Role of e-Invoicing in Malaysia for SME’s in 2024

Small and Medium Enterprises (SME’s) are those ventures in which the maximum level of investment or turnover or other parameters such as employee strength is already defined. Each country has it’s own level of parameters set for classification. Further, SME’s include both manufacturing and service businesses. SME’s are critical for the growth of a Country.

SME’s are pillar of the Malaysian economy constituting more than a quarter of Malaysian GDP and generating a large amount of workforce. In the recent budget, Malaysian Government plans to implement e-Invoicing in Malaysia from 1^st August 2024. It is introducing the same in a phased manner. For enterprises having turnover of more than RM 100 million, must compulsorily generate e-Invoices from 1^st August 2024. 

A business can qualify as SME’s in Malaysia, if it meets any of the below criteria:

• Manufacturing- Sales turnover not exceeding RM 50 Million or full-time employees or exceeding 200 workers,
• Services and other sectors- Sales turnover not exceeding RM 20 Million or full time employees not exceeding 75 workers.

The second phase of e-Invoicing is from 1^st January 2025, with annual revenue or turnover not more than RM 50 Million and third is from 1^st January 2026. 

What is e-Invoicing?

An invoice is a document which specifies the transactions between a supplier and a recipient. The same in a digitised manner is called as an e-Invoice. In Malaysia, Inland Revenue Board of Malaysia (IRBM) is the nodal authority for the same. An e-Invoice would be created in a format specified by IRBM. Further, e-Invoices in Malaysia for SME’s should be in place of Invoice, Credit, Debit notes and refund notes. 

Current landscape in Malaysia for e-Invoicing for SME’s

Apart from the above broader classification of MSME’s. The same are further bifurcated accordingly.

In Malaysia, approximately more than 90% of businesses are MSME’s out of which over 60% are SME’s. e-Invoicing goes beyond digitilisation, it is a transformative change in the business. It will impact all businesses, big and small. SME’s are required to adopt the same. Though it is not a compulsion for the SME’s to adopt e-Invoicing in the first phase, but it is essential to adopt at an early stage

What are the benefits of e-Invoicing in Malaysia for SMEs?

e-Invoicing though it may look difficult and cumbersome at the initial level but it has various benefits:

• Tax compliances

e-Invoices ensures tax compliance and minimum tax evasion. The data is stored on the government portal immediately. 

• Reduce admin cost

e-Invoices will reduce stationery, postage and other administrative costs. With implementation of it, the human resources could be employed in other tasks.

• Authenticity of invoice

e-Invoices ensures authenticity. e-Invoicing allows customer to track the status of their invoices in real time. Through this status, both the buyer and the seller get confidence.

• Improved working capital

e-Invoices would also improve working capital. Due to conventional system of accounting, many SME’s would need more time to receive the payment of invoices. Due to this delay, the working capital gets blocked. Due to e-Invoices, there is a check by the Government; hence, payments must be made within a definite time.

Conclusion

SME’s form the backbone of an economy. In Malaysia, e-Invoices for SME’s would be a compulsion from third phase. The implementation of e-Invoice aims to bring a digital transformation in the business. Through its implementation, the business process would be streamlined up to some extent.