E-Invoicing for Small and Medium Enterprises

Implementing e-invoicing systems for small and medium enterprises (SMEs) is mandatory in Saudi Arabia. With over 1.2 million SMEs in the Kingdom, compliance with e-invoicing requirements presents significant challenges. However, it also offers numerous benefits that empower SMEs to grow and compete globally.

In this guide, we explore the benefits of e-invoicing for small and medium enterprises and discuss how EZ Integrated’s e-invoicing solutions can address operational, regulatory, and financial challenges effectively.

Definition of Small and Medium Enterprises in Saudi Arabia

The Small and Medium Enterprises General Authority (Monsha’at) classifies SMEs in Saudi Arabia based on the number of full-time employees and annual revenue:

Medium enterprises: 50 full-time employees and annual revenue between SAR 41–200 million.
Small enterprises: 6 full-time employees and annual revenue between SAR 4–40 million.
Micro enterprises: 1 full-time employee and annual revenue not exceeding SAR 3 million.

As of 2023, there are 1,373,252 SMEs in Saudi Arabia, with the majority concentrated in Riyadh, Makkah, and the Eastern Province. Around 85.5% of these are classified as micro and small enterprises.

Is E-Invoicing Mandatory for Small and Medium Enterprises?

The classification of companies required to implement e-invoicing depends on their VAT-eligible revenue. ZATCA has defined 17 groups and set deadlines for their integration with the FATOORA portal.

Currently, SMEs within groups 4 to 9 (annual revenues between SAR 30–150 million) are already required to comply. Group 10, consisting of small enterprises with revenues under SAR 10 million, has a deadline at the end of 2024.

Future compliance deadlines for smaller enterprises are:

Group 11: Revenue above SAR 15 million, deadline: January 31, 2025.
Group 12: Revenue above SAR 10 million, deadline: February 28, 2025.
Group 13: Revenue above SAR 7 million, deadline: March 31, 2025.
Group 14: Revenue above SAR 5 million, deadline: April 30, 2025.
Group 15: Revenue above SAR 4 million, deadline: May 31, 2025.
Group 16: Revenue above SAR 3 million, deadline: June 30, 2025.
Group 17: Revenue above SAR 2.5 million, deadline: July 31, 2025.

ZATCA will announce the remaining groups and deadlines later.

Benefits of E-Invoicing for Small and Medium Enterprises

E-invoicing offers numerous advantages to SMEs, improving their performance and reputation in both local and global markets:

1. Streamlined Operations and Resource Optimization

E-invoicing eliminates time-consuming steps in traditional invoicing, freeing up resources for business growth instead of paperwork.

2. Enhanced Accuracy and Reduced Errors

Manual errors in data entry can lead to financial losses. E-invoicing automates tasks, reducing the likelihood of mistakes.

3. Better Cash Flow Management

E-invoicing provides real-time visibility into due payments, helping SMEs track late payments and manage their cash flow efficiently.

4. Environmental Impact and Global Appeal of E-Invoicing for Small and Medium Enterprises

Beyond cost savings, e-invoicing aligns with eco-friendly practices, boosting customer trust and supporting global sustainability goals.

Challenges of E-Invoicing for Small and Medium Enterprises

Adopting e-invoicing systems poses several challenges for SMEs, given their limited resources. Here are the key challenges and potential solutions:

1. High Initial Costs for Small and Medium Enterprises

SMEs may face expenses related to upgrading systems or paying subscription fees. However, ZATCA notifies companies six months in advance, allowing time to prepare financially.

2. Lack of Employee Training

Insufficient training leads to errors and inefficiencies in e-invoicing. Investing in training is crucial to prevent mistakes and protect against fraud.

3. Integration Difficulties

Older systems may not be compatible with e-invoicing requirements, causing delays in integration. With EZ Integrated’s solutions, SMEs can seamlessly connect their systems to the FATOORA portal.

4. Technical Issues Facing Small and Medium Enterprises

Software bugs or system errors can disrupt operations and harm a company’s reputation. Choosing a provider like EZ Integrated ensures continuous support to overcome these challenges.

Seamless E-Invoicing Integration with EZ Integrated

As SMEs in Saudi Arabia prepare for Phase Two of e-invoicing, EZ Integrated offers solutions to ensure smooth integration with accounting systems while adhering to ZATCA standards.