information — a fact that's particularly true for the B2B payments space, in which remittance and transaction data is a critical component of accounts receivable and accounts payable operations.
As businesses continue their digitization migrations, there are more ways than ever to transmit electronic data. Not all are created equal, however, and a lack of standardization has created a new source of friction in B2B payments, limiting businesses' ability to gain insight into cash inflows and outflows.
In some markets, eInvoicing mandates are creating government-led initiatives to standardize the way businesses exchange data — and presenting an opportunity for the public sector to lead by example for the private market.
Australia is one of them, with the government announcing plans earlier this year to transition to the Pan-European Public Procurement Online (PEPPOL) eInvoicing standard. Announced in conjunction with New Zealand, Australia's adoption of PEPPOL aims to save businesses money on invoice generation and processing, while streamlining data sharing between companies in the B2B trading environment.
According to John Delaney, managing director of B2B integration service provider MessageXchange, standardization is now a vital part of successful buyer-supplier relationships.
"Without standards," he told PYMNTS, "companies would have to connect to each trading partner separately, which is time-consuming and costly. ... Without the standard, the cost to trade would be much higher, and, in my opinion, the uptake of electronic data exchange would be much lower."
The Government's Private Sector Influence
As a set of standards designed to heighten cross-border eProcurement efficiencies, PEPPOL has already been adopted by several markets in Europe (including Germany, France and Sweden), as well as Singapore. Its expansion in the Oceania region reflects governments' growing interest in guiding buyers and suppliers toward a more affordable, efficient way to conduct business.
Australia's embrace of PEPPOL is part of the government's broader strategy to promote fair and efficient B2B payments in the government procurement space, having vowed to pay eInvoices within five days beginning Jan. 1, 2020. Such speed of supplier payments could not be possible without automated invoice processing, made much more efficient by standardization, said Delaney.
"The survey that initiated eInvoicing in Australia found the cost of receiving a paper invoice was $30.87 AUD [$21.29 USD], and the cost of receiving an eInvoice was just $9.18 AUD," he said, relaying statistics previously cited by Australian Small Business and Family Enterprise Ombudsman Kate Carnell. "It can have a significant impact on a company's bottom line, and the economy more broadly, and that's why the government is moving in this direction."
He also pointed to a reduction in invoice and payment errors associated with manual data entry as additional benefits for both buyer and supplier. Furthermore, he addressed the ability for standards like PEPPOL to embed elevated data security capabilities that cannot be achieved through paper invoices or other data exchange tools.
As the government embraces standardization and digitization in its own supplier payment practices, the public sector could influence the private sector to do the same.
The Future Of EDI
PEPPOL itself is an electronic data interchange (EDI) protocol, meaning the standardization initiative aims to address friction associated with a legacy data exchange tool that has been around for years. Today, EDI remains a staple in the buyer-supplier relationship across the globe, with widespread adoption among its largest benefits. Of course, EDI isn't without its drawbacks.
"Historically, EDI has required specialized knowledge in the field to help a company get started," said Delaney. "It's also been difficult to get 100 percent adoption from vendors."
Technology service providers like MessageXchange aim to tackle that pain point by supporting the onboarding process. The company recently announced that it is now the first PEPPOL-certified eInvoice Access Point service provider in Australia and New Zealand, as part of its effort to support businesses' adoption of the framework.
Yet, challenges remain, he said. A lack of adoption, onboarding challenges and a lack of standardization have often forced businesses to revert back to manual strategies to move information, as Delaney noted, including the use of PDFs and paper invoices. Though buyers and suppliers still face barriers to embracing EDI and PEPPOL, the opportunities for cost savings, efficiencies, faster supplier payments and data integrations are vast.
As such, Delaney said the government's participation in PEPPOL is a step in the right direction to help not only the public sector accelerate supplier payments, promote security and accuracy, and boost efficiency, but to guide the private sector to those same achievements.
"Here in Australia and New Zealand, [the] government and industry are ready to take this next step [toward] eInvoicing," he said. "There's enough awareness of the benefits of automation, like time and cost savings, and what's required to achieve this. The Australian government is taking a huge step to promote adoption by promising to pay supplier eInvoices in five days. It's an exciting time."