How Xero Helps SMEs in E-Invoicing

Malaysia’s transition to mandatory e-invoicing is a significant step towards digital transformation in the business landscape. Malaysia’s e-invoicing mandate will be implemented in five phases between 2024 and 2026, based on annual revenue thresholds. This phased rollout allows larger companies to comply first, followed by SMEs and micro businesses. This shift aims to streamline invoicing processes, enhance tax compliance, and reduce administrative burdens.

For Malaysian SMEs, leveraging the right tools is crucial to ensure a smooth transition. Xero, a globally recognized cloud accounting software, offers integrated e-invoicing solutions that align with Malaysia’s regulatory requirements. 

In this article, we’ll explore how Xero assists SMEs in complying with e-invoicing mandates, ensuring efficiency and accuracy in their financial operations.

Also Read: Simplify e-Invoicing Compliance in Malaysia with Xero

Understanding Malaysia’s E-Invoicing Mandate

What Is E-Invoicing?

E-invoicing refers to the electronic generation, transmission, and storage of invoices in a structured digital format. In Malaysia, this system utilizes the Peppol (Pan-European Public Procurement On-Line) network, a standardized framework that facilitates secure and interoperable electronic document exchange between businesses and government entities (Xero).

Who Needs to Comply and When?

The Malaysian government has outlined a phased approach for e-invoicing adoption:

• 1 August 2024: Mandatory for businesses with an annual turnover exceeding RM100 million.
• 1 January 2025: Mandatory for businesses with an annual turnover between RM25 million and RM100 million.
• 1 July 2025: Mandatory for businesses with an annual turnover between RM5 million and RM25 million.
• 1 January 2026: Mandatory for businesses with an annual turnover between RM1 million and RM5 million.
• 1 July 2026: Mandatory for businesses with an annual turnover of up to RM1 million.

During the relaxation period, businesses may issue consolidated invoices instead of individual ones. This transitional phase allows SMEs to adapt their systems and workflows.

Businesses with annual turnover below RM500,000 are exempt if they meet MSME criteria (not part of a larger related group above the threshold).

How Xero Supports Malaysian SMEs in E-Invoicing

Seamless Integration with the Peppol Network

Xero is a certified Peppol Access Point Provider, accredited by the Malaysia Digital Economy Corporation (MDEC). This means Xero’s e-invoicing solution is fully compliant with Malaysian regulations and capable of securely transmitting invoices through the Peppol network (Xero Malaysia).

Example: Imagine a local café sending monthly invoices to multiple suppliers and corporate clients. Instead of emailing each invoice separately and risking errors, Xero automatically sends them through Peppol. The café’s accounting records are updated in real-time, and the invoices are securely delivered to the correct recipients without manual intervention.

This seamless integration ensures interoperability. Whether your clients or vendors are using Xero, SAP, or any other Peppol-compliant system, invoices are exchanged effortlessly, reducing delays and disputes.

Automated Compliance with IRBM Requirements

Xero simplifies compliance by automating the generation, submission, and tracking of e-invoices for the Inland Revenue Board of Malaysia (IRBM) via the MyInvois portal.

Example: A small logistics company with dozens of monthly shipments can now generate invoices and have Xero automatically submit them to the IRBM. This reduces the chance of errors, avoids late submissions, and ensures the company stays fully compliant with tax reporting regulations.

Beyond compliance, Xero provides audit-ready records, which can be invaluable during IRBM inspections or when reconciling financial reports. SMEs gain peace of mind knowing that their e-invoicing processes are accurate, secure, and fully traceable.

Also Read: Customizing Xero for Your Business: Expert Setup Training 

Consolidated E-Invoicing During the Relaxation Period

During the initial six-month relaxation period (1 July 2025 to 31 December 2025), SMEs with annual turnover between RM5 million and RM25 million can issue consolidated e-invoices summarizing all transactions for the month instead of sending individual invoices. Xero facilitates this process, enabling users to generate and submit consolidated invoices easily.

Example: A retail SME selling to multiple clients daily can generate a single consolidated e-invoice at the end of the month. Xero aggregates all transactions, calculates totals automatically, and submits them to the IRBM, saving time and simplifying compliance.

Benefits of Adopting Xero for E-Invoicing

Enhanced Accuracy and Reduced Errors

Xero ensures that every e-invoice is generated with consistent formatting, correct amounts, and proper tax codes. This drastically reduces human errors that are common in manual invoicing.

Example: A small manufacturing business that issues dozens of invoices weekly can avoid mistakes like duplicate billing or incorrect GST calculations. The system automatically applies the right tax rates and records each transaction correctly for IRBM reporting.

Faster Payments and Improved Cash Flow

E-invoices are delivered instantly and securely through the Peppol network. This eliminates postal delays and miscommunication, encouraging clients to approve and pay invoices faster.

Example: A digital marketing agency can send monthly retainer invoices to multiple clients and receive automated confirmations, reducing waiting times and ensuring consistent cash flow.

Real-Time Financial Insights

All invoices are tracked and recorded within Xero, providing SMEs with clear visibility into their accounts receivable and overall financial health. Real-time dashboards and reporting help identify unpaid invoices, top clients, and revenue trends.

Example: A logistics SME can generate a monthly report showing all pending payments, allowing the finance team to follow up proactively before cash flow issues arise.

Scalable and Future-Ready Solution

Xero’s e-invoicing system can handle any number of invoices, making it ideal for businesses planning to scale. Whether you expand to multiple branches or start dealing with international clients, Xero ensures compliance and efficiency.

Example: An e-commerce SME expanding into neighboring ASEAN countries can issue Peppol-compliant invoices to local distributors without worrying about compatibility or manual processing.

Also Read: How Xero Health Check Can Save Your Business Time and Money

Time and Cost Savings

Automating invoicing processes saves administrative hours and reduces operational costs. SMEs no longer need to print, post, or manually file invoices, freeing up staff to focus on core business activities.

Example: A café issuing daily invoices to suppliers can save hours every week previously spent on manual entries, printing, and courier costs.

Eco-Friendly Business Practices

By eliminating paper invoices, SMEs can significantly reduce their environmental footprint. Digital records also simplify audits and long-term storage.

Example: A boutique retailer that transitions to Xero e-invoicing can eliminate hundreds of sheets of printed invoices annually while maintaining legally compliant digital records.

Enhanced Security and Compliance

Xero encrypts e-invoices and ensures they are delivered through secure channels. This reduces the risk of fraud, data tampering, and lost invoices. At the same time, all invoices comply with IRBM regulations, safeguarding SMEs from potential penalties.

Example: A small accounting firm can submit invoices directly to clients and IRBM without worrying about sensitive information being intercepted or misplaced.

Automated Reminders and Follow-Ups

Xero allows SMEs to set up automatic reminders for unpaid invoices, reducing the need for manual follow-up and improving payment collection efficiency.

Example: A freelance designer can set automated reminders for overdue payments, ensuring they receive timely compensation without sending multiple emails. 

Also Read: Why Regular Xero Health Checks Are Essential

Tips for Malaysian SMEs Preparing for E-Invoicing

1. Assess Your Turnover

Before adopting e-invoicing, it’s crucial to determine your business’s annual revenue. Your compliance deadline with IRBM depends on your turnover. Knowing this helps you plan ahead and avoid penalties.

Example: If your SME earns RM1 million annually, your e-invoicing deadline is 1 January 2026, giving you time to implement the necessary systems before mandatory submission begins.

2. Choose the Right Xero Plan

Not all Xero plans automatically include e-invoicing features. Make sure you select a plan that supports Peppol-compliant e-invoices, so your invoices are automatically generated, transmitted, and recorded correctly.

Example: A small digital marketing agency may start with the Xero Standard plan to access automated e-invoicing and reporting, avoiding manual uploads to the MyInvois portal.

3. Register with MDEC

To send e-invoices via the Peppol network, businesses must register with the Malaysia Digital Economy Corporation (MDEC). This registration allows secure transmission of invoices to clients and the IRBM.

Example: A retail SME can complete the MDEC registration to ensure its invoices are Peppol-compliant, enabling instant delivery to suppliers and government entities.

4. Integrate Your Accounting Systems

If your business uses multiple accounting or billing systems, it’s important to link them with Xero. Integration ensures that data flows smoothly between systems, reduces duplication, and minimizes errors.

Example: A logistics company using separate payroll and sales systems can integrate them with Xero, automatically updating invoices and financial reports without manual intervention.

5. Train Your Team

Educating your staff about the new e-invoicing procedures is essential for smooth adoption. Employees should understand how to generate, approve, and submit e-invoices using Xero to avoid delays or mistakes. FastLane Group offers Xero Setup and Training services for Malaysian SMEs, providing hands-on guidance to ensure your team is confident and ready to manage e-invoicing efficiently.

Example: A boutique retailer can engage FastLane Group to organize a customized training session for their finance team, helping them practice issuing invoices, approving drafts, and reconciling payments in Xero while ensuring compliance with IRBM regulations.

Also Read: Xero Migration & Setup with FastLane Xero Platinum Partner

6. Monitor Compliance Regularly

E-invoicing rules may evolve over time, and IRBM compliance is ongoing. Regularly review your invoicing processes, check submitted invoices, and reconcile records to ensure accuracy and avoid penalties.

Example: A small construction firm can set monthly checks in Xero to confirm that all e-invoices have been submitted to IRBM and that totals match bank deposits and accounting records.

Why Choose FastLane Group for Xero Implementation

FastLane Group, a Xero Platinum Champion Partner, offers expert guidance and support to Malaysian SMEs navigating the e-invoicing transition. As the winner of the Xero Accounting Partner of the Year Hong Kong 2019, Xero Asia Advisory Partner of the Year 2024 and the Total Xero Award 2025, FastLane Group has a proven track record in assisting businesses with Xero implementation and optimization.

Our team of Xero Certified Advisors provides tailored solutions, ensuring that your business not only complies with e-invoicing mandates but also leverages Xero’s full potential to drive efficiency and growth.

Conclusion

The mandatory e-invoicing initiative in Malaysia represents a pivotal shift towards digitalization in business operations. For SMEs, adopting a robust solution like Xero can simplify compliance, enhance operational efficiency, and position your business for future growth.

To ensure a seamless transition to e-invoicing and to fully leverage the capabilities of Xero, consider partnering with FastLane Group. Our expertise and commitment to excellence can guide your business through every step of the implementation process.

Ready to Simplify E-Invoicing?

Ready to streamline your invoicing processes and ensure compliance with Malaysia’s e-invoicing mandates? 

Let FastLane Group guide your transition to digital compliance. Our Xero Certified Advisors will tailor the setup to your business needs and ensure you’re ready for Malaysia’s e-Invoicing mandate. Contact FastLane Group today to learn how their Xero solutions can empower your business.