Challenges in adoption of e-invoicing in northern SMEs in Malaysia

Small and medium-sized businesses (SMEs) in Malaysia are crucial to the nation's economy, making up more than a third of the GDP. However, they face significant challenges because they need to start using electronic invoicing (e-invoicing) by 2027. This requirement is particularly difficult for businesses in Northern Malaysia. While e-invoicing can improve tax compliance, efficiency, and business transparency, many SMEs find it hard to adopt due to a lack of understanding. Research has identified several hurdles that SMEs encounter in adopting e-invoicing. These include financial issues, regulatory complexities, technological readiness, human resistance, and perceptions of complexity. To gather insights, a survey collected data from SME owners, financial officers, and accountants from regions such as Kedah, Perlis, and Penang. The study highlights those insufficient financial resources, confusion regarding regulations, limited access to IT infrastructure, and resistance to change are significant barriers. Moreover, many SMEs perceive e-invoicing as complicated and hard to integrate, which slows down its adoption. On the other hand, when SMEs are technologically prepared and view e-invoicing as beneficial and user friendly, they are more inclined to adopt it. For successful implementation of e-invoicing, comprehensive support is needed. This includes government incentives, improvements in digital infrastructure, training programs, and simplified regulatory guidelines. These findings offer valuable insights for policymakers, tax authorities, software providers, and SME owners, seeking to facilitate digital transformation and ensure smooth compliance with Malaysia’s e-invoicing mandate.