eInvoicing and NZBN for productivity gain and business innovation

Jun 2019

Small Business Minister Stuart Nash is leading New Zealand’s push into eInvoicing based on mass take up of the NZBN. The 2018 Budget put funding into a major project for this and last March, New Zealand and Australia committed to a joint approach on eInvoicing across the TransTasman single market.

Mr Nash talks with SCAN about Government intentions for eInvoicing and the NZBN to promote productivity gain, business innovation and further eCommerce initiatives throughout our economy. 

Question: How do you see the future with broad take up of eInvoicing?
I’m advised that about 35% of invoices are paid late across the New Zealand economy today. Even Inland Revenue says that it late pays a third of the invoices it receives. The issue is simply that when invoices are submitted, they’re often wrong and must be sent back to the supplier, corrected and resubmitted and that’s another 30 or so days added to the payment cycle. Before you know it, your business has suppliers or perhaps banks knocking on the door, saying ‘hey we need to get paid here’. Not much good for anyone. The move to eInvoicing should tidy that all up and we can expect many businesses to be paying in fewer than 21 days from then on and maybe 14 days will become the norm. I think there will be a cultural shift around eInvoicing as people find they can be more efficient on payment issues, and as big players in both the public and private sectors say to their suppliers, ‘we’re going to eInvoicing and if you want to be part of our business supply chain, you have to come with us which means using the right software package so that my system can talk to your system’. The transition could be tough for people who have been doing things their own way for decades but I bet that after six months, they will be saying, ‘why weren’t we doing this six years ago’!? For us in Government, the challenge will be communicating the value proposition for eInvoicing … you’re going to be paid on time and more than that, there’ll be a new paradigm around ‘on time’ and the ease of business transactions. Today you usually have to wait until the 20th day of the month following, and perhaps 50 days after you delivered. In future, that wait might be never more than two weeks. There might be four or five compelling value propositions … we have to ensure we get those out to people in ways meaningful to them. They can tick at least two of the boxes perhaps. It might be the advantages of being paid faster, or of incurring less cost when you do your invoicing. You could be moved by saving time, say, five hours a month. There’s also the motivation that comes from seeing everyone else move to eInvoicing. I’m sure the market will drive everyone in the same direction over time.

Question: What do we actually mean by ‘eInvoicing’?
It’s literally a customer entering all your details as a supplier into their accounting software and you doing the same … when you push ‘go’ on an invoice message, it can be received, authorised and paid without any unnecessary delay. It’s literally accounting software talking to accounting software, and processes that allow an invoice to be verified against an order number and your electronic record of goods and services being received. As soon as that happens and the invoice is confirmed as correct, then it can be paid. There are no more PDFs being created and emailed through to the accounts payable department at your client company, where it is printed off and cross checked with an order number and so on. No more saying, ‘we asked for 15 linear metres, the invoice is charging us for 17 metres and we need to look again at how much was actually received’. The process will show up mismatches in data wherever they occur in purchasing and payment processes … if there is a problem, people will find out within days, not weeks. eInvoicing is basically automating the supply chain to the point where correct invoices can be received and paid in a timely manner and without manual work in organisations. A substantial number of small businesses in New Zealand are already using one of the software packages that will support this.

Question: Where is $5.8 million allocated in the 2018 Budget going to be spent?
We’ve got MBIE1 staff working on the whole programme at the moment and that includes our collaboration with Australia on interoperability. Government agencies are going to be driving much of the early take up of eInvoicing with changes in their own processes … we have to be walking the talk within the state sector to have credibility with business. Same as with the NZBN. The Government and its agencies have an important role in driving innovative processes forward in what they do every day. From there, suppliers and others can be asked to come on board.

Question: Why is Australia so important in the work on eInvoicing?
It’s about interoperability. There’s no point in us working on Beta and Australia going ahead with VHS2 . Between the two countries, I think there are 1.3 billion invoices generated every year, so with eInvoicing we’re talking about substantial productivity gain in businesses that trade both ways across the Tasman. This is something that both Governments really want. The collaboration is everything from Ministerial and Prime Ministerial talks, to officials travelling both ways across the Tasman and exchanging lots of ideas and papers. There will be confirmation of progress at the highest level at the appropriate time. I’m impressed with the speed and quality of the work that is being done by our officials and their Australian counterparts. It’s very much part of the Single Economic Market concept. As the Minister responsible for eInvoicing, I would like our Prime Minister to be able to stand up at the next Australia-New Zealand leaders forum next March and say that eInvoicing is nearly a reality now3 . We’re working fast ... but we also need to ensure the system has integrity and is robust. The last thing we want is to put something into the market that is half baked … 80% right but with businesses finding that some of their messages bounce back. At that point, they’ll give up and go back to paper! Of course, eInvoicing needs to work for every type of business who might be operating TransTasman and that encompasses many, many different types of business.

Question: Are the Australians ahead on digital business processes?
They are slightly but they’re also keen to work with us … we’re fast catching up. There’s no benefit to Australia in doing things in this area independent of New Zealand and there’s no benefit to us in not tagging on to a lot of what they’re doing. We are very aware of what is happening around the world. There’s growing recognition that our old ‘number 8 wire’ mentality isn’t good enough today. It’s helped build a level of resilience among New Zealand businesses, but today our innovativeness needs to be taken to the next step of professionalism.

Question: What’s the vision eCommerce overall?
eInvoicing is the first step and there’s a lot more to come. We would love to get the whole procurement process online across the New Zealand economy and to have world leading traceability on our products. The Government has a responsibility to promote the best use of technologies that drive higher productivity and more innovation, and of course, those technologies are constantly being developed. Once we get eInvoicing embedded we won’t rest … we’re looking at the next steps for using new technology in every supply chain function. In fact, really innovative New Zealand firms – there are not that many but the number is growing – are already well on the way. Take those who are selling into China for example … firms who are selling to consumers off Alibaba or another platform and who do all their warehousing in New Zealand, doing just in time delivery as orders come in. Gone are the days where you sent a huge delegation to China, set up an office in Beijing and incurred lots of cost in warehousing your product in one of the most expensive warehousing precincts in the world (China). It’s getting easier and easier for SMEs to actually engage in export markets in ways they never did before. When New Zealand signed the Free Trade Agreement with China (2008), you had to be a Fonterra or Lion Nathan to be there in a meaningful way because of the resources required to do that. The way things are going now with online platforms, you can take advantage of an FTA in a way we never foresaw … marketing and selling directly to the Chinese consumer and getting paid in whatever currency you like. That is the fast innovator end of the market today and I don’t know how long it will take to become the norm. Certainly, in my children’s lifetime. Where technology is really going to drive the New Zealand brand forward is traceability. As people become more educated and more enabled by technology, they are going to want to know where their food comes from … what part of the world, using what resources and processes. The technology exists now to some extent, an example being a fishing company that can send video images of each catch along the supply chain to restaurant diners who will be consuming the fish. That is the sort of highend consumerism where New Zealand could be aiming with its great products. We do have a good country brand but we’ve always got to be looking at enhancement – and traceability is a big part of that.

Question: The market is fast evolving on its own accord. What role does the Government really need to play?
Three things. We can be a big enabler for New Zealand businesses. The Government’s got to have trade people on the ground in global markets, communicating the national story, basically being brand ambassadors. The businessperson in Gisborne who is producing and selling manuka honey in China, for example, can’t also be responsible for promoting Brand New Zealand. The second thing is legislation and that is about ensuring New Zealanders selling on Alibaba, eBay and so on are protected … that when they sell, say, $50,000 worth of goods in a container sent to China they get paid. We need to ensure that transactions occur as cleanly as possible and that people meet their legal obligations here and around the world. The third role for Government is squarely in relation to trade agreements. Of course those generally reduce tariff barriers but they also need to address non barriers of all kinds. We’ve got to ensure integrity in the whole supply chain including the efficiency of processing when goods pass through borders here and overseas. We need to have the right systems and platforms for enabling that to happen in good time and at least cost. One illustration of this is ensuring tax compliance at the New Zealand border… we’re creating the systems needed to collect GST on goods imported here after purchase online. The Government needs to work with other countries in getting them to adopt the same or complementary approaches and systems for management of trade flows. Only governments can do these three things and they’re increasingly important with the rise of eCommerce in a globalised world where businesses and consumers are able to do so many more transactions. This Government is very focused on getting a genuine multiagency approach to all the issues and in fact across every portfolio. I know this sounds glib, but we have to work together much more if New Zealand is going to optimise all its opportunities economically and in social policy areas as well.

Question: Where does the NZBN fit in to all this? Surely it is a building block in any form of eCommerce.
It is exactly that … the building block that will allow organisations big and small to leverage much of what the Government is doing and to grow productivity in all their supply chains. The NZBN is the unique identifier that gives confidence to your customers and suppliers, and takes away a lot of the pain in routine business activities especially for small businesses. The Australians have done it really well with their ABN which is also the GST number for an Australian business. The ABN is at the bottom of every business card. In New Zealand, I’m asking people to put their NZBN on every card printed from now on here. If someone asks about your business, you can refer them to the NZBN website for all the basic information. When the NZBN is also linked to the compulsory provision of information, it becomes even more powerful.

Question: What about the NZBN becoming our GST number as well?
Ultimately the fewer numbers you have the better, right? In the future, if you want to do business with any part of government and ideally any company, you will need an NZBN ... you register your business get an NZBN and a GST number and away you go. And in time, we could almost get rid of the GST number.

Question: How well are government agencies doing with their implementation of the NZBN in their systems?
I have written letters to all agencies after the most recent annual audit on this issue. Some organisations like the Broadcasting Standards Authority are doing brilliantly, but District Health Boards aren’t. Some of my letters have been a bit harder than others. Eight core government agencies4 must have the NZBN implemented in all their dealings with businesses by December 2019 by Cabinet Direction. There are some agencies of whom we are not requiring implementation at this stage, the Crown Research Institutes for example. In reality, I think using NZBNs will just become part and parcel of doing business for everyone whether in the public or private sector. Audit report pages relating to each Minister’s portfolio were pulled out and sent to him or her with a message that, ‘your agencies are doing well’ or ‘your agencies need to do better’. We recognise there are costs. It’s easy for Inland Revenue, for instance, as they go through a business transformation at the moment, spending $1.8 billion ... they can embed NZBN as part of this. At the extreme end you get a couple of organisations who have buried their heads in the sand. There’s a middle group where the chief financial officer or whoever has NZBN responsibility knows they have a deadline, and they’re needing some encouragement to get the work done. Over all, we are getting there.

Question: What importance do you attach to the current process of updating the primary business data against NZBNs?
It’s another important piece of the pie. We are doing consultation on what data to include, what works currently, what isn’t needed and so on. There’s been a lot of feedback. We need to get this right because you really only get one chance at it … getting it wrong will leave people cynical about future efforts. We do need to be very clear that this isn’t ‘Big Brother’ collecting information on people but rather, it’s about enabling productivity gain. Most of the information in the NZBN register will be what’s already public anyway, in various places. There are some things you can ask not to be publicly available.

Question: Are there particular business sectors likely to stand out as early adopters of NZBNs and eInvoicing?
These things will take off where there is a business association leader who really gets it … when someone who is well respected starts telling his or her business members, ‘this NZBN stuff is brilliant, I’ve used it in my business and you need to get on board’. It will be that sort of across the fence talk, starting first with an inspired leader and most people will act when they hear about it from someone they know and trust. Communicating the value proposition will be the great challenge for the Government. I can’t get to all the decision makers from here in my ivory tower but MBIE and others will use all the channels available.

Question: What is your key message?
eInvoicing is the beginning of a journey as we focus on really driving productivity and innovation in the New Zealand economy by using current and emerging information technologies. As a small trading nation, we have a lot to gain from making it easier for businesses – and small to medium sized businesses in particular – to operate and to engage successfully in export markets. As technology develops, we’ve got to make sure we are close behind the lead adopters. As I’ve said, people need to understand the value proposition to them … and the Government doesn’t need to take any credit for this. The technology itself, and peoples’ ability to see its benefits, will be what drives change. I think we’re going to see rapid growth in eCommerce over the next three or four decades.

Note: NZBNs are based on GS1 Global Location Numbers, sourced through GS1 New Zealand