Southeast Asia’s population of nearly 700 million people, along with its tens of millions of big and small businesses, many in markets still considered to be developing, are ignoring one of the easiest post-pandemic digital transformation wins available to them: digitising paper invoices.
There are estimated to be more than 70 million small and medium-sized enterprises (SMEs) across the region, representing 99 per cent of operating firms, all of which send and receive dozens if not hundreds of invoices each month.
That equates to billions of invoices each year, many still in paper form with the rest in traditional digital formats such as PDF that are difficult to extract data from, requiring optical character recognition (OCR) software.
Whether in paper or PDFs, the reality is that both of these are old analogue standards designed for a pre-pandemic world.
The real challenge lies in extracting all the raw invoice data and then storing it in the cloud for easy and secure future access. We think of this as an analogue-to-digital transition business will have to make in the years ahead for greater resilience.
What we see on the ground is interesting because, while the concept of e-invoicing has been talked about for years, its actual implementation in day-to-day life for most of Southeast Asia’s businesses is only just getting started in the aftermath of COVID-19.
Technologies such as OCR and artificial intelligence (AI) are now maturing on a commercial basis and will help to automate much of this invoice processing, even in emerging markets.
Moving from analogue to digital invoices
Singapore is a pioneer in the region when it comes to embracing e-invoicing among the private sector, going as far as to mandate it for all central government authorities four years ago.
Just before the pandemic struck in 2019, Singapore had already adopted PEPPOL, an e-invoice standard that is generated, transmitted and processed digitally with little-to-no manual processing.
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In Thailand, since 2016, the government has implemented a new policy known as Thailand 4.0, which seeks to drive e-invoicing adoption, though it has not yet gone as far as Singapore in mandating it in the public sector.
Value added tax (VAT) parties in Thailand could send e-invoices and receipts voluntarily using the country’s e-tax system, while in the Philippines, a similar e-invoicing system was announced this past December.
As part of the Philippines’ Comprehensive Tax Reform Programme introduced by the ministry of finance, there is an ongoing push to digitalise tax and administrative systems with a pilot launched this July.
Other key markets in the region that are seeing a national push towards digital invoices include Vietnam, Indonesia, and Malaysia.
Vietnam’s ministry of industry and trade’s e-invoice system, for example, was originally planned for 2020 but only launched this July after many delays, and provides services at an official online portal and via the country’s e-tax-mobile app.
The government has said it aims to create a transparent and fair business environment, more streamlined administrative processes, and higher productivity, all of which are integral parts of Vietnam’s national strategy for digitalisation.
The e-invoice system in Indonesia, known as e-Faktur Pajak, became mandatory between 2015 and 2016 and is based on a clearance model where all invoices issued must be first approved by the tax authority before being sent to customers.
Finally, Malaysia plans to introduce gradual e-invoicing starting next year, according to the ministry of finance’s 2023 budget statement, even though e-invoicing has been permitted but not mandatory for seven years already.
It’s time for Southeast Asia’s businesses to go digital on invoices
Given the priority digital invoices are taking on the national agendas of all these economies, it’s important that businesses big and small get behind the push and start preparing for the shift as part of their own internal strategies.
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In the short term, this means investments into new digital and cloud infrastructure that can support their move away from paper and formats such as PDF towards truly modern digital standards.
Over the longer term, with government support, these investments will pay for themselves by delivering real cost savings, reducing carbon footprints, and increasing resiliency in the face of unexpected future economic shocks.
Based on our own research, businesses that have made the transition to fully-digital invoices on average save hundreds of man-hours per month by using a mixture of cloud, AI, and OCR technologies to automate processing.
If I were to highlight two markets outside of Singapore that I am particularly excited about, I would choose Thailand and the Philippines as having huge potential for the transition to digital invoicing.
If I were to name some sectors that I think need the most urgent help, I would say maritime and shipping, construction, and real estate have all lagged on digital historically and must now look to catch up as part of their post-pandemic recovery strategies.
In Singapore, where we have our regional headquarters, plenty of local businesses plan to expand into regional markets over the next 12 months and are now ramping up their investments into digital to support these efforts.
I would encourage digital invoicing and its benefits as part of broader digital transformation strategies to be on their radar as they do so.
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