Governments worldwide are increasingly embracing electronic solutions to streamline processes and enhance efficiency across various sectors. Malaysia, a fast-growing economy in Southeast Asia. It has recently introduced a significant initiative – the e invoicing mandate. This mandate aims to modernize the country’s invoicing system. Transitioning from traditional paper-based processes to electronic formats. While the benefits of e invoicing are evident in terms of efficiency and cost savings. Its impact on capital markets is a topic of considerable interest and discussion.

The Government of Malaysia will implement e-invoices in stages to enhance the efficiency of Malaysia’s tax administration management. The Inland Revenue Board Malaysia (IRBM), also known as Lembaga Hasil Dalam Negeri (LHDN), announced that the e invoicing initiative will be implemented in phases beginning in August 2024. This mandate applies to businesses with an annual turnover exceeding RM 100 Mn+ in the first phase. With the next phase, applicable to businesses with an annual turnover of over RM 25 Mn+ by January 2025. The final stage to go live by July 2025 will effectively cover a significant portion of the commercial landscape in the country.

Under the mandate, businesses are required to generate and transmit electronic invoices in a standardized format. Which is known as the Malaysian Revenue Accounting System (MYS) XML. This format ensures uniformity and compatibility across different systems, facilitating seamless exchange of invoices between buyers and suppliers.

How does e-invoicing impact stockbrokers in Malaysia?

The implementation of e invoicing in Malaysia is expected to have several implications for the stockbrokers:

• Improved Transparency and Data Accessibility:

E invoicing will promote transparency in financial transactions. By providing a digital trail of invoices and payment records. This transparency will enhance the reliability of financial information. Making it easier for investors and stakeholders to assess the financial health and performance of companies. With easier access to accurate data. Investors can make more informed decisions, leading to greater confidence in capital markets.

• Enhanced Efficiency and Cost Reduction:

The automation of invoicing processes through e invoicing will result in significant cost savings for businesses. By eliminating paper-based documentation and manual processing.  Companies can reduce administrative expenses and improve operational efficiency. This increased efficiency can translate into higher profitability for businesses, thereby potentially attracting more investment in capital markets.

• Strengthening Regulatory Compliance:

The e invoicing mandate imposes strict compliance requirements on businesses. Including the use of standardized formats and adherence to data integrity standards. This focus on regulatory compliance is likely to instill greater confidence among investors, as it signifies a commitment to maintaining integrity and transparency in financial operations. Consequently, compliant businesses may enjoy enhanced credibility and reputation in capital markets, potentially attracting more investment.

• Facilitating Access to Financing:

E invoicing can simplify the documentation and verification processes involved in financing arrangements such as invoice financing and supply chain financing. With electronic invoices readily available in standardized formats, lenders can assess the creditworthiness of businesses more efficiently, enabling quicker approval of financing facilities. This streamlined process enhances access to capital for businesses, fostering growth and expansion opportunities that contribute to the vibrancy of capital markets.

Overcoming concerns and challenges with the NOVA E-Invoicing module

Cost of Technology | Stockbrokers may incur initial costs associated with the adoption and integration of e invoicing systems like the NOVA E Invoicing module, however, the long-term benefits outweigh these costs. The improved efficiencies and reduction in administrative expenses make the overall investment only a fraction of the expected business profitability.

Integration with existing systems | NOVA E Invoicing module easily connects with any internal system using APIs thereby minimizing disruptions to business operations. NOVA Post Trade software platform automates the complete process from trade execution to settlement and compliance. The NOVA E Invoicing module easily plugs into the system and auto-calculates and generates invoices for all required processes, including fee calculation.

Cybersecurity | NOVA platform is built on multi-layer architecture, adding additional layers of security to all sensitive data. It separates the user interface through several layers of encryption. Partnering with the best cloud solutions providers in the market, we enable additional data security protocols.

The e invoicing mandate in Malaysia represents a significant step towards modernizing the country’s invoicing practices and enhancing efficiency in business transactions. While the immediate focus is on compliance with regulatory requirements, the broader implications of e invoicing on capital markets are noteworthy. By promoting transparency, efficiency, and regulatory compliance, e invoicing has the potential to strengthen investor confidence, improve access to financing, and contribute to the growth and development of Malaysia’s capital markets in the long run.