There are many opportunities in the blockchain, crypto and AI space, says Jessica Ellerm, who looks at what Xero is doing for e-invoicing.

Friction may be responsible for forming diamonds out of coal, and majestic mountain ranges from the collision of tectonic plates, but when it crops up between a procurement team and an accounts payable function, all it’s generally responsible for is headache, and dollars down the drain.

As a business owner myself, I feel I can talk to this point with some real world experience. Accounts payable is the least fun part of the five or so hats I wear on a weekly basis, but as someone with an entrepreneurial mindset, living through the pain has also made me realise there is a real opportunity available for someone to come in and significantly improve the end-to-end process. Whether that be simple automation hacks or better visibility between suppliers and buyers, a great procure-to-pay journey is just waiting for someone to innovate and own.

Aside from the pain points, in Australia alone there are serious economic reasons why we desperately need innovation in this space. According to a report commissioned by the Australian Tax Office, introducing structured e-invoicing practices between businesses, and businesses and government agencies, could save the Australian economy $10bn every year.

Depending on how familiar you are with your company’s accounts payable process, it may (or may not) shock you to learn that e-invoicing adoption in Australia is estimated to sit at a paltry 10-15%. We are well behind countries such as Brazil, which is at over 90%, Mexico at around 75%, and even the Eurozone, which is thought to sit at 28%.

These numbers are backed up by a recent report from global invoicing powerhouse Tungsten Network. The 2017 P2P Friction Study Report, which surveyed over 424 global procurement and accounts payable professionals, found that paper-based invoices remain the main source of friction and wasted man hours, with 49% of respondents naming this as their number one cause of friction. It was followed fairly closely by non-purchase order invoices being recorded in ERP systems, dealing with suppliers chasing invoice payment status, and a lack of automated process able to handle exceptions and approvals.

According to Tungsten Network, the degree of friction compounds the larger the organisation becomes. Using a proprietary Friction Index, the Tungsten Network report found smaller businesses feel the impacts of friction slightly less. While this could point to a direct correlation between friction and invoice volume, it’s possible that smaller businesses are able to access better technology for their procure-to-pay systems than their larger counterparts.

Xero-ing in on e-invoicing

This is backed up by the simple fact that what we have witnessed in the fintech space to date, is that innovation tends to flourish at the small business end of the spectrum. Why? Because existing processes are less entrenched, business unit politics are nonexistent, and decision makers are easier to reach.

Xero’s rise in the cloud accounting space is one example of this, as is Canadian startup Wave. Xero in particular is leading the charge on a number of technology driven initiatives, specifically around e-invoicing, outpacing a number of its competitors, and showing the big end of town how the cloud can truly be leveraged on a grand scale.

One of these initiatives is Xero to Xero invoices, a feature that enables a supplier to create a draft sales invoice in a buyer’s Xero organisation. So rather than receive an email with a link to an invoice, or a PDF that requires uploading and manual data extraction, the buyer simply logs into Xero and can see the invoice set up and ready for final approval in their accounts payable dashboard. With a Billentis report estimating costs of $30.87 to process a paper invoice, and $27.67 to process a PDF invoice, at $9.18 to process an e-invoice using Xero-like technology, the economics are clear.

Xero Connect takes the Xero to Xero concept a step further, opening up the platform to big suppliers not on Xero, but who regularly invoice clients who are. Two large corporates, Reece and Caltex, have joined Xero Connect, with Xero actively seeking more partners. Of course the catch is that, as a small business, you have to be using Xero to access the platform. And like any network, it’s only worth joining if there are suppliers who you regularly transact with already present. In my case, none are, so I’m personally back to square one.

What is really required here is complete interoperability between all software in the supply chain ecosystem. Until then, e-invoicing middleware platforms will be the go-to for most businesses.

Beyond dynamic discounting – accounts payable meets crypto

While e-invoicing is a no-brainer, it’s interesting to think for a moment how the future for accounts payable could shake out in other, more strategic ways, especially around working capital management.

Working capital is a huge friction pain point for businesses, hence the dramatic rise in fintech’s operating in the invoice financing space over the past five or so years. While businesses such as Tungsten Network operates Early Payment schemes for suppliers, there are broader opportunities that could negate the need for financing altogether, or at least complement this type of service.

Today, dynamic discounting is widely accepted as something accounts receivable have in their toolkit to speed up payments, but what if accounts payable could tap into alternative currencies to find other ways to access cheaper payment instruments, locking in discounts in other ways?

With this in mind, it seems for many of these two-sided e-invoicing networks, a natural progression is to develop their own cryptocurrency. In a world of increasingly globalised trade, being able to transact free of fiat currency conversion fees would be attractive, and a network-accepted currency would be advantageous from a speed of settlement perspective.

It’s not hard to imagine the supplier’s invoice of the future offering the buyer’s accounts payable an option to pay in an e-invoicing network’s token. This would offer a discount over and above early payment via fiat currencies, which would still need to meander their way through sluggish back-end banking infrastructure, and would incur multiple transaction fees along the way.

On top of this, it’s also not hard to imagine a bot managing all of this for you, reporting daily about how you could best optimise your working capital and payments due based on the mix of network tokens and fiat currencies you had to hand. The technology exists today, but a smart and simple implementation of it doesn’t.

Isolate then innovate

Businesses are slowly realising that deep productivity gains and competitive advantages can be found in places such as accounts payable. The problem isn’t necessarily understanding the friction points, but working out what to do about them, and who to work with. Getting the basics right, however, is fundamental, and we must get business working towards these fast, with the technology to hand.

Looking to the future, opportunities abound in the blockchain, crypto and AI space. The key for businesses will be thinking carefully about who they work with today, and making sure those partners are on that innovation journey themselves.

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– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Image by Sergey Nivens,

About the author

Jessica Ellerm

Jessica Ellerm is CEO and co-founder at Australian fintech startup Zuper Superannuation. She's also a fintech commentator, blogging at her own website ( and guest posting for BankNXT. In addition, she writes for the fintech blog Daily Fintech Advisers, specialising in small business banking. Prior to Zuper, Jessica spent 6+ years at payments company and small business startup bank Tyro. Jessica is a contributor to Brett King's Breaking Banks, and has freelanced as a finance news journalist for Australia's leading online markets channel Finance News Network.

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