E-invoicing, or “Fatoora,” is a major step forward for businesses in Saudi Arabia. This system, mandated by the Zakat, Tax, and Customs Authority (ZATCA), moves your company from old paper receipts to a secure, digital invoicing process.
For Saudi SMEs, getting this right isn’t just about modernizing, it’s about staying compliant and avoiding hefty fines.
While the goals are clear, the technical requirements of Phase 2 (the Integration Phase) can be tricky. Here are the 5 most common e-invoicing mistakes Saudi SMEs make and, more importantly, how you can easily avoid them.
1. Using Non-Compliant or Unregistered Software
This is the biggest and most common mistake. Many businesses try to use old accounting software, simple Excel templates, or external plugins that are not certified by ZATCA.
The Mistake: You might think your current system is “digital enough,” but ZATCA Phase 2 requires specific technical features:
- Generating invoices in a secure, mandated XML format.
- Creating a Cryptographic Stamp (a unique digital signature).
- Generating the required QR Code.
- Having the capability to integrate with the ZATCA platform to report invoices in real-time or near real-time.
How to Avoid It: Choose an all-in-one ERP solution that is explicitly ZATCA-certified, like NumberOneERP. This software handles all the complex technical work,the XML formatting, the digital signatures, and the reporting, automatically, so you don’t have to worry about any of the technical details.
2. Mixing Up Invoice Types
ZATCA requires different actions for different types of invoices, and confusing them is a sure way to get a rejection.
The Mistake: There are two main types of invoices:
- Standard Tax Invoice (B2B): Used when selling to another registered business.
- Simplified Tax Invoice (B2C): Used when selling to a consumer (like in a retail store).
Some SMEs mistakenly issue a Simplified Invoice (B2C) to a business customer (B2B). The rules for each are very different: Standard Invoices must be validated by ZATCA before they are issued (real-time clearance), while Simplified Invoices must be reported to ZATCA within 24 hours.
How to Avoid It: Your ERP system should clearly label and generate the correct invoice type based on whether the buyer has a VAT ID. The right software prevents you from selecting the wrong option, ensuring the proper clearance or reporting process is followed every time.
3. Missing or Incorrect Mandatory Data Fields
Even if your software is compliant, garbage in equals garbage out. Small errors in the basic information can make an invoice invalid.
The Mistake: ZATCA requires many specific data fields that might not have been mandatory before. Common omissions or errors include:
- Missing or wrong Buyer VAT Registration Number (for B2B invoices).
- Incorrectly calculated VAT amount (even slight rounding errors can lead to rejection).
- Missing UUID (Universal Unique Identifier) or Invoice Reference Number.
- Incorrectly classifying a zero-rated or exempt supply.
How to Avoid It: The key is data validation at the point of entry. Use an ERP system that locks you into using correct data formats and automatically performs complex calculations, like VAT, to ensure they are mathematically sound before the invoice is sent for validation.
4. Ignoring the Integration Deadline
ZATCA is rolling out Phase 2 in waves, based on a company’s revenue. Waiting until the last minute is dangerous.
The Mistake: SMEs often assume they are in a later wave, only to find out their deadline is closer than they thought. ZATCA notifies companies six months in advance. Ignoring this notification or delaying the system setup means you risk facing penalties from the moment your wave begins.
How to Avoid It: Check ZATCA’s official announcements regularly for the latest wave updates. The moment your company falls under a new revenue threshold, treat that six-month window as a firm deadline. Partner with an ERP provider who can implement and integrate your system quickly, often in a matter of weeks, not months.
5. Forgetting Secure Archiving
Compliance doesn’t end when the invoice is sent. You need to keep records securely for a long time.
The Mistake: Businesses often save only the PDF copy of an invoice. ZATCA requires you to securely store the signed XML electronic file for up to six years for audit purposes. Storing these on a local computer or in an unsecured folder is risky and non-compliant.
How to Avoid It: Use a Cloud ERP solution like NumberOneERP. Compliant cloud systems offer secure, encrypted storage and automated backups for all your approved XML files, ensuring they are tamper-proof and easily accessible when ZATCA requires an audit.
By avoiding these five mistakes, your Saudi SME can turn the ZATCA e-invoicing mandate from a burden into a powerful tool for efficiency and growth.
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