Is QR Code Mandatory for E-Invoicing?

In a rapidly digitising world, Malaysia is embracing the digital future with a clear vision. Since the announcement of the e-invoicing initiative, the term has become a buzzword across various industries, signaling a significant shift in the way businesses operate. The announcement of Malaysia’s e-invoicing initiative was made by the Inland Revenue Board (IRB) on May 22, 2023. This initiative is part of a phased implementation plan targeting 4,000 businesses initially, with mandatory enforcement for those with a sales threshold of RM100 million per year. The implementation of the e-invoicing system is set to begin in August 2024, with the first phase applying to businesses with an annual turnover exceeding RM100 million.

What is a QR Code?

A QR code, or Quick Response code, is a matrix barcode that stores data accessible via digital devices, especially smartphones. Initially developed for Japan’s automotive industry, QR codes are now essential in various applications, particularly digital transactions, due to their compact, easily scannable format and high data capacity.

Usage in Various Sectors

QR codes have found their way into nearly every industry, becoming a versatile tool for businesses. In Malaysia, QR code payments are increasingly popular in the retail sector, where they’re used to facilitate mobile payments and engage customers by linking them directly to product information, special offers, or loyalty programmes. In banking, QR codes play a crucial role in initiating secure transactions, such as peer-to-peer payments and bill settlements, ensuring that financial exchanges are both swift and secure. The logistics industry also benefits from QR codes, using them to track shipments and manage inventory with precision, ensuring that products move smoothly through the supply chain. Additionally, QR code receipts are becoming a common feature, offering customers a digital alternative to traditional paper receipts, which are both convenient and environmentally friendly.

Relevance to E-Invoicing

When it comes to e-invoicing, QR codes are more than just a convenience—they’re a vital component of the process. By embedding a QR code in an e-invoice, businesses can encode essential invoice details that can be quickly and accurately scanned, reducing the need for manual data entry. This not only minimises errors but also streamlines the payment process, allowing businesses to operate more efficiently. In Malaysia, the integration of QR codes into e-invoicing systems is a key part of the country’s push towards digital transformation, making them an essential tool for any business looking to stay ahead in a rapidly evolving market. Additionally, the e-invoice Malaysia Software Development Kit (SDK) introduced by Lembaga Hasil Dalam Negeri (LHDN) further simplifies the integration process, making it easier for businesses to adopt e-invoicing and reap its benefits.

How Does E-Invoicing Impact Cash Flow Management for Companies?

E-invoicing enhances cash flow management by expediting payment processes. Reduced processing times mean quicker payments, improving liquidity. Additionally, e-invoicing reduces manual errors and streamlines invoicing cycles, ensuring a steady cash flow for companies.

The Role of QR Code Malaysia

QR codes have become more than just a tool for marketing or quick access to websites; they are now a critical component of the e-invoicing process in Malaysia. These codes play several vital roles:

Validation and Verification: When an invoice is generated, it doesn’t simply get sent out. It must first be submitted to the Inland Revenue Board of Malaysia (IRBM) for validation. Once approved, a QR code is embedded within the e-invoice. This QR code carries crucial information, allowing both the supplier and the buyer to verify the invoice’s authenticity and status through the MyInvois portal.

Efficiency and Accuracy: Manual data entry has long been a source of errors and inefficiencies in business transactions. With QR codes, these concerns are significantly reduced. The codes enable the automatic capture of invoice data, streamlining accounting processes and speeding up the payment cycle, which ultimately improves cash flow.

Cost Reduction: The shift to digital invoicing, bolstered by the use of QR codes, also translates into tangible cost savings. Gone are the days of printing, posting, and storing paper invoices. Businesses can now reduce these overheads, contributing to a leaner and more efficient operation.

Mandatory Inclusion of QR Codes

The IRBM has made the inclusion of QR codes on e-invoices a mandatory requirement for all businesses subject to the e-invoicing mandate. This ensures a standardised and consistent approach to e-invoice validation and verification across the country.

Specific QR Code Requirements

The QR code must be prominently displayed on the e-invoice, either as a standalone element or integrated into the document’s design. The code must contain the necessary information to enable direct access to the validated e-invoice through the IRBM’s MyInvois portal.

Consequences of Non-Compliance

Failure to include a valid QR code on e-invoices can result in penalties and non-compliance issues. Businesses that do not adhere to the QR code mandate may face fines or other enforcement actions by the IRBM.

Integrating QR Codes into E-Invoicing Workflows

To ensure a seamless integration of QR codes into their e-invoicing processes, businesses in Malaysia can leverage various strategies and tools:

Automated QR Code Generation

Many e-invoicing software solutions and accounting systems offer built-in functionality to automatically generate QR codes for each e-invoice. This streamlines the process and reduces the risk of manual errors.

API-based Integration

Businesses can also integrate their existing accounting or enterprise resource planning (ERP) systems with the IRBM’s MyInvois API. This allows for the direct submission of e-invoices and the retrieval of the associated QR codes, ensuring a fully automated e-invoicing workflow.

Advantages of Using QR Codes in E-Invoicing

The adoption of QR codes in e-invoicing is not just a technological upgrade; it’s a game-changer for businesses looking to streamline their operations and enhance customer satisfaction. Here’s how QR codes bring significant benefits to the e-invoicing process:

Improved Accuracy and Efficiency

One of the most compelling advantages of using QR codes in e-invoicing is the improvement in accuracy and efficiency. Traditional invoicing methods often involve manual data entry, which can lead to errors, delays, and costly disputes. However, QR codes automate the data capture process, reducing the likelihood of mistakes. When a QR code is embedded in an invoice, all the essential details are encoded within it. This information can be quickly and accurately scanned, ensuring that the data entered into accounting systems is spot-on. The result? Fewer disputes, faster processing times, and a smoother overall workflow for your business. In a world where time is money, the efficiency gains from QR code integration can significantly impact your bottom line.

Enhanced Security

In today’s digital age, security is a top concern for businesses and customers alike. QR codes add a crucial layer of security to the e-invoicing process. Each QR code is unique to the specific transaction it represents, making it incredibly difficult to forge or tamper with invoices. This added security measure ensures that the invoice is genuine and validated, protecting both businesses and customers from potential fraud. By using QR codes, you can be confident that payments are made only for validated invoices, safeguarding your business’s financial integrity and maintaining customer trust.

Better Customer Experience

The benefits of QR codes extend beyond operational efficiency and security—they also play a vital role in enhancing the customer experience. In today’s fast-paced world, customers value convenience more than ever. With QR codes, customers can simply scan the code to access all relevant invoice details instantly. There’s no need for lengthy manual entry, which not only speeds up the payment process but also reduces the chances of errors on the customer’s end. This seamless, hassle-free transaction experience can significantly boost customer satisfaction. Moreover, offering QR code payments demonstrates that your business is forward-thinking and customer-centric, which can further strengthen your brand’s reputation.

By integrating QR codes into your e-invoicing system, you’re not just keeping up with the times—you’re setting your business up for greater accuracy, security, and customer satisfaction.

Implementation Timeline for E-Invoicing Mandate

Malaysia’s e-invoicing mandate is being rolled out in stages, with the use of QR codes being phased in according to company turnover:

August 1, 2024: Companies with an annual turnover exceeding MYR 100 million must comply.

January 1, 2025: The mandate extends to companies with an annual turnover between MYR 25 million and MYR 100 million.

July 1, 2025: By this date, all companies in Malaysia will be required to adopt e-invoicing with QR codes.

Compliance Requirements

To stay on the right side of the law and ensure smooth operations, businesses must adhere to specific compliance requirements:

Invoice Submission: Invoices must be submitted in XML or JSON format via the MyInvois platform.

Inclusion of QR Code and UIN: Each invoice, once validated by the IRBM, must include a QR code and a Unique Identifier Number (UIN).

Archiving: Validated e-invoices should be archived for a minimum of seven years.

Conclusion

The mandatory use of QR codes in e-invoicing is not just a regulatory requirement in Malaysia; it’s a step towards a more efficient, accurate, and digital economy. For businesses, embracing this change is not merely about compliance but about seizing the opportunity to streamline their operations, reduce costs, and position themselves as leaders in a digital-first world. As the deadlines approach, now is the time to ensure your business is ready for this new era of invoicing and meets all legal requirements set by the Inland Revenue Board (LHDN).

How Does E-Invoicing Enhance Accounting and Tax Compliance?

E-invoicing plays an important role in modern accounting and tax compliance by automating the invoicing process and ensuring that all financial transactions are accurately recorded. This automation reduces the risk of manual errors, which can lead to discrepancies in financial records and potential issues with tax authorities. With e-invoicing, all invoices are digitally stored, making it easier to track and retrieve them during audits or when preparing financial statements. Additionally, e-invoicing ensures that tax-related information is correctly applied and recorded, simplifying the process of filing tax returns and ensuring accurate tax reporting. By integrating e-invoicing into their accounting systems, businesses can improve accuracy, streamline financial reporting, and ensure compliance with local tax regulations.

How Can Grof Help with Accounting and Taxes?

At Grof, we simplify financial management by offering a comprehensive, all-in-one solution for accounting, bookkeeping and tax compliance. Whether you need expert advice or are looking to outsource your accounting services in Malaysia, we provide competitive accounting fees tailored to your business needs.

Annual Tax Return Filing: Our expert team ensures that your annual tax returns are filed accurately and on time, giving you peace of mind and helping you stay compliant with Malaysian tax laws.

Bookkeeping: We offer detailed monthly or annual bookkeeping services to efficiently manage your finances. Our meticulous approach ensures that all financial records are up-to-date and accurate, allowing you to make informed business decisions.

Financial Reports: Receive clear, concise financial reports either monthly or annually. We audit your financial statements and ensure they are ready for submission with your annual reports, giving you a comprehensive view of your business’s financial health.

By outsourcing your accounting services to Grof, you gain more time and mental bandwidth to focus on strategic business development and driving growth. Additionally, we offer other corporate solutions, such as company secretary and business incorporation services in Malaysia, making Grof your trusted financial sidekick in all aspects of business management.