By Koren Wines
With the commencement of Malaysia’s national e-invoicing initiative, small and medium-sized businesses (SMEs) nationwide are seeking to better understand its requirements and how to get started with digital solutions.
The Inland Revenue Board of Malaysia (IRBM) announced that from August, e-invoicing will be mandatory for taxpayers engaged in commercial activities with annual revenues exceeding RM100mil.
This mandate will extend to those with a RM25mil to RM100mil annual turnover from 1 January 2025 and all taxpayers engaged in commercial activities from 1 July 2025.
While the IRBM has granted a six-month relaxation period for each deadline, now is the time for SME leaders to learn about e-invoicing and how to integrate digital solutions into their workflows.
The benefits of e-invoicing
A common misconception is that e-invoicing refers to simply replacing paper invoices with electronic ones. The textbook explanation of e-invoicing is an integrated solution that automates sending, receiving and processing digital invoices via a secure, shared, interoperable network, directly from one accounting software platform to another.
Because e-invoices are generated within the sender’s accounting software and are subsequently received directly by the recipient’s accounting platform, regardless of the platform used, this can improve efficiencies by addressing common pain points associated with traditional invoicing, such as loss and potential fraud.
Most significantly, e-invoicing alleviates cash flow issues by speeding up the invoicing process, reducing errors, and ensuring faster approval and payment. With a quicker receipt of funds, businesses are better equipped to maintain steady cash flow, cover operational costs promptly and invest in growth without delays.
E-invoicing also facilitates easier compliance with tax regulations. With e-invoicing, transaction data is automatically captured and stored, ensuring that all necessary information is correctly recorded and readily accessible. As a result, generating tax reports and filings becomes significantly more efficient and simplified.
Security is another benefit of e-invoicing. E-invoicing in Malaysia operates through the transmission of standardised structured data governed by the Peppol framework, under the oversight of the Malaysia Digital Economy Corporation (MDEC). The Peppol network enables the secure and efficient exchange of electronic documents, protecting them from potential cyberattacks.
Strategic steps toward e-invoicing readiness
To prepare for the upcoming mandate, businesses should explore how digital solutions can support their success.
Adopting a reputable and secure cloud accounting platform is a crucial first step. Such solutions increase operational efficiencies and productivity by automating tasks, reducing errors and streamlining workflows. Seamless connectivity with other business tools additionally enables better data management, real-time access to information, enhanced communication and collaboration, along with insights for better decision-making. Choosing a platform with e-invoicing capabilities will also facilitate tax compliance once the national e-invoicing mandate is rolled out.
By preparing early and implementing digital solutions, Malaysian businesses can transition smoothly to e-invoicing, while simultaneously improving their operational efficiencies and financial management.
Koren Wines is Managing Director of Xero Asia
