MICRO, small, and medium-sized enterprises (MSMEs) represent a remarkable 96.9% of all businesses in Malaysia as of 2023.
Micro-sized businesses make up a significant 69.7% of the 1,101,725 MSMEs, emphasising their pivotal impact on the Malaysian economy.
Even though MSMEs experienced positive year-on-year growth in 2023 — contributing 39.1% to the economy, 12.2% to exports, and 48.5% to employment — they still encounter obstacles in sustaining this growth trajectory.
These include challenges in the financial sector and difficulties in scaling up operations, as detailed in the 12th Malaysia Plan Mid-Term Review.
Budget 2024 has allocated RM44bil for MSMEs loans and financing, but many struggle with loan approvals due to incomplete financial reporting.
This gap in financial documentation also complicates and limits the allocation of funds by disbursement agencies, which may explain the reduction in micro-sized enterprises from 923,667 in 2022 to 767,421 in 2023.
On the other hand, small-sized and medium-sized enterprises saw increases of 35.8% and 7.9%, respectively, likely owing to better access to funding through sufficient financial reporting.
Role of e-invoicing
E-invoicing can bridge financial reporting gaps, especially for micro-sized enterprises, by providing clear revenue records to facilitate loans access.
MSMEs earning less than RM150,000 annually are not required to issue e-invoices unless part of larger company supply chains, where e-invoicing is necessary to complete the continuous transaction control (CTC) process.
In other words, no business is entirely exempt from e-invoicing to remain competitive in the market, particularly as micro-sized SMEs grow and surpass the RM150,000 revenue threshold.
The government has introduced an interim relaxation period from July 1, 2025, to Dec 31, 2025 for companies to transition gradually into e-invoicing. This period also provides MSMEs with time to identify e-invoicing providers that meet the following criteria:
1. Seamless and cost-effective:
The solution must integrate smoothly into daily operations, especially for retail MSMEs serving walk-in customers.
An ideal solution is a point of sale (POS) system with built-in e-invoicing, eliminating the need for extra devices.
Finexus offers a comprehensive POS with e-invoicing, including payment gateways, DuitNow QR standees, electronic data capture, mini POS, QR sound boxes and vending machines.
2. Compliant:
The solution should include automated verification to ensure compliance with the Inland Revenue Board (LHDN) e-invoicing regulations, preventing heavy penalties and fines.
Finexus’ POS ensures that all required information is provided before generating an e-invoice, reducing non-compliance risk — a major concern expressed by 56% of SMEs.
Non-compliance can result in fines ranging from RM200 to RM20,000 and/or imprisonment for up to six months.
3. Efficient:
The solution must also handle high volumes of walk-in customers without delays.
Finexus’ POS app generates a dynamic e-invoicing QR code after payment, allowing customers to scan it and enter their details privately on the Finexus website or app.
Required details include identification number (NRIC, passport, BRN or army number), name, Tax Identification Number (TIN), residential address, and contact number.
4. Easy to learn:
The solution should be user-friendly, even for elderly or less tech-savvy merchants.
Ideally, the POS system should come preloaded with the merchant’s e-invoicing information required by LHDN, such as merchant classification codes, product details, unit prices and signatures to issue an e-invoice.
The Finexus POS offers this preloaded feature and an intuitive product category menu for quick selection of customer’s order to generate an e-invoice.
Additionally, for MSMEs with multiple branches, Finexus allows restricted access to e-invoicing information by branches and companies.
5. Secure:
The solution must protect customers’ information from data breaches.
Finexus operates two fully owned, secure data centres in Kuala Lumpur and Cyberjaya, providing bank-grade security to store customers’ e-invoicing data for seven years, far exceeding LHDN’s two-year requirement.
These data centres are accredited by global standards, including PCI DSS Level 1, Tier 3, and ISO 27001.
Finexus group chief executive officer Clement Loh shared, “Although 78% of SMEs have expressed concerns about being less than 50% prepared for e-invoicing implementation, we are more than ready to address these concerns by offering an easy, affordable, and secure POS solution with e-invoicing capabilities for walk-in customers.
“We can also enable POS and e-commerce solution providers in Malaysia to offer these e-invoicing features to their customers as well, facilitating faster e-invoicing digitalisation for all MSMEs in Malaysia.”
To learn more about Finexus e-Invoicing solutions for MSMEs, please visit: https://www.finexusgroup.com/arema/
This article has been published in The Star: https://www.thestar.com.my/news/nation/2024/09/03/e-invoicing-feasible-for-msmes