How e-invoicing via Peppol can increase security of your business
Like many governments worldwide, the Australian government is actively promoting the adoption of electronic invoicing. Yet unlike many other countries, where e-invoicing is mandatory, the “Australian way” for e-invoicing adoption is voluntary — and Peppol is the system of choice.
What is Peppol?
Pan-European Public Procurement Online, or Peppol, is an extremely secure way to send invoices. Originally developed to streamline business with customers in Europe’s public sector, Peppol is now used to exchange electronic business documents, especially e-invoices, for B2G as well as B2B transactions in many countries. Peppol is both a delivery network and standard for e-invoicing and other procurement processes.
The Australian government strongly encourages, promotes, and incentivizes businesses to use Peppol e-invoicing. Australian government agencies are connected to Peppol and will pay e-invoices from suppliers (who must be Peppol users) within five days. Receiving money fast can be very attractive and motivates many businesses to join Peppol for their B2G transactions — and subsequently for their B2B business. That, in turn, can motivate their business partners to join Peppol. This network effect supports the Australian government’s strategy for Peppol adoption.
Peppol as four-corner model
Australian companies typically engage with certified Peppol Access Point providers in order to connect to the Peppol network and leverage the many Peppol e-invoicing benefits. Access Point providers assist companies in registering on the Peppol network and offer connections to other Access Points — in the country and abroad.
By using Peppol via their Access Point providers, companies can easily exchange e-invoices and other electronic documents with business partners (who are also connected to the Peppol network via their providers). In the e-invoicing world, this model is generally known as the four-corner model: Supplier and customer are two corners each connected to their Access Point provider (the remining two corners).
While the four-corner model allows for fast and secure exchange of invoice data and can boost efficiency for finance departments, it doesn’t allow for tax authorities to perform Continuous Transaction Control (CTC) on business transactions: The tax authority isn’t part of the billing process and therefore can’t collect any transactional data. So why would a government encourage utilization of Peppol in the country?
Who benefits from Peppol? And how?
For many countries, including Australia, the government’s motivation to use e-invoicing isn’t tied to tax reporting. Peppol e-invoicing is encouraged because it’s an established, proven, and standardized e-invoicing system that can bring many benefits to the local economy, including:
- Competitive advantages
- Protection against financial fraud
- Enhanced cybersecurity
To advance their economies and protect companies are major reasons for governments to support Peppol adoption. Joining Peppol e-invoicing often sparks digitization boosts for organizations — followed by succeeding digital transformation projects. Digitization and automation can bring savings, efficiency, environmental protection, and competitive advantages on an international scale.
Protection against financial fraud
The next factor, which is no less important, is limiting the space for financial fraud. Paper invoices and visual digital invoices such as Word, Excel, or PDF files can be easily imitated. With the look and feel of the original supplier’s invoice, false paper- or PDF-based invoices can contain a “new bank account,” and lure an Accounts Payable accountant into a trap. When the genuine invoice from the real supplier later arrives, the money to pay it is long gone.
Using invoices in structured formats (e-invoices) significantly lowers such risk: By sending e-invoices via the Peppol network, invoice information “travels” as structured data directly from the seller’s ERP (or other business system) to the customer’s system — eliminating the possibility of interference in the process. Every Peppol user must be registered with a unique Peppol ID. Every e-invoice “traveling” through the system is validated and registered. It’s virtually impossible to manipulate Peppol e-invoicing.
Another reason for using Peppol for invoice data exchange is the prevention of cybercrime. A digital invoice in an unstructured format, such as a PDF or Word file, might be used as a point of entry when trying to infiltrate companies’ IT systems with viruses or scams, as it’s possible to create a PDF file with an embedded virus that activates when the file is opened on the victim’s computer. Smaller businesses often lack sufficient measures against cybercrime and might become easy targets for cybercriminals.
When a company uses the Peppol network with its certified Peppol Access providers, this “door” for virus infiltration is closed to cybercriminals: Sending structured data as bits and bytes through the secure network of certified connections eliminates the risk of clicking on an infected PDF, Word, or Excel file.
Peppol: International standard with local specifics — and many benefits
As of today, more than 30 countries have implemented or are in the process of implementing the Peppol framework. Peppol is primarily used in European countries, but has also gained adoption in Japan, Australia, New Zealand, and Singapore.
To enable Peppol access, each Peppol country must join the international OpenPeppol association and establish its own Peppol Authority, which represents the association within the country. This local-country OpenPeppol representation ensures the formats for using e-invoicing via Peppol will support international document exchange standards while aligning with local regulatory requirements.
Businesses in countries where Peppol e-invoicing is available should leverage the advantages the Peppol network offers — fast and reliable invoice exchange while limiting exposure to fraudulent and cybercrime activities. Peppol e-invoicing adoption can help tax authorities safeguard businesses against fraudulent activities while fostering economic growth and prosperity.
In addition, by replacing traditional paper invoices with e-invoices, use of Peppol e-invoices contributes to environmental sustainability, benefiting everyone involved.
Avalara E-Invoicing and Live Reporting allows you to exchange e-invoices through the Peppol network. Contact us to learn how Avalara E-Invoicing and Live Reporting can help your business comply with global e-invoicing and live reporting requirements.
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