Building a Malaysia E-Invoicing Business Case

With the mandate for e-Invoicing in Malaysia looming, businesses are focused on compliance. Business leaders may not be considering the broader implications of the mandate. E-invoicing is not just about compliance but a strategic move that can drive real value. To realise this value, businesses need to consider all aspects of the change. The most effective way to do this is through creating a detailed business case. This comprehensive guide will help you build a business case for e-invoicing adoption.

The Challenge With Most E-Invoicing Business Cases

Business cases are important and used to review whether an initiative is a good idea. They usually have a strong focus on the financial aspect of initiative. This is a common mistake that businesses make.

“If your business case is solely focussed on high level financials – it’s not believable. Business cases should cover all aspects of the change that your business will go through. It needs a bottom-up value assessment that provides confidence it can be delivered. A good business case can be very effective in driving the project too.”

Jussi Karjalainen – e-Invoicing expert, CEO

High level business cases that are financially focused usually have unvalidated ROI claims. This results in low executive buy-in and a low probability of approval. If it does get approved, the project might not deliver the promised return on investment. Software is implemented but processes don’t really change and benefits are not achieved. This can all be avoided with a proper business case. It will not only help drive value but effectively prepare you for the change.

Malaysia E-Invoice Business Case – Where to Start

The starting point is acknowledging that your business case is not a spreadsheet. Financials are, of course, an important component of the business case. But it should address three areas to ensure the project delivers:

• Trust – The business case should be well researched. This ensures both you and the Executives trust that you know what you are talking about
• Honesty – it should be honest in its assessment of this project. It should cover the things that will speed up and slow the project down. You should describe the financial and project delivery assumptions.
• Governance – it should plot a clear path with robust monitoring and evaluation points. Designed to ensure that the project will deliver on its promises. Include key ‘transformation’ metrics and what corrective action can be applied.

To ensure your business case covers all these, it should have:

1. Change Management Assessment
2. Alignment to Strategic Goals
3. Risk
4. Financials

Change Management Assessment

Start with a detailed assessment on the people impacts of your project. Include things that are going to both support your project as well as hinder it. You should be considering the following:

• Your current culture and value system
• Your businesses capacity for change including how much change is underway or planned
• The leadership styles and power distribution across the organisation
• Impacts and perceptions of previous changes
• Your middle management’s attitude toward the change. They will be key in driving end user adoption
• Employee readiness and openness to change
• The executive sponsorship required to drive the change across the organisation

Alignment To Strategic Goals 

There should be a clear line from one or more of your strategic goals to eInvoicing. This helps with executive support for the project and getting approval for the spend. It should be more than it aligns with Goal X around digital transformation as it is a digital project. So, how do you get to the level of detail required?

• Review the corporate and departmental strategic plans. If none exist, meet with the executive team to understand key strategic priorities.
• Identify the specific outcomes of e-Invoicing that will support the corporate strategic plan.
• Align the success metrics and timelines with those of the corporate strategic plan.

Test out your findings with a couple of key stakeholders to ensure they make sense. This also helps seed the idea for your project with that stakeholder.

Risk

Every project carries risk, e-Invoicing is no different. Show that you’ve done your homework and you understand the risk across three key areas:

• Project risks – what are the risks involved in the implementation of e-Invoicing.
• Inaction risks – what are the risks of not implementing e-Invoicing.
• ROI risks – what are the risks of not achieving the expected return on investment.

For each risk, identify the likelihood, impact, risk rating and mitigation strategy. The areas that are usually missed are the inaction risks and the ROI risks.

Risk of Inaction

This refers to the compliance risks that your business faces without implementing e-Invoicing. You should also consider the risks to your processes as well. Process risks like:

• Fraudulent invoices – the risk that you will pay an invoice that you shouldn’t
• Duplicates invoices – the risk that you pay the same invoice twice for a supplier.
• Tax compliance – the risk that you aren’t able to follow relevant tax laws.
• Incorrect invoice data capture – the risk that you capture invoice data incorrectly. This can result in issues around supplier payments or inaccurate record keeping.

Financials 

Financials are an integral part of the business case. They need to be detailed enough to provide confidence that the numbers are realistic. An analysis of your current and future business processes help drive your financials. Business case financials that get approved typically contain the following information:

• As-is cost breakdown
• Future-cost breakdown
• Invoice processing cost reductions
• People benefits
• Return on investment (ROI) and net present value (NPV).

As-Is Cost Breakdown

This should measure the costs involved in running your current invoice processing. This should include:

• The people time involved in executing the process. Map your existing processes to calculate the time taken for each task. Consider the person’s role and include salary with on-costs to calculate the cost for each step.
• The cost of current infrastructure and software.  Map out all the technology used in your current processes. Identify the direct and indirect costs involved in the invoicing process.

Future-Cost Breakdown

This should include the costs involved with implementing e-Invoicing and the new processes. You should align this with a future process and transformation roadmap. This helps to ensure you have clarity over what is needed for the project. You want to have an accurate view over at least a 3-year period of the on-going costs involved with e-Invoicing. This gives you an understanding of the total cost of ownership of your new technology and processes.

These future costs should include:

• Software costs
• Change management costs
• User training/support costs
• Integration/s cost
• External system implementation costs
• Operating model change costs.

e-Invoicing Processing Related Benefits

e-Invoicing drives the cost of processing invoices down across three main areas:

• Reducing time spent on processing invoices through automation. e-Invoicing can cut a lot of unnecessary manual work operations and button pushing.
• Digitising and automating approval workflows. Automated invoice approval workflows can be setup based on your business rules. This can drive real efficiency in the invoice approval process.
• Drive focus into process accountability and efficiency. e-Invoicing means you can measure the whole process with accuracy. This provides efficiency insights so you can baseline performance and improve over time.

Assign time and roles to your future-process map. You can then assign a cost to that time and roles based on your staffing costs. Costs for your future process can then be subtracted from your current process costs.

People Related Benefits

These are a little bit more speculative as they are harder to measure. Aim to measure the benefits from staff spending more time on strategic activities.

For example, you have front line staff spending 2 hours a week on invoicing tasks. You can measure this from your existing process map work completed earlier. With the new process this drops to half an hour a week. The question is, with that extra 1.5 hours a week what value can your team create?

Conducting interviews with people involved in your current processes can provide some insights. What is the current process stopping them from doing? This should help identify an expected benefit for adopting e-Invoicing.

There is an extra benefit from your staff focussing on more value adding activities. Improving morale and job satisfaction. Driven by your team feeling that they are having a greater impact on the company.

Calculating ROI and NPV

Once you’ve completed this analysis you should have the following figures:

• Current costs to run your invoicing process per year (CC)
• Future costs to run your invoicing process per year (FC)
• Implementation Costs (IC)
• People related benefits per year (PB)

You can then calculate your expected return on investment percentage over 3 years. Use the following formula:

Calculate total Costs: IP plus ((FC minus – CC) multiply by 3)

Calculate Total Benefits: ((PB) multiply by 3)

ROI: (Total Benefits minus Total Costs) divided by Total Benefits

Map out each of the figures above into each year to calculate an annual loss/benefit. This will enable you to calculate the net present value of the e-Invoicing project.

What Will Your Malaysia E-Invoice Business Case Look Like?

A business case built on detailed and genuine analysis of the business. One that considers factors such as costs, change management, risk and strategic alignment. One that gets approved and is used to track the project to achieve the benefits calculated.

Next Steps

E-invoicing is not just a regulatory need but an opportunity for significant benefits. Benefits you can measure with an effective business case and the right partner. Businesses need e-invoice software that not only ensures compliance but drives value.

Contact us today for a confidential discussion about your e-invoicing needs. We can help you develop an e-Invoicing implementation plan tailored to your business. Our experts can help you navigate the e-Invoicing process ensuring a smooth transition.