According to the 2023 McKinsey Global Payments Report, global cash usage declined in 2022 and electronic transactions growth rate has been nearly triple the overall growth in payments revenue. This indicates an expected rise in Digital Transformation investments by businesses of all sizes.
This upward trend in global electronic transactions growth coupled with Malaysia’s mandatory e-Invoicing mandates highlights just how imperative it is that businesses based in Malaysia transform their paper-based invoicing processes into electronic invoicing (e-Invoicing) in line with the e-Invoicing implementation timeline issued by the Inland Revenue Board of Malaysia (IRBM).
In this article, we explore the 6 best practices to implement when reviewing your business’ invoicing processes and procedures.
Invoice processing – a basic business function – involves the creation, receipt, tracking, management, validation and payment of invoices between a buyer and a seller.
By optimising the invoicing process, businesses in Malaysia and other countries stand to benefit from greater efficiency gains that - in the long run - help drive down costs and raise profit margins.
In the current climate of Malaysia’s state mandated Digital Transformation initiative, businesses – small and large – need to leverage innovative technologies to meet regulatory compliance and to help build sustainable business eco-systems.
Read on to find out how best to review your business’ invoicing process and procedures for greater growth prospects along your payment cycles.
A standardised invoice format simplifies the review process for teams. By ensuring that all invoices contain uniform elements—such as item descriptions, quantities, prices, and payment terms—organisations can minimise confusion and reduce the likelihood of errors during processing.
Once standardised, businesses that rely on paper-based invoicing processes will be better equipped to take the leap and invest in e-Invoicing processes.
According to IRBM, ‘An e-Invoice contains the same essential information as traditional documents, for example, suppliers’ and buyers’ details, item description, quantity, price excluding tax, tax, and total amount, which records transaction data for daily business operations.’
So, if your Malaysian business earns between RM 25 Million and RM 100 Million and are looking to make the shift from paper-based invoicing to e-Invoicing by 1 January 2025 – the IRBM mandated deadline for e-Invoicing implementation - ensure your invoice formats are standardised and that they include all the essential elements listed by IRBM in order to meet regulatory compliance with ease.
Refer Appendix 1 of IRBM’s ‘e-Invoice Guideline (Version 3.2)’ for the full list of required fields for e-Invoices.
Establishing a well-defined approval workflow is vital for maintaining accountability and efficiency within a business. Clearly outline who is responsible for reviewing and approving invoices at each stage. This minimises delays and ensures that no invoice falls through the cracks, streamlining the path to timely payments.
However, if your business is based in Malaysia, IRBM - Malaysia’s tax authority – has created a transmission mechanism called ‘MyInvois Portal’ which facilitates near real time e-Invoice validation. The validation and approval process is carried out by IRBM itself and ensures the highest level of accountability for both buyers and suppliers.
Read our article titled, ‘The Future of e-Invoicing in Malaysia: Benefits, Challenges, and Implementation Strategies’ to find out more about Malaysia’s e-Invoicing processes and procedures.
Leveraging technology is one of the most effective ways to improve invoice processing.
Many online billing and invoicing software solutions offer automation features that can streamline data entry, approvals and reminders for outstanding invoices. By automating routine tasks, organisations can reduce human error and free up valuable time for strategic activities.
By leveraging IRBM’s e-Invoicing platform and creating standardised electronic invoices, your business will be able to reap the rewards of automation as the MyInvois Portal facilitates the management, tracking and validation of all e-Invoices and reduces the need for human intervention in the e-Invoice management process. By automating these invoicing processes, companies can redirect funds and resources previously used for invoicing toward tasks that require critical thinking skills and human-centric decision making.
Ongoing training for employees handling invoices is essential to keep them informed of best practices, software updates and compliance requirements. Regular workshops or training sessions can help staff stay updated on common issues and best practices, ultimately leading to a more competent and confident team.
If your Malaysian business is about to make the shift to online invoicing and payment processing, IRBM advises businesses to assemble a dedicated team equipped with e-Invoicing expertise and capabilities to enable seamless e-Invoice implementation.
Once you’ve established a dedicated team that is familiar with the ins and outs of IRBM’s e-Invoicing platform and e-Invoicing solutions, best practice dictates that companies should invest in regular training workshops to keep accounting teams nimble, agile and capable of responding to updates on Malaysia’s digital invoicing system.
Periodic audits of the invoice process can uncover discrepancies and inefficiencies. Track key performance indicators (KPIs) like processing time, error rates, and payment shortages to gauge performance. Addressing these issues promptly can lead to long-term improvements in the overall invoicing experience.
In the context of electronic invoices, your company – whether based in Malaysia or elsewhere – should conduct regular audits of your tech infrastructure. This is to ensure that your company’s technological hardware and software is capable of meeting its daily or monthly invoicing demands and has ample storage capacity.
While IRBM stores all validated e-Invoices in its database, Malaysia’s tax authority advises tax payers to ‘retain sufficient records and documentation in relation to the transaction’.
Encouraging feedback from employees involved in the invoice process can provide valuable insights into potential invoicing improvements. Regularly solicit suggestions and be open to making changes based on this feedback to foster a culture of continuous improvement within the organization.
In 2022, global electronic transactions witnessed a boom with electronic transaction growth rate being nearly triple the overall growth in payments revenue. This boom indicates a rising trend in digital transformation in the payment industry.
Ensure your company’s payment and invoicing processes are up to date by implementing these 6 best practices for reviewing invoice process and procedures: Standardise invoice formats; Implement a clear approval process; Utilise technology and automation; Regular training for invoicing staff; Conduct regular audits; and Gather feedback and continuously improve invoicing processes to gain greater efficiency and drive down operational costs in the long run.
Get in touch to implement these best practices and ensure regulatory compliance with Malaysia’s e-Invoicing mandates ahead of IRBM’s e-Invoicing deadlines.