E-Invoicing gives SMEs full invoice visibility. — Photos: 123RF
AS the Malaysian government begins to roll out its phased e-Invoicing mandate, small and medium-sized businesses across the country need to consider how they will make the shift to electronic reporting and get familiar with digital solutions.
Starting in August, e-Invoicing will be mandatory for taxpayers engaged in commercial activities generating revenue over RM100mil annually.
In January 2025, this requirement will extend to those with an annual turnover between RM25mil and RM100mil.
By July 2025, it will be mandatory for all taxpayers, although they can choose to participate earlier, regardless of their revenue status.
It may sound simple, but there is a common misperception that e-Invoicing refers to simply sending and receiving invoices as PDFs. In reality, e-Invoicing is an integrated solution that automates the sending, receiving and processing of digital invoices via a secure, shared, interoperable network.
As the deadline approaches, SME leaders in Malaysia must grasp how embracing this new digital process enhances overall business efficiency.
The value of e-Invoicing for small businesses
The advantages of e-Invoicing are numerous, with automation and accuracy being pivotal.
It significantly reduces the time invoices take to reach customers and get approved, minimising the delays commonly associated with manual invoicing, such as errors or omissions in information.
For SMEs, e-Invoicing may help mitigate some cash flow challenges due to delayed payments, translating to quicker inflow of cash to cover operational costs, invest in growth and avoid financial shortfalls.
A large part of e-Invoicing is also around tax compliance – ensuring accuracy and real-time recording of tax data, ultimately reducing the risk of errors in tax filings.
E-invoicing ensure compliance and boost SME efficiency. - 123RF
In terms of security, the Malaysia Digital Economy Corporation (MDEC) is the authority that will facilitate the e-Invoicing process through Peppol, a delivery network and standard for e-Invoicing globally.
Peppol standardises the way information is exchanged, ensuring businesses can send and receive documents via an open and secure network.
This minimises the risk of fraud and unauthorised access to financial data. Additionally, Malaysian businesses may transact beyond borders through Peppol, including with vendors or partners in Singapore, Australia and New Zealand.
Finally, for businesses looking to align with the increasing prioritisation of sustainable practices amongst consumers, e-Invoicing will reduce paper usage and the overall environmental impact associated with traditional invoicing methods.
Through e-Invoicing, SME owners have complete visibility over invoice delivery.
This means they can spend more time working on the strategic aspects of the business and less time on administrative paperwork that takes up valuable time and resources.
What can businesses do right now to prepare
When adopting e-Invoicing, it is important for business leaders to understand how it will fit into their business operations to set them up for success.
Many Malaysian businesses opt for Xero, a cloud accounting software, to improve their financial management.
Marketplace platform Dropee has been able to save 50 hours per week on administrative tasks by utilising Xero to automatically manage purchase orders and invoices.
E-Invoicing speeds up invoice delivery and approval.
This has allowed the team to track cash flow in real-time, reconcile goods and quickly reimburse retailers.
Goget, a tech platform that handles thousands of transactions daily, also uses Xero, which provides them with an instant overview of all accounts and transaction codes, allowing the business to close their books in days instead of weeks, with accurate data.
Xero is trusted by businesses across the globe, including those in Singapore, New Zealand and Australia – and Malaysian businesses using Xero can expect to access e-Invoicing features soon.
Embracing e-Invoicing will not only ensure compliance, but also improve operational efficiencies and financial management for SMEs.
By preparing early and implementing an effective, overarching digital solution, the shift to e-Invoicing will likely be smooth for Malaysian businesses.
For more information, visit https://www.xero.com/my/
