Sales Register vs Sales e-Invoice Reconciliation in Malaysia

With the mandatory e-invoicing regulations rolling out in Malaysia, businesses are facing a crucial challenge: reconciling their sales register with the newly generated e-invoices. 

As the government moves towards an e-invoicing system, businesses will need to adapt to ensure their SST and other tax compliance are complete and accurate as now the IRBM has more updated data than ever before. The stricter tax audit measures demand an immediate focus on seamless reconciliation between the company books, returns and filings and e-invoice data- between sales registers and e-invoices.

In this article, we will explore the details of the e-invoicing requirements, the importance of the sales register and e-invoice reconciliation, and how businesses can reconcile them for upcoming tax audits and compliance requirements in Malaysia.

Reconciliation, e-Invoice and Sales Register

What is Reconciliation?

Reconciliation, in general, is the process of comparing two sets of records or data to ensure consistency and accuracy. It typically involves matching transactions, balances, or entries in different accounting systems, bank statements, or financial records to confirm that they align. The goal of reconciliation is to identify and resolve any discrepancies or errors, ensuring that the financial statements are accurate and reliable. 

In the context of e-invoicing, reconciliation refers to the process of ensuring that the data captured in electronic invoices matches the financial records and tax returns, particularly for income and expenses. 

What is an E-invoice?

An e-invoice is a digital record of a transaction that is submitted to the IRBM for real-time validation. It includes detailed fields, such as:

• Seller and buyer details
• Item descriptions
• Quantities and prices
• Taxes and total amounts
• Payment details

The e-invoice is validated by the IRBM, and once approved, it is assigned a Unique Identification Number (UIN) and a QR Code for easy online validation.

What is a Sales Register?

A sales register is a record that businesses maintain to track sales transactions. This record typically includes details such as:

• Date of transaction
• Customer name
• Invoice amount
• Tax details
• Payment terms

Businesses typically rely on sales registers to calculate and report taxes. However, with the implementation of e-invoicing, these traditional manual processes must now align with digital systems for tax reporting.

Impact of e-Invoicing on Compliance and Audits

Here’s a detailed look at the impact of e-invoicing on compliance and audits:

• Real-Time Data Access: The IRBM gains immediate access to detailed transactional data in real-time, capturing almost 55 different fields such as buyer and seller details, transaction amounts, items, payments, currency, SST, etc.
• Full Transparency and Data Accuracy: Every transaction, including B2B, B2C, and B2G, is captured, including not just invoices but also refunds, credit notes, and debit notes. This provides a complete view of the company’s tax activities.
• Efficient Scrutiny and Audits: Automated reconciliation between business records and IRBM's database could speed up audits. Since e-invoices are submitted electronically, the IRBM can cross-check the data against the taxpayer’s returns in real time.
• Increased Risk of Penalties: Submitting incomplete data, omitting data, data inconsistencies in books, filings and e-invoices are more likely to attract penalties in future.
• e-Reporting and e-Auditing: e-Invoicing is just the beginning. Over time, businesses will be required to submit additional digital tax-related data, relying heavily on AI and data analytics to identify discrepancies and optimize auditing processes.

The Importance of Reconciliation Between e-Invoicing Data and the Sales Register

Reconciliation between e-invoicing data and the sales register is essential to ensure compliance, maintain accuracy, and avoid regulatory risks. Here's why:

1. Avoiding Penalties: Generating e-invoices for every sales transaction is mandatory. Missing even a single e-invoice could result in hefty penalties and the exclusion of such sales from recorded revenue, affecting tax calculations.
2. Buyer Relations: Buyers often require e-invoices for reimbursements and record-keeping. Failing to provide them can damage customer relationships, lead to dissatisfaction, and even result in a loss of future business opportunities.
3. RMCD Notices and SST Returns: With the Inland Revenue Board of Malaysia (IRBM) and the Royal Malaysian Customs Department (RMCD) sharing data, RMCD can cross-check SST filings against e-invoice records. Discrepancies in these filings may trigger audits or notices, highlighting the need for precise alignment.
4. Compliance Audits: Regulatory obligations, including corporate income tax, tourism tax, etc often involve compliance audits conducted by government agencies. With e-invoicing, businesses can expect similar scrutiny, requiring accurate and reconciled records to meet audit standards.

As the IRBM now has real-time access to detailed tax data, any mismatches between the sales register and e-invoices are likely to raise red flags during audits. This increases the risk of penalties or legal consequences for businesses that fail to maintain proper alignment. Reconciliation ensures accuracy, reducing these risks significantly.

How to Effectively Reconcile E-Invoice Data and Sales Register?

Here are a few steps that businesses can take to make sure that their sales ledger data matches the filed e-invoice data

Automated Integration: Automation is the most efficient way to reconcile e-invoice data with the sales register for high transaction volumes. Integrating e-invoice systems with ERP allows businesses to automatically capture and match transaction data, eliminating manual entry and reducing errors.

Regular Audits: Periodic reconciliation audits should cross-check the sales register, e-invoices, and relevant financial documents. Routine audits ensure discrepancies are identified and corrected promptly.

Comprehensive Data Tracking: E-invoicing mandates in Malaysia require 55 fields in each e-invoice, covering transaction details like seller and buyer information, item descriptions, tax, and total amounts. The sales register must track these fields accurately for reconciliation.

Data Consolidation: At the end of each period (daily or weekly), businesses can generate reports comparing individual and consolidated e-invoices, consolidating sales data from all terminals, including online channels. 

Monitoring and Reporting: Track e-invoices and match them with their corresponding sales register entries regularly. This helps ensure transparency and flags discrepancies early.

Track Failed and Rejected e-Invoices: Failed or rejected e-invoices should be re-issued within the required timeframe to avoid mismatches. These discrepancies can lead to major issues during reconciliation. ClearTax's e-invoicing portal provides a dedicated dashboard that allows businesses to track failed and rejected e-invoices in real time, ensuring they are promptly addressed.

Key Challenges of Sales Register vs Sales E-Invoice Reconciliation

1. Multiple Sales Channels and Terminals: Tracking transactions across various sales channels and terminals is complex, making reconciliation difficult.
2. Lack of Audit Trail: The e-invoicing process often lacks complete visibility, making it hard to trace the entire journey of a single e-invoice.
3. Data Integrity: Sales register data can be adjusted later (e.g., for refunds, credits, discounts, or corrections) without updating the corresponding e-invoice data, leading to discrepancies.
4. Consolidated E-Invoices: For B2C transactions where consolidated e-invoices are allowed, it becomes challenging to identify and reconcile specific discrepancies within the data.
5. ERP Customizations for E-Invoice Tracking: Tracking e-invoices effectively often requires ERP customization. Manual tracking through the MyInvois portal is inefficient, making it harder to manage large volumes of transactions.

How ClearTax Helps with Sales Register vs Sales E-invoice Reconciliation?

ClearTax is a leading e-invoicing solution provider in Malaysia, offering a dedicated portal to generate, track, and manage e-invoices. Here's how it streamlines the reconciliation process:

1. Automatic Synchronization: ClearTax automatically syncs e-invoice data from the MyInvois portal, including the Unique Identification Number (UIN) and QR code. These details are essential for real-time validation and ensure alignment between your sales register and e-invoice records.
2. Real-Time Updates: ClearTax detects any mismatches between the sales register and e-invoices instantly, providing real-time alerts for discrepancies. This ensures that discrepancies between recorded sales and generated e-invoices are addressed promptly.
3. Cross-System Reconciliation: ClearTax integrates e-invoice data with your ERP or accounting systems via API or SDK. This enables seamless reconciliation between the sales register and the sales e-invoices, reducing manual workloads and ensuring accurate alignment of accounts receivable and payable.
4. Efficient Data Matching: ClearTax matches e-invoice records with internal financial records (such as payments and order histories) to ensure that all transactions are properly aligned between your sales register and e-invoices before filing with the IRBM.
5. Consolidated E-Invoice Reports: For businesses handling multiple transactions, especially B2C sales, ClearTax consolidates e-invoices and compares them against overall sales and payments. This simplifies the reconciliation process and ensures that the sales register matches the e-invoices for tax reporting.
6. Track Rejections and Cancellations: ClearTax monitors e-invoice rejections or cancellations by the IRBM and any buyer-requested changes. These updates are immediately reflected in your sales register, ensuring that only validated, accepted invoices are considered in the reconciliation.
7. Audit Trails: ClearTax keeps a comprehensive log of every invoice rejection or cancellation, ensuring there is a clear audit trail. This supports both internal and external audits while facilitating smooth reconciliation between the sales register and e-invoices.
8. Multi-Channel Integration: ClearTax integrates sales data from various channels into a single e-invoice format. This ensures consistency and simplifies the reconciliation of sales across different touchpoints, helping businesses reconcile their sales register with e-invoice data.

Conclusion

The implementation of e-invoicing in Malaysia is not just a regulatory change—it is a significant shift in how businesses manage their tax compliance and reporting. 

Reconciliation between sales registers and e-invoices is an essential part of this transformation, and businesses must adapt their processes to ensure smooth compliance and readiness for audits. With ClearTax’s automated reconciliation solutions, businesses can ensure that their sales registers and e-invoices are always aligned, reducing the risk of errors and ensuring tax compliance.