“Think of it as insurance”: As business scams mount, Financial Services Minister Stephen Jones says it’s time to adopt eInvoicing

It is “critical” for small businesses to protect their payments with Australia’s new eInvoicing protocol, Minister for Financial Services and Assistant Treasurer Stephen Jones says, after invoice fraudsters helped national scam losses grow to $2 billion last year.

eInvoicing is a secure digital system connecting business-to-business transactions through their accounting software, eliminating the need for physical invoices, PDF scans, or emailed forms.

To increase take-up, the federal government, the Australian Taxation Office (ATO), and bookkeeping providers have launched eInvoicing Week, encouraging businesses to activate eInvoicing through their accounting partners.

The government claims invoices filed through the eInvoicing system could cost around $20 less than those sent by traditional means, creating a significant cost benefit for businesses over time.

Speaking to SmartCompany, Jones says the system has another significant benefit: fraud prevention.

The Australian Consumer and Competition Commission estimates Australians lost $2 billion to scams in 2021, with $128 million in funds diverted through business email compromise scams alone.

“The most insecure way of invoicing, either sending or receiving, is using your email system, because scammers have found lots of ingenious ways to either mimic the email or to take over an email and send out fake invoices, redirecting to their bank accounts,” Jones said.

“So we know that is an insecure way of sending out invoices and receiving them, so we’ve got to change our business practices.”

Unlike invoices sent by email, which can fall victim to redirection through human error or deliberate tampering, the eInvoicing system allows businesses to transfer funds between validated ABNs.

“There’s a pre-approval process so that invoicers’ and invoicees’ business to business communications is done securely,” Jones said, so businesses “can know confidently that money they’re sending has gotten to the person to whom it’s owed”.

Small business advocates have also noticed a disturbing rise in the number of scams targeting vulnerable businesses, with some scammers eking more than $50,000 from businesses recovering from this year’s devastating flooding in Queensland and northern New South Wales.

Considering the ways scammers deliberately target businesses at their weakest point, Jones says activating eInvoicing can act as a form of insurance.

“A small amount of investment you have to make, if you don’t already have software with this functionality, is absolutely worth it,” he said.

“Businesses should think of it as insurance which actually enhances their functionality, because built into the software is the ability to have secure transfer of funds across a secure system.”

That ‘insurance’ is even more important for businesses unable to cope with the brutal cost of fraud, he said.

“If you’re a big business you can probably absorb a few $100,000 worth of fraud through dodgy invoicing. If you’re a small business that could be the thing that sends you to the wall.”

In a separate statement, Minister for Small Business Julie Collins said the uptake of eInvoicing will “make a real difference for Australia’s small businesses — saving time and money to improve productivity”.

Those calls have been echoed by Xero, one of many accounting platforms which now facilitates eInvoicing.

With an estimated 62% of businesses still unable to pinpoint what eInvoicing is, Simon Foster, Xero’s GM of product for eInvoicing, says he hopes the week’s activities would point businesses in the right direction — and, ultimately, cut down on wasted time and resources.

“We know small businesses are time poor, but they have the willingness to adopt new technology,” Foster said.

“We hope that eInvoicing week will give small businesses access to subject matter experts so that they can understand the positive impact it could have on their invoicing processes.”

A full list of eInvoicing Week information sessions can be found on the ATO website.