In Malaysia, both traditional and e-Invoicing serves the function of helping businesses manage financial records to ensure compliance with the Inland Revenue Board of Malaysia (IRBM)’s tax laws. However, these two methods are very different.
Traditional invoicing involves more manual effort to submit to the IRBM, while e-Invoicing involves a templatised digital submission. It is now compulsory for businesses in Malaysia to adopt e-Invoicing as the IRBM’s goal is to improve tax compliance through digital transformation.
To further understand this shift, we will discuss the key differences between traditional and e-Invoicing methods in this article.
Traditional invoicing
Traditional invoicing refers to the paper-based method where businesses manually create and send invoices to suppliers or customers. Here is what traditional invoicing usually involves:
Invoices are manually prepared and printed whether in written format, or through softwares such as Microsoft Excel. Additionally, data is manually entered, which makes it more prone to human errors.
These invoice copies are manually stored in files or folders, which can take up significant space and could be subject to damage or loss.
Invoices are delivered manually via methods such as email, post, or hand-delivered.
While businesses in Malaysia are familiar with traditional invoicing, there are some limitations such as speed, cost, and scalability.
e-Invoicing
On the other hand, e-Invoicing is a digital solution where invoices are created, sent, and stored electronically. With this, invoicing is more streamlined and tax compliant. This is because e-Invoicing systems are automated and organised to collect correct information, while also processing it directly into the government’s tax system (MyInvois Portal). `Here is what e-Invoicing consists of:
Invoices are created and sent in a digital form to MyInvois Portal. This portal is hosted by the IRBM and accessible to taxpayers for free. The e-Invoice system also allows direct transition of data using the Application Programming Interface (API).
The e-Invoicing process is partially automated if a business uses a software solution where some of the pre-maintained information can be captured into an invoice directly (for example, customer details, product details, etc.). However, if the businesses are not using a software solution, manual data entry is required to input data in each field.
Submission to the IRBM is automated. Submissions that are validated by IRBM also come with a QR code that allows businesses to access the e-Invoice immediately.
In Malaysia, e-Invoicing is a key driver to ensure businesses comply with the government’s tax regulatory requirements. It simplifies the process of reporting to IRBM, while also reducing the risk of non-compliance and makes the audit process much easier.
Key differences between traditional invoicing and e-Invoicing
Both methods serve the same purpose but there are fundamental differences between the two. The main difference lies in the format, efficiency, and overall compliance. e-Invoicing automates most processes, while traditional invoicing requires businesses to rekey data all over again in the MyInvois Portal.
Currently, in Malaysia, e-Invoicing is primarily focused on submission to the IRBM through the MyInvois Portal, which allows businesses to file their invoice digitally. However, businesses are still responsible for sharing invoices with buyers directly, which could be through traditional routes like email, PDF or printed copies.
According to IRBM, the benefits of e-Invoicing include:
Reduce manual efforts and human errors: e-Invoicing simplifies the invoicing process by electronically managing transaction documents, reducing the chance of manual mistakes.
Easier tax filing: The system integrates with tax reporting processes, allowing for smoother and more accurate tax submissions.
Improved operational efficiency: Automation of invoicing tasks leads to faster workflows and significant reductions in costs and time spent.
Digitised financial processes: e-Invoicing modernises tax and financial reporting by aligning with digital standards and regulations.
Meanwhile, submission for e-Invoicing to the IRBM is entirely digital. It is also easier to access and store because of its cloud-based nature.
Additionally, traditional e-Invoicing is more susceptible to errors because of manual data entry at each step of the process, from creating the invoice to entering data and submission. In contrast, e-Invoicing significantly reduces mistakes as submission is done digitally and data input follows the IRBM’s template. Overall, e-Invoicing is significantly faster, more efficient, and compliant with modern business needs—it integrates with the tax systems to ensure accurate reporting and reduces the risk of penalties.
e-Invoicing is crucial for tax compliance
As Malaysia continues to push for greater digitalisation, e-Invoicing is becoming a critical tool for businesses to improve their efficiency and ensure compliance with IRBM regulations. Although traditional invoicing is still applicable for small businesses based on the current threshold, the benefits of e-Invoicing cannot be ignored.
Moreover, many businesses, especially small and medium-sized companies, hold misconceptions about e-Invoicing. Commons concerns include the complex transition to a digital invoicing system, the compromise of data security, and its hefty cost.
However, modern e-Invoicing solutions are made to be user-friendly and accessible to businesses of all scales. In fact, businesses can also look to software solutions, such as AutoCount, to help the adoption of e-Invoicing. Autocount is a reliable solution that offers a comprehensive e-Invoicing solution that works in compliance with Malaysia’s tax regulations, while simplifying tax submissions.
In conclusion, with faster processes, reduced errors, and better compliance with tax regulations, e-Invoicing is a more efficient and scalable solution for businesses in Malaysia.
This e-Invoice News series is an collaboration with AutoCount.
The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.
