Is eInvoicing worthwhile for contractors & small businesses?

Einvoicing On Mobile

If you are a small business owner or contractor you may have noticed the recent hype around eInvoicing. If you are wondering what it is all about and whether eInvoicing is right for you, read on.

What is eInvoicing?

eInvoicing is the direct exchange of data from one accounting system to another. By using eInvoicing you can electronically transfer an invoice at the push of a button, directly from your financial system to your customers, or from your suppliers to you, even if you use different systems.

Currently, you probably create an invoice in Xero and then send it as a PDF by email to your customer, who then has to physically open it and input the information into their accounting system. This manual process can lead to errors, such as entering the wrong bank account or the wrong amount. eInvoicing is part of a government initiative to help businesses be paid on time by avoiding manual errors, minimising admin and delays.

What are the benefits of eInvoicing?

eInvoicing is rapidly becoming more widely used within New Zealand and there are some great benefits for small businesses and contractors, as well as the large businesses, who have been the early adopters in New Zealand.

  • Faster payment: By far the biggest advantage for smaller businesses and contractors, eInvoicing is designed to reduce errors and delays for business to business payments. By sending your invoices directly from Xero to your customers’ accounting system, it will arrive ready to be approved and paid. Whether you are working as a contractor for one main client, or you’re agency with multiple clients, this should result in faster payment and better business cash flow for you.
  • Reduced Admin: eInvoicing will reduce your admin. Once you have registered for eInvoicing you can receive eInvoices from your suppliers directly into Xero. No need to type in each invoice individually. All you will need to do is approve the invoice for payment, saving you valuable time and costs, and leaving you able to focus on gaining more customers and managing your small business.
  • More secure: eInvoices are impossible to lose and minimise the risk of fake or compromised invoices. Your details, and your customer or suppliers details, are validated, audit logs are kept and strict protocols are followed. eInvoicing means you can be sure your invoice has reached your client, and it should be easy for them to approve the payment.
  • Improved financial management: eInvoicing allows for a lot of detail on each invoice to be retained, which in turn, supports financial analysis, forecasting, planning and budgeting.
  • Compliant with new GST rules: The IRD have recently updated their rules for record keeping for GST returns, making it simpler and more flexible. The great news is, eInvoices is fully compatable with these rules.

Our recommendation

We have specialist knowledge of the medical, creative, legal, IT and not-for-profit industries. Some of the entities within these industries may benefit from using eInvoicing, however the real benefit will come when everyone is onboard with the practice. If you’re not sure whether eInvoicing is worthwhile for your business, then get in touch.

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