PETALING JAYA: As Malaysia progresses with the phased rollout of its nationwide e-invoicing mandate, a new white paper by global small business platform Xero reveals that the country’s SMEs need support and guidance to help them understand and build capability ahead of implementation deadlines.
The Inland Revenue Board of Malaysia mandates that businesses must fully transition to e-invoicing by specific dates – July 1, 2025 for businesses with annual revenues more than RM500,000 but less than RM25 million, and Jan 1, 2026 for businesses with revenues between RM150,000 and RM500,000.
The white paper shows that just 30% of them have a full understanding of what e-invoicing entails, and only 31% have fully integrated it in their business operations. Notably, a significant 19% have yet to even begin implementation.
Looking at the specific challenges slowing progress, 55% of SMEs identified a lack of clear understanding of the mandate’s requirements. This was followed by technical and operational challenges such as having large amounts of data to digitise (49%), concerns about data security and privacy (47%), and limited internal technical expertise (45%).
Still, despite these challenges, SMEs are aware of what they ultimately stand to gain from the transition. 69% believe e-invoicing will bring tangible business benefits, with improved recordkeeping (72%), improved efficiency (67%), and better compliance (55%) identified as the most anticipated gains.
“Many business owners understand that change is coming, but they are overwhelmed by complexity, unsure of where to start, and concerned about doing it right,” said Xero Asia managing director Koren Wines. “The good news is that they acknowledge the benefits e-invoicing offers their businesses, and are open and optimistic to act if the process is made easier.”
To assist with faster and easier implementation, SMEs identified step-by-step guides or checklists (70%), support for integration with existing systems and software (59%), as well as recommendations on e-invoicing solutions (53%) as the resources most needed to support them in their transition.
The survey revealed that realities of implementation differ even among SMEs, often dictated by their size, resources and goals. 65% of larger SMEs with annual revenues of between RM500,001 and RM25 million say they are confident in their ability to implement e-invoicing, compared to 57% of smaller SMEs Businesses with annual revenues of between RM150,000 and RM500,000. In larger SMEs, e-invoicing is often implemented by dedicated teams comprising more than three employees, or a ‘hybrid model’ combining both internal teams and external expertise. In contrast, implementation in smaller SMEs is often driven by business owners themselves, or small teams of up to two employees.
While both groups pointed to a lack of understanding of the mandate’s requirements as their top concern, smaller SMEs identified a lack of time to explore implementation as their second most pressing challenge, while larger SMEs indicated concerns over having large volumes of data to digitise.
Both groups recognise the benefits of e-invoicing, with smaller SMEs focused on immediate operational impacts such as better compliance, fewer errors in recordkeeping, and faster payments. In contrast, larger SMEs are focused more generally on improved efficiency across the business.
“The e-invoicing mandate is an opportunity for Malaysia’s SMEs to accelerate their digital transformation journeys. With guidance and support from their accountants, bookkeepers and business advisors, they’ll be able to not only make sense of requirements and technology required for compliance, but also the tools that will simultaneously enable them to operate more efficiently and productively,” Wines said. “Particularly for smaller businesses that run on leaner resources, they’ll be on the lookout for simple, easy-to-use and cost-effective solutions.”
“Once SMEs are able to bridge that gap and fully implement e-invoicing, they will start to reap rewards for their business, including increased efficiency, better cash flow, and significant time and cost savings,” said Wines.
