The Simplified Guide for Entrepreneurs: Steps to Apply Electronic Invoicing Without the Need for a Technical Team

In light of the rapid digital development witnessed by the Kingdom of Saudi Arabia, electronic invoicing has become not just an option, but an urgent necessity and a legal obligation for all businesses subject to VAT. While this transformation aims to enhance transparency and efficiency in business transactions, it can seem like a major challenge, especially for entrepreneurs and start-ups who often work with limited resources and may not have a dedicated technical team to support this transformation.

This guide aims to simplify the process of applying e-invoicing for entrepreneurs in Saudi Arabia, and provide practical and clear steps that enable them to comply with legal requirements without the need for deep technical expertise or hiring a specialized team. In this article, we will review the importance of electronic invoicing, the stages of its application, how to choose ready-made software solutions that facilitate this process, in addition to tips to ensure compliance and success in this vital digital transformation.

Electronic invoicing for startups
Electronic invoicing is defined as the process of issuing and filing invoices and debit and credit notes in a structured electronic format, instead of relying on traditional paper invoices. This system aims to streamline financial operations, enhance transparency, and combat tax evasion. In Saudi Arabia, the Zakat, Tax and Customs Authority (ZATCA) has obligated all taxpayers subject to the e-invoicing regulation to switch to it in two stages:

  • The first phase is the issuance and archiving phase: It started on December 4,  2021, and requires the issuance and filing of tax invoices and notices in an organized electronic format that is compatible with the requirements of the Authority.

  • The second phase is the linking and integration phase: It started gradually on January 1  , 2023, and requires electronic invoicing systems to integrate directly with the authority's Footarah platform, and share invoices automatically.

The importance of electronic invoicing for startups lies in several aspects:

  • Legal Compliance: Compliance with ZATCA  regulations avoids startups from fines and penalties of up to SAR  50,000 in some cases, and ensures continuity of legal processes.

  • Improve operational efficiency: Automating the invoicing process reduces manual errors, saving time and effort, allowing startups to focus on core activities that support growth.

  • Cost savings: Reduces printing, paper, storage, and shipping costs, as well as reduces the need for error correction and re-invoicing.

  • Enhance transparency: Provides accurate and orderly records of all financial transactions, facilitating audits and audits.

  • Improve cash flows: Speeding up the invoicing and collection process enhances the liquidity of the startup.

  • Building a professional reputation: Using a modern electronic billing system that reflects a positive image of the project in front of customers and partners.

  • Facilitate integration: Enables integration with other business management systems such as accounting andCRM, improving data flow and process efficiency.

 Why is e-invoicing essential for your startup?An 
entrepreneur may wonder how important e-invoicing is to his startup, especially in light of the many challenges he faces at the beginning of his career. The answer is simple and clear: electronic invoicing is not just compliance with legal requirements, it is a smart investment that benefits your project in several ways:

  • Legal compliance and avoidance of fines: In Saudi Arabia, electronic invoicing has become mandatory. Failure to comply with these regulations exposes your project to hefty fines of up to SAR  50,000 in some cases, an amount that can be a significant burden on startups with limited resources. The commitment ensures the continuity of your business legally and properly.

  • Enhance operational efficiency and save time: Startups often rely on small teams, and time is their most valuable resource. Electronic invoicing automates the invoicing process, drastically reducing the time and effort spent on manual tasks such as printing, signing, sending, and storing. This time saving allows entrepreneurs to focus on core activities that support the growth and development of the enterprise.

  • Reduce human errors: Manual invoices are prone to human errors, whether in data entry, calculating taxes, or tracking payments. These errors may lead to delays in payment, disputes with customers, or even problems with tax authorities. Electronic invoicing systems significantly reduce these errors through automation and data validation, ensuring billing accuracy and transaction integrity.

  • Improving cash flows: The speed of issuing and sending invoices electronically contributes to speeding up the process of collecting receivables from customers. Good cash flow is vital for the survival and growth of startups, and e-invoicing helps achieve this by reducing the billing and collection cycle.

  • Cost savings: In the long run, electronic invoicing saves on printing, paper, inks, physical storage, and even postage costs. These savings, although seemingly small at first, accumulate to make a tangible difference in the startup budget.

  • Enhance transparency and ease of auditing: Electronic invoicing provides accurate and organized digital records of all financial transactions. This greatly facilitates internal and external audits, and makes dealing with tax authorities smoother and more transparent, reducing the likelihood of getting into legal trouble.

  • Building a professional image and keeping pace with development: Using the latest technologies in business management reflects a professional image of your project in front of customers, partners and investors. Keeping pace with digital developments puts your project in the ranks of modern companies that adopt innovation and efficiency.

Basic stages of e-invoicing implementation

The application of e-invoicing in the Kingdom of Saudi Arabia takes place in two main stages, and each stage has its own requirements that entrepreneurs must understand well:

The first stage: the issuance and preservation phase began on December 4  , 2021 AD
This stage is the basis on which the electronic invoicing system is built. At this stage, businesses are required to issue and file tax invoices, debit and credit notes in an electronic format organized and compliant with the requirements of the Zakat, Tax and Customs Authority (ZATCA). The most important requirements at this stage:

  • Invoices in electronic format: Invoices must be in digital format, not paper. Supported formats are XML or PDF/A-3  with XML data included.

  • Include mandatory fields: The invoice must contain all the mandatory fields specified by the Authority, such as: invoice number, date and time of issue, seller and buyer tax number if any, details of goods or services, total amount, and VAT amount.

  • QR Code: Simplified B2C tax invoices must include   a scanned QR Code that contains basic invoice information.

  • Electronic signature: Invoices must be electronically signed using a valid electronic signature certificate to ensure data integrity and non-tampering.

  • Electronic archiving: Electronic copies of all invoices issued and received must be saved in an organized manner that ensures easy access when needed.

What does this mean for entrepreneurs without a tech team?
At this stage, no direct connection with ZATCA systems is required. Entrepreneurs can use ready-made billing software that provides these essential features, generating invoices in the required formats, including mandatory fields, generating  a QR code, and automatically applying an electronic signature. All an entrepreneur needs is to enter the correct data.

The second phase: the linking and integration phase gradually started on January 1  , 2023
This stage is more advanced and requires direct integration between the facility's billing system and the Fawtarah platform of the Zakat, Tax and Customs Authority. The goal is to automatically send invoices to DEWA for instant verification before sharing them with customers. The most important requirements at this stage:

  • Fatora Platform Registration:  The facility must register  its Solution Unit with DEWA to enable connectivity.

  • API connectivity: Requires a programmatic link between a facility's billing system and  the Fatoorah API to automatically send invoices.

  • Instant or 24-hour  dispatch: B2B tax invoices must be sent as soon as they are issued, and B2C simplified tax invoices  must be sent within 24 hours of issuance.

  • Invoice chronology: Each invoice must carry a unique and sequential serial number, preventing tampering with this sequence.

  1. Audit Logs:  The billing system should create and maintain detailed audit logs for all activities related to invoices.

What does this mean for entrepreneurs without a tech team?
This phase may seem technically complicated, but ZATCA-certified  off-the-shelf software solutions take care of this aspect entirely. These programs are specifically designed to meet the requirements of connectivity and integration, and automatically send invoices to the authority without manual intervention from the entrepreneur. Therefore, choosing a compatible and certified e-invoicing software is the key to successfully passing this stage without the need for an in-house technical team.

Choosing the right solution:  out-of-the-box billing software
 as an alternative to the technical team For entrepreneurs who don't have a technical team, the best solution for an e-invoicing application  is to choose off-the-shelf e-invoicing software or cloud-based solutions. These programs are specifically designed to meet the requirements of the Zakat, Tax and Customs Authority (ZATCA) and provide user-friendly interfaces that do not require technical expertise.

Why are these solutions ideal for startups?

  • Ease of use: These programs feature simple and intuitive user interfaces, allowing entrepreneurs and non-technical employees to easily issue and manage invoices after simple training.

  • Full compliance: These programs are constantly developed and updated to ensure their compliance with the latest ZATCA regulations and requirements, including XML and PDF/A-3 invoice formats, mandatory fields, e-signature requirements, and the mechanism of linking with the Fatorah platform.

  • No need for technical infrastructure: Since they are cloud solutions, your facility does not require any complex servers or technical infrastructure. The software is hosted and maintained by the service provider, saving the startup investment and maintenance costs.

  • Save time and effort: These programs automate many billing-related tasks, such as generating invoices, sending them, saving them, and linking with the authority, which saves a lot of time and effort for the entrepreneur.

  • Specialized technical support: Most of these solution providers provide specialized technical support to assist users in case they encounter any issues or queries, reducing the need for an in-house technical team.

  • Affordable costs: These solutions are usually based on monthly or annual subscriptions, making them more affordable for startups compared to developing custom solutions or hiring a technical team.

  • Security and reliability: The companies developing these programs provide high levels of security to protect data, and ensure regular backups, reducing the risk of data loss or compromise.

How to choose the right e-invoicing software?

When choosing an e-invoicing program for your startup, consider the following points:

  • ZATCA Accreditation: Make sure the program is officially accredited by the Zakat, Tax and Customs Authority in Saudi Arabia.

  • Ease of use: Try the user interface and make sure it's simple, intuitive, and doesn't require technical expertise.

  • Basic features: Does the software provide all the necessary features for compliant invoicing, such as mandatory fields, QR Code, and e-signature?

  • Connectivity capabilities: Does the program support automatic connectivity with the Footar platform in the second phase?

  • Technical support: Does the provider provide good and responsive technical support in Arabic?

  • Cost: Does the cost of the subscription fit into your project budget?

  • Ratings and reviews: Find ratings and reviews of other users of the software.

  • Integration with other systems: Can the software integrate with the accounting or CRM systems  you might use?

Practical steps to apply electronic invoicing without technical complications
After understanding the importance of electronic invoicing and choosing the appropriate software solution, entrepreneurs can start applying electronic invoicing in practical and simplified steps, without the need for complex technical expertise:

Step 1:  VAT Registration
What to do: If you are not already registered for VAT, this is the first and most basic step. Visit the ZATCA  website and follow the instructions to register. This registration is a prerequisite for issuing tax invoices.
Why it's important: Electronic invoicing is directly related to VAT. Without registration, you won't be able to issue compliant tax invoices.

Step 2: Choose the certified e-invoicing software
What to do: Based on the criteria we mentioned earlier ZATCA certification, ease of use, features, technical support, cost, choose the e-invoicing software that suits the size and nature of your startup. Find the list of supported programs on the ZATCA website.
Why it's important:  The accredited program ensures that you fully comply with legal and technical requirements, and takes care of the complex technical aspects of you.

Step 3: Set up and configure the program
What to do: After signing up for the program, you will need to enter some basic information about your project. This includes:

  • Establishment data: company name, tax number, address, commercial registration number.

  • Billing settings: Select currency, terms and conditions, company logo optional.

  • Tax settings: Ensure that the correct VAT rates are applied.

  • Link settings for phase II: The program will guide you to link your account to the ZATCA Fawtar platform. This process is often simplified and is done directly through the software interface.

Why it matters: Proper preparation ensures that the invoices you issue will be compliant with the authority's requirements and contain all the necessary data.

 Step 4: Train the work team even if it is one person
What to do: Train yourself or any billing employee on how to use the software. Most programs provide easy manuals, instructional videos, and technical support to help with this process.
Why it's important: A good understanding of how to use the software reduces errors and increases the efficiency of the billing process.

Step 5: Issue test invoices and test compliance
What to do: Before you start issuing real invoicing, issue some test invoices. Verify that all mandatory fields exist, that the QR  code works correctly if it is a simplified invoice, and that the invoice appears in the required format XML or PDF/A-3. If the software supports direct linkage, make sure that the trial invoices are sent to ZATCA successfully.
Why it's important: Testing ensures that your system is working properly before you start actual transactions, and helps detect any potential problems early.

 Step 6: Start issuing real invoicing
What to do: After making sure that everything is working properly, start issuing your real invoices using the software. Ensure invoices are issued on time in accordance with ZATCA regulations Fawry for tax invoices, and within 24 hours for simplified tax invoices.
Why it matters: This is the final step that ensures you comply with electronic invoicing regulations and avoid any penalties.

Step 7: Periodic review and update
What to do: Keep an eye on any updates or changes to ZATCA's e-billing regulations. Most supported billing software automatically updates themselves to comply with these changes, but it's a good idea to be aware of them. Periodically review invoices issued to ensure continued compliance.
Why it's important: Continuous review ensures you stay up to date with requirements and avoid any future problems.

Tips to ensure compliance and success

In addition to the practical steps mentioned above, there are a set of additional tips that can help entrepreneurs in Saudi Arabia ensure full compliance with e-invoicing regulations and make the most of this digital transformation:

  • Don't put off starting: Procrastinating in your e-invoicing app may expose your project to fines and penalties. Start early, even with small steps, to avoid last-minute stress and to give yourself time to understand and adapt to the system.

  • Take advantage of available resources: The Zakat, Tax and Customs Authority (ZATCA) provides several educational guides and resources on its website. Use these resources to understand the requirements more deeply. Also, e-invoicing software providers often offer training courses and educational materials to their users.

  • Keep accurate records: Even with the use of electronic invoicing, it's essential to keep accurate and organized records of all transactions. Make sure that your system backs up invoices on a regular basis, and that you have a way to easily access them when needed.

  • Keep an eye on new updates and regulations: The e-invoicing ecosystem may see updates or modifications in the future. Stay up-to-date with any announcements or changes made by ZATCA to ensure your continued compliance.

  • Consult experts when needed: If you encounter complex challenges or have queries that you don't find a clear answer to, do not hesitate to consult tax accountants or legal advisors with experience with ZATCA regulations. Investing in a short consultation may be better than making costly mistakes.

  • Use e-invoicing to improve your operations: Don't see e-invoicing as an additional burden, but rather as an opportunity to improve the efficiency of your financial operations. Use the data provided by your billing system to analyze your sales, track your receivables, and improve cash flow management for your business.

  • Ensure data security: Choose an electronic billing software that offers high levels of security to protect your sensitive financial data. Ensure data encryption, regular backups, and robust security measures to prevent unauthorized access.

  • Communicate with customers: Educate your customers about switching to electronic invoicing and how they receive new invoices. Some customers may need help initially adapting to the new system.

  • Take advantage of integration: If your e-invoicing software supports integration with other systems you use such as accounting or CRM software, take advantage of this feature to streamline workflows and reduce double data entry.

The shift to e-invoicing in Saudi Arabia represents a golden opportunity for entrepreneurs to enhance the efficiency of their startups and ensure their compliance with government regulations. While the technical aspect may seem intimidating at first, our simplified guide shows that the application of electronic invoicing is possible and easy, even without the need for a specialized technical team. By choosing ready-made billing programs approved by the Zakat, Tax and Customs Authority, and following the practical steps outlined, entrepreneurs can not only avoid fines and penalties, but also take advantage of the many benefits offered by e-invoicing, such as improving operational efficiency, saving costs, enhancing transparency, and improving cash flows. These advantages will directly contribute to the growth and sustainability of their projects in the growing Saudi market. Always remember that investing in understanding and implementing electronic invoicing is an investment in the future of your project. Be proactive, choose the right solutions, take advantage of available resources, and you will find that this digital transformation will open up new horizons of success and excellence.