This article first appeared in Digital Edge, The Edge Malaysia Weekly on April 8, 2024 - April 14, 2024

When the Inland Revenue Board (IRB) announced last year its intention to introduce mandatory e-invoicing for local companies by July 2025, it meant that Malaysia would join 40 countries around the world in implementing e-invoicing as part of the country’s measures to modernise and digitalise its economy.

Along with this, IRB released guidelines, a road map and even a Software Development Kit (SDK) to help companies prepare for the coming challenges and journey to fully implementing e-invoicing, all to assist companies in digitalising as part of the government’s digitalisation road map.

However, the purpose and benefits can extend beyond this as well. Kevin Phang, regional manager of Epicor Software Sdn Bhd, points out that e-invoicing “helps businesses document their transactions and gives concerned parties easier access to these documents”.

Ben Lim, senior country manager for Epicor, an enterprise software solutions provider that has helped businesses adopt e-invoicing in other countries, notes that a key aspect of helping businesses prepare for the inevitable is assisting them in understanding e-invoicing — why it is being made mandatory now and what they can do to truly prepare for the fast-approaching August 2024 implementation date for large businesses with an annual turnover or revenue of more than RM100 million.

“Over the years, we have seen more legislative requirements coming from governments around the world. From a Malaysian perspective, there was GST (goods and services tax), then SST (sales and service tax) and now e-invoicing,” says Phang.

“E-invoicing is not new in the world. Countries in Latin America and Europe have already made it mandatory. But I think from a Southeast Asia standpoint, Malaysia is probably the first country to actually do it on a mandatory basis.”

The closest other country Phang could think of was Singapore which, despite the heavy consideration of mandatory implementation, is still voluntary. He believes the reason is a lack of need to do so as Singapore’s economy consists of larger companies.

Meanwhile, Malaysia has many small and medium enterprises, which are more likely to resist adopting this kind of technology than larger corporations.

Lim says the reason why e-invoicing is being implemented now, beyond government road maps, is primarily due to Malaysia developing its stable infrastructure. With the number of businesses that are required to utilise e-invoicing, a high bandwidth is needed to handle these transactions and with the availability of 5G, such bandwidth is attainable.

With this stable infrastructure, Lim believes that the adoption of e-invoicing will be faster and simpler, as it is not as complex as that for GST.

He and Phang believe that the e-invoicing implementation will be successful in ways that GST was not due to how transparent and thought out the road map for e-invoicing is. Despite this, Phang believes that the timeline set could be challenging for businesses.

“There are so many companies, RM100 million and above, and there is a timeline for them to go on. But with only [until August] what is the best way for them to move forward? That is the biggest question,” says Phang.

Automating the invoicing system is just one aspect of e-invoicing, and it brings many benefits. One thing that Lim and Phang stress is how since invoices are done electronically, it means these can be sent out instantly and be validated by IRB directly.

Unlike manual invoices, where the invoices issued have no real standard and are up to the invoice issuer, all e-invoices have to be shared and validated by IRB through the MyInvois Portal or its application programming interface.

Lim notes that the biggest benefit of this process is that digital data is readily available since the invoices are sent directly through IRB. This streamlines processes like the filing of tax returns. This leads to fewer errors as the document of the transaction has to be validated by IRB.

All this leads to an added layer of accuracy for the transactions while reducing duplicated work or manual invoicing as companies head towards automation.

There are also many indirect benefits to e-invoicing in the form of transparency. Accurately recording each transaction and storing it digitally will prevent errors and cases of fraud.

Additionally, by being the first to adopt e-invoicing in the region, Malaysia is seen as a leading figure. If it is successful in its im­plementation, other countries will follow suit and perpetuate the adoption of e-invoicing, streamlining transactions across borders.

With the rollout of e-invoicing comes implementation. Lim notes various challenges, perceived or real, that will emerge. He dispels concerns about the mounting cost of implementing e-invoicing since the process is part of a government initiative. He expects grants to help with the process.

“The government mentioned about RM5,000 that has already been given to those small [businesses] to take part in the e-invoicing solutions,” he says.

As for larger businesses, Lim says the implementation will not be expensive, but businesses would need to spend a sufficient amount if they want a more mature invoicing platform.

Phang believes that the biggest challenge for end users like business owners is looking for the right vendor and using the right technology to go along with all the legislative requirements. Meanwhile, business owners can focus more on the business side of things.

Because of this, he encourages business owners to look at adopting e-invoicing as part of following the legislation from a long-term standpoint. Epicor, for example, has experience following legislation and implementing e-invoicing for a variety of clients and is preparing ahead of time for Malaysia, using Singapore as a base.

Nevertheless, Phang and Lim know that Malaysia will be a little different as it will have its version of e-invoicing and its regulations and quirks, which they will only know when it is officially launched. It will not be as easy as creating an account on IRB’s system, but having a platform that follows its standards.

“Go with a platform that has experience dealing with e-invoicing globally rather than [an] individual or a small group of people,” says Phang.

One thing that he warns is that since the e-invoicing implementation will be rolled out in waves, there will be a learning curve, and businesses need to expect changes and iterations to the process along the way, as the government may ask for more details and add more controlling factors. “These are the changes which I think will then become roadblocks [to users if these users] do not use the right platform or provider,” he says.

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