This article first appeared in Digital Edge, The Edge Malaysia Weekly on June 23, 2025 - June 29, 2025
As Malaysian companies urgently prepare for the e-invoicing mandate, many businesses — especially small and medium enterprises (SMEs) in the value chains of larger companies — face significant challenges such as outdated systems, integration complexity and the need for robust data security.
“Many SMEs struggle with limited IT infrastructure and expertise, making it difficult to implement and manage an e-invoicing system. The initial investment costs for software, system integration and training is also seen as a barrier,” says John Yang, vice-president of Asia-Pacific and Japan at Progress, a software development company.
Malaysia is in the process of making e-invoicing compulsory for all businesses, having initiated the transition in 2023 to enhance the local digital economy.
The first phase of e-invoicing implementation for companies with annual revenues of RM100 million and above concluded in August 2024. Initially, all businesses were expected to comply by July 2025. However, in early June, the Inland Revenue Board (LHDN) revised its timeline, requiring companies with annual revenues of RM500,000 and RM1 million to implement e-invoicing by July 2026. MSMEs with annual revenues below RM500,000 are exempted from e-invoicing implementation.
E-invoicing involves the electronic exchange of structured invoice data between suppliers and buyers, allowing for automatic processing with minimal human intervention and errors. This does not include unstructured invoicing formats such as PDF files or scanned paper invoices, as they do not enable automated data exchange between accounting systems.
By fully digitalising the invoicing process, e-invoicing is expected to bring potential savings of US$94.55 billion (RM401 billion) for more than 70 million micro, small and medium enterprises (MSMEs) across Asean, according to the Economic Research Institute for Asean and East Asia’s report last year.
“By digitising the compliance process, huge volumes of manual paperwork can be removed from the system, and the new technology used can generate insightful data for better administration. Apart from data analysis, real-time visibility also allows the authorities concerned to speed up the tax returns and assessment process, thus minimising the turnaround time,” says Yang.
Given the deadlines and scramble for businesses to adopt e-invoicing, companies should use this extended deadline to consider the most important aspect of e-invoicing adoption, that is, choosing the right technology partner, he adds.
This is because a vast amount of personal and financial data needs to be furnished digitally, so e-invoicing systems that utilise fully automated file transfer systems to execute the invoicing are recommended, as it ensures the best accuracy. SMEs are encouraged to find the right partner that can provide these services according to their budget and sector. Part of finding the right partner is tackling key concerns like data security and privacy.
Yang says SMEs need to ensure their technology partner provides robust security measures as cyber threats like data theft and unauthorised access can disrupt operations and erode trust. SMEs should learn from early adopters, he adds.
One key lesson Yang highlights is the need to proactively assess the current and future needs of business support systems, as many current business invoicing systems are not compliant with LHDN’s specific e-invoice data requirements, such as being available in XML or JSON formats.
“The incompatibility of existing business systems with Malaysia’s e-invoicing framework arises because these legacy systems were built for paper-based processes. They inherently lack the necessary features for digital data exchange, adherence to standardised formats and the application of mandated secure digital signatures,” he says.
Yang recommends that Malaysia learn from Singapore’s e-invoicing implementation, where the government offered support through subsidies and training aid for e-invoicing adoption.
As 2025 progresses, he has identified three key trends that all e-invoicing solution providers should watch closely.
“First, there will be a significant push for businesses with annual turnovers of between RM500,000 and RM25 million to integrate e-invoicing solutions with existing accounting software and ERP systems, moving beyond manual portals to API connectivity for smoother workflows,” he says.
Additionally, data security and concerns about compliance with local data protection regulations need to be addressed. Yang calls for solution providers to ensure their platform and clients strictly follow regional regulations.
Lastly, as the deadline for SMEs to implement e-invoicing approaches, he foresees a high demand for user-friendly and cost-effective solutions that can integrate with simpler accounting software. Since many of these smaller companies are not tech-savvy, solution providers must ensure their offerings are accessible and easy to use.
With the July 2026 deadline fast approaching and most systems currently not compliant, SMEs need to act now to upgrade their technology and prepare their teams to ensure a smooth and secure adoption, says Yang.
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