Above (L to R): Robin Sands, Simon Foster, Sam Hassan

E-invoicing app Link4 and receipts processing app Squirrel Street have merged into an all-in-one accounts payable app under the Link4 name. It’s an interesting development for accounts payable processing in a space that is quite crowded.

Receipt Bank is the largest app globally in the bills and expenses section of the Xero ecosystem, and then there is AutoEntry, Datamolino, Expensify, HubDoc, ExpenseCheck, Entryless – and the list goes on.

E-invoicing is a relatively new concept for most countries outside South America. It is a platform that takes an invoice from one accounting program and inserts it into another accounting program, even if those two accounting programs are made by different software companies.

There is no scanning or scraping the data; the invoice is 100 percent the same in both accounting programs.

Combining e-invoicing – clearly the future for accounts payable – and receipts processing to handle laggard suppliers is a new approach and a strong differentiator. The two companies have a combined customer base of 72,500 users in Australia and New Zealand, almost all those coming from Squirrel Street.

Squirrel Street (formerly Shoeboxed Australia) will now be a wholly owned subsidiary of Link4 and each company will retain their current branding. The newly formed Link4 Board consists of Robin Sands as CEO, Simon Foster as executive chairman, Sam Hassan as CTO and Jono Herrman as non-executive director.

Digital First caught up with Simon Foster and Sam Hassan earlier this week to find out exactly how this will work.

 

Digital First: So what do you call it when you combine expense management and e-invoicing? Is this a new category?

Simon Foster: I guess so. In some ways it’s evolutionary. The best parallel is Netflix. Netflix started out with a red envelope, sending out DVDs in the post. We sent out the blue envelope and people sent back their receipts. We still do that.

But streaming in video is analogous to e-invoicing. Analogue invoicing, even when it’s a PDF sent by email, it’s still a manual process that has been happening for thousands of years.

Now with e-invoicing it goes straight from one accounting program to the other and enables a whole lot of things we haven’t imagined yet.

 

Digital First: How does that improve on receipt scanning services such as Squirrel Street?

Simon Foster: We all talk about receipts payables space as having a 99% accuracy. But there are 10 fields on an invoice, so that means that one in 10 invoices has an error. And of course that error is random. A human bookkeeper’s accuracy is more like 70%-80% but those errors are unlikely to have an impact. They are unlikely to add an extra zero, for example, which can happen with automated scanning.

But when you import an e-invoice automatically there’s no mapping fields, it is 100% accurate every time.

 

Digital First: Why do you need receipt scanning if you have e-invoicing, then?

Sam Hassan: It came from discussions we had with our customers. There will always be a supplier sending a PDF and they still need a way to process it. It’s more likely to be PDF files than paper at this stage.

 

Digital First: Is that true for Squirrel Street? Are you processing more PDFs than paper these days?

Simon Foster: A micro-business treats everything as a receipt, and a lot of it can be paper. They don’t operate payables processes. But if you move a little higher up then companies treat bills differently and at that level you’re getting more PDFs than paper.

We’ve already seen it in our case – the change from paper to digital has been pretty dramatic over the past couple of years. Three years ago a third of receipts were digital (i.e. PDFs) and two thirds paper, and now that’s swapped around. For new customers it is even more extreme.

 

Digital First: Don’t large companies already have EDI programs that do the same thing?

Simon Foster: “Procure to pay” projects have been around for decades but they are really expensive and long projects. This is taking one piece of it – the invoicing component – and making it much cheaper. It’s making it easier for the enterprise and accessible for the SMEs.

The precondition for this is cloud accounting software. It can be done with desktop software but it’s really hard to do and harder to support. And Australia is way out ahead of the rest of the world with penetration for cloud accounting

If we were having this conversation six years ago, enterprise wouldn’t have been interested in delivering to the 1% of their customer base that were using cloud accounting software. Now we’re talking about 40% of their customer base, and it’s only going to go up.

For example, (Australian gas supplier) BOC has hundreds of thousands of SME customers and they are delivering invoices directly to their accounting system (under a pilot program with Link4).

Enterprises are interested in servicing those customers in a better way than a posted invoice or a PDF.

 

Digital First: But if you’re supporting PDFs, won’t many of those be sent from desktop accounting software?

Sam Hassan: Link4 doesn’t work with desktop accounting solutions. Our focus is on cloud accounting. Software vendors themselves are not in favour of desktop any more. And at the same time it’s very complicated to work with different desktop versions and support those customers.

Simon Foster: When we launched in 2010 we supported desktop versions of MYOB and Reckon. We dropped that three years ago. Connecting to a cloud system needs to be very easy and you simply can’t do that with desktop software.

 

Digital First: So what will change for users of Squirrel Street?

Simon Foster: Initially, nothing. We will continue to develop the product and support it. We will then start to look at ways to connect the two products.

 

Digital First: How?

Simon Foster: We have customers already that we see have BOC as a supplier. Now we can deliver those invoices electronically. We already have accountants and bookkeepers who use both Link4 and Squirrel Street. We will make it easier for them to use both products, for example with single sign-on, unified billing and one dashboard to process e-invoices and scanned PDF invoices.

 

Digital First: Will Squirrel Street have some way to identify the e-invoices and avoid duplicating an emailed PDF?

Simon Foster: Yes. from a user’s experience it will be completely seamless.

 

Digital First: What will change for users of Link4?

Sam Hassan: They already have a page on Link4 where they can either upload a PDF file to the page or forward a PDF invoice by email for processing. We process it for them, they review the fields and save it to their accounting software.

 

Digital First: And that creates a template saved for future PDF invoices from that supplier?

Sam Hassan: Yes. It is done through Squirrel Street. It is very effective. One of the hospitality groups used through Link4 increased productivity from 150 PDF invoices a day up to 220 per day on average, a 50 percent improvement. And that’s by processing only PDF invoices at this stage.

 

Digital First: How many SME customers have signed on to Link4?

Sam Hassan: We have more than 2,000 users, but around 1,100 active users receiving invoices from BOC or other suppliers on the network itself.

 

Digital First: Why do you only have 1,000 users if BOC has 100,000 customers?

Sam Hassan: We did a trial program with BOC for 1,000 users. Now BOC are running a marketing campaign to expand that. You have to opt in.

 

Digital First: Once you opt in to using Link4 then can any supplier on Link4 send an e-invoice to the user?

Sam Hassan: The user still has to approve each supplier. It’s how we make sure we’re not delivering any spam invoices. You have to accept invoices from legitimate suppliers.

If you have stopped working with the supplier you can tell Link4 and it will stop all invoices from that supplier.

There have been several invoice scams recently. That’s the reason why we are trying hard to make sure we’re not delivering invoices through Link4 from someone who isn’t authorised by the business to send invoices.

Simon Foster: It’s the same with Squirrel Street customers. You want to make sure that you’re the customer that’s receiving it. That’s why you need to have the authorisation per supplier. It also gives you the opportunity to set up the rules for that supplier and code it the way you want and set up the approvals process.

 

Digital First: So you validate the SMEs when they sign up?

Sam Hassan: Yes, we validate them when whey sign up. When someone connects their software to Link4 we sync the supplier list and customer list. The SME can connect with any of their suppliers or customers. The have to connect with them if the connection is done between the customer and supplier then it will be delivered through any  system thru Link4 as well.

 

Digital First: Do the products cost any more?

Sam Hassan: No they already have it in place and within the same pricing of Link4.

 

Digital First: Has anyone else in the software industry combined e-invoicing with receipt processing?

Sam Hassan: I think we can say no, not at this stage.

 

Digital First: So it’s an all-in-one solution for accounts payable?

Simon Foster: Yes. And I don’t think we have fully understood the possibilities of fully digital processing. It will change the way these systems work. Some of the stats that have come out of the trials in e-invoicing, it has turned around payments significantly. For one enterprise 60% of their payments were late and 40% were ontime. After they introduced e-invoicing that ratio has swapped.

Sam Hassan: And even the business users who used to pay late, they paid eight days late and now they pay just two days late which might just be the weekend. So they are almost paying on time as well.

With BOC, some users are paying before the due date and in some cases 21 days before the due date. What happens is that they receive the invoice on Monday in their cloud accounting program and the payday is on Tuesday or Wednesday so they just pay the invoice. Even if it has a three week due date they just pay it because it’s easier for them. Rather than wait till the end of the week to collect all the PDF invoices and start processing them over a week, now it happens instantly.

 

Digital First: Isn’t the government introducing e-invoicing?

Simon Foster: The federal government has created a framework that enables e-invoicing networks to talk to each other. It’s sort of like an API standard.

I think the government is still trying to figure out how to promote e-invoicing for B2B. In a Western economy you don’t mandate this for business. The ATO thought there would be a lot of pushback and they haven’t been keen to do it. In South America, governments have mandated it and most countries there are 100% e-invoicing.

There are still a few questions about how this is going to be funded. What’s been made clear is that e-invoicing will be mandatory for government procurement. Government can effectively use e-invoicing as a large enterprise and that will start the process.

In the conversations I have had with government it has a policy to support small business and buy from them. For a small business to set up EDI system for $50,000 to deliver to government, it’s just too high risk. But if you’re talking hundreds of dollars it’s a much easier proposition.

 

Digital First: What are your plans for international expansion?

Sam Hassan: Robin (Sands) is in London now and we found out that they have a similar government program to mandate e-invoice for small business in 2019. We are going to be there this week and next week to expand Link4 to the UK and to New Zealand as well.

Image credit: Link4