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Minimising Rejection and Cancellation of e-Invoice

Minimising Rejection and Cancellation of e-Invoice_Cover

In the rapidly evolving business landscape, ensuring compliance with e-Invoicing regulations is crucial. The Continuous Transaction Controlled (CTC) e-Invoicing is implemented in Malaysia with the aim of tracking the transaction amount of every business for taxation purposes, and the first phase will be implemented on businesses with an annual revenue of RM100 million and above beginning 1 August 2024.

At IFCA Software, our e-Invoicing Solution is designed to help businesses navigate the complexities of e-Invoicing, ensuring smooth submission to, and validation by the Inland Revenue Board of Malaysia (LHDN).

However, every time e-Invoices are rejected or cancelled, the workflow of business owners will surely be disrupted, as precious time to grow business and serve customers will be diverted to administrative work. Therefore, let’s explore the reasons behind e-Invoice rejections and cancellations, and strategise ways to minimise these issues.

Understanding the E-Invoicing Process


Before diving into the reasons for rejection or cancellation, it is essential to understand the e-Invoicing process. The journey begins with the creation and submission of e-Invoices, either manually through MyInvois portal of LHDN, or automatically via software such as the IFCA e-Invoice Solution. These invoices are then validated in near real-time. If there are errors, they must be corrected before the invoice can proceed.

Once validated, e-invoices receive a unique identifier and a validation link. Both the supplier and the buyer are notified of the validation status. The validated e-invoice, complete with a QR code, is then shared with the buyer for their records.

E-Invoices with errors or discrepancies can be rejected or cancelled within 72 hours. Otherwise, all validated and accepted e-invoices are stored in the LHDN database, and taxpayers can check the details of their e-Invoices through MyInvois portal.

Common Reasons for E-Invoice Rejection or Cancellation

E-invoices can be rejected at various stages, due to a wide variety of reasons, such as:

LHDN Validation:
– Structure Non-Compliance (improper format)
– Incomplete or Inaccurate Core Fields [missing details like TIN (Tax Identification Number)]
– Invalid Digital Signature
– Taxpayer Validation (invalid taxpayer data)
– Reference Document Invalidity (errors in referenced documents)
– Invalid Code Usage (incorrect tax or currency codes)
– Duplicate Submission (duplicate invoices within a short time frame)

Buyer Rejection:
– Incorrect Details (errors in items, quantity, or supplier information)
– Disagreements with Agreed-Upon Terms (price, discount, or payment discrepancies)
– Purchase Order Mismatch (differences with purchase order details)
– Unauthorised Charges
– Tax Discrepancies (errors in tax rate or other details)
– Late Submission (exceeding the agreed submission timeframe)

Supplier Cancellation:
– Errors in Invoice Details (incorrect pricing, quantities, etc.)
– Duplicate Invoice (accidentally issuing a duplicate invoice)
– Change in Terms or Conditions
– Customer Request (customer requesting cancellation)
– Regulatory Compliance (original invoice not compliant with regulations)

The Process for Rejection or Cancellation

The process for rejecting or cancelling e-Invoices involves several steps. If the buyer identifies errors, they must request rejection within 72 hours of validation, specifying the reasons such as invalid taxpayer data or incorrect details. The supplier receives a notification and if the reason is valid, proceeds to cancel it.

Similarly, suppliers can cancel e-Invoices within 72 hours of validation if errors are detected. Justifications must accompany cancellation requests. If the e-Invoice is not rejected or cancelled within 72 hours, any subsequent adjustments require a new e-Invoice document, such as a Credit Note, Debit Note or Refund Note.

Strategies to Avoid Rejection or Cancellation

Strategies to Avoid Rejection or Cancellation

Ensuring that your e-Invoices are accurately processed and accepted without rejection or cancellation is crucial for maintaining smooth business operations. Here are some comprehensive strategies to help you achieve this:

To avoid errors in e-Invoicing, it’s essential that all personnel involved in billing, accounting, and e-Invoicing processes are thoroughly trained. This training should cover:

– Regulatory Knowledge: Understanding of current e-Invoicing regulations and compliance requirements, particularly those set by LHDN.
– System Use: Proficiency in using your e-Invoicing software and related tools to ensure accurate data entry and processing.
– Best Practices: Familiarity with best practices for invoice creation, submission, and follow-up to minimise the risk of errors.

Robust Systems
Investing in reliable billing, Point of Sale (POS), and Enterprise Resource Planning (ERP) systems can greatly reduce the likelihood of errors in e-Invoicing. These systems should be capable of:

– Automatic Data Fetching: Automatically fetching and populating data fields from your central database to minimise manual entry errors.
– Integrated Processing: Seamlessly integrating with your e-Invoicing system to ensure smooth data transfer and validation.

Minimise Manual Entry
Manual data entry is prone to errors, which can lead to e-Invoice rejections. Implementing API (Application Programming Interface) e-Invoicing can help automate data transmission between your system and the LHDN servers, ensuring:

– Accurate Data Transfer: Automatic and accurate data transfer between systems without human intervention.
– Real-Time Updates: Instant updates and corrections to data fields as soon as discrepancies are detected.

Pre-Submission Checks
Conduct thorough pre-submission checks to ensure that all data fields are correctly filled out and comply with regulatory requirements. This should include:

– Field Verification: Checking mandatory fields such as Tax Identification Number (TIN), addresses, and product/ service descriptions for accuracy.
– Compliance Check: Ensuring that the e-Invoice format adheres to the prescribed standards and structures, such as XML or JSON formats required by LHDN.

Confirm with Buyers
Before submitting e-Invoices, it is crucial to confirm the details with your buyers to address any potential discrepancies. This involves:

– Detail Verification: Verifying items, quantities, prices, and payment terms with the buyer.
– Discrepancy Resolution: Resolving any discrepancies or concerns raised by the buyer before the e-Invoice is submitted to LHDN.

e-Invoicing Solution Provider
Partnering with a reliable e-Invoicing solution provider like IFCA Software can significantly enhance your e-Invoicing process. Our solution offers:

– Seamless Integration: Smooth integration with your existing ERP systems to ensure a unified e-Invoicing workflow.
– Data Validation: Automated data validation checks to ensure all fields comply with regulatory standards and are correctly populated.
– Cloud Storage: Secure cloud storage for all your e-Invoices, ensuring they are easily accessible and protected against data loss or unauthorised access.

By following these strategies, businesses can reduce the likelihood of e-Invoice rejections and cancellations, ensuring a more efficient and compliant invoicing process. This not only streamlines operations but also enhances business relationships and financial accuracy.

Embrace IFCA e-Invoicing Solution to stay compliant and enhance your operational efficiency. To have a better understanding of our e-Invoicing Solution and how it can benefit your business, feel free to contact us today.