It’s an efficient, secure and more sustainable billing technology that can deliver several key benefits to you, your team and your customers. And it will help you comply with new rules about how to document GST on your supplies.
Documenting GST on your supplies: Big changes are on the way
These changes are intended to better align tax legislation with the modern realities of an internet-based world and the regular practice of e-invoicing. Updates to the GST Act will come into effect on 1 April 2023.
It is worth remembering the original GST rules were designed in 1985 – the days of paper-based accounting and large document boxes containing invoices. Under the new rules the old “GST invoice” will be replaced by “taxable supply information”. Along with this change in terminology, different information - and in some cases much more information - must be included on an invoice to comply with the GST Act. In some situations substantially more information is needed under the new rules:
- For a sale of goods or services of more than $1,000 you will need to show the buyers full details that include both a physical and an email address, and either a NZ Business Number or a website URL/address.
- The information requirements for imported goods or services are even more detailed. Not only does the purchaser need to keep a record of the consideration, but they must also record what portion of that consideration represents any salary or wages paid to an employee of the seller, and any payment for interest incurred by the seller.
While there is likely to be some grace period allowing existing business to get things updated, now would be a good time to look at your invoicing systems to make sure they can be adjusted to meet the new requirements.
Still not convinced? Here’s another five ways e-invoicing can benefit your business …
1 Accelerated efficiency and potential cost savings
Electronic invoicing completely removes the time required to manually enter invoices into your accounting system, and emailing customers links to your invoices. This could also present an opportunity to upskill your finance team members so they can add value to other areas of the business.
2 Reduced risk of fraud
Cybercrime is rampant and shows no signs of slowing down. Electronic invoicing puts the right protections in place by sending your bills via a secure network exchange with no human intervention, which heavily reduces the risk of interception and fraud.
3 Greater accuracy and a better customer experience
Less manual handling of invoices means the risk of human error is considerably lower. Not only is this is another great time saver when it comes to fixing errors, it will improve your customers’ experience as well – no one likes spending time on sorting out incorrect charges!
4 Reduced payment days
e-invoicing decreases the average number of days to receive payment. The top two reasons for these delays are incorrect billing information and invoices being sent to the wrong person. Electronic invoicing reduces these risks and increases the likelihood of payments reaching your bank account in full and on time.
5 Kinder on the environment
Business should always be in the lookout for ways to become more sustainable and environmentally friendly – not only because this reduces your carbon footprint, it also demonstrates to your market that they’re buying from a business that invests in this area. Electronic invoicing is one way to achieve this.
Where to start
Some accounting systems have made this very easy. For example, Xero is already set up to both send and receive e-invoices. This means the e-invoicing network has been facilitated for you, and XERO is currently providing this service at no charge.
Other accounting systems are e-invoice enabled, however we suggest checking with your accounting software supplier to confirm their status as they will also likely have a preferred APP for you to use. There are currently 28 e-invoicing software products registered with IRD to date.