Accounting in Saudi Arabia Is Changing on a Timetable
Not long ago, the monthly rhythm in many Saudi finance teams was predictable: key in journals, reconcile the bank statement at month end, prepare the VAT return a few days before it was due. That rhythm has broken. Invoices are now cleared by ZATCA the moment they are issued, management wants last week's numbers rather than last month's, the presentation of the income statement itself is about to change, and the accounting server in the back office no longer keeps up.
Most of these shifts are not abstract trends. They come with dates, rules and direct consequences for the finance function. Below are the developments shaping accounting in the Kingdom now and over the next year, each with what is changing, why it matters and what a finance manager should do about it.
1. E-Invoicing Reaches Small Businesses
Phase 1 of e-invoicing (generation) started on 4 December 2021. Phase 2 (integration) has been rolled out in waves since 1 January 2023, starting with the largest taxpayers and moving steadily down. The latest waves reach much smaller firms. Wave 24 covers businesses with turnover above SAR 375,000, with an integration window from 1 April to 30 June 2026. Wave 25 covers those above SAR 187,500 in any year from 2022 to 2025, due from 1 February 2027.
Why it matters: In Phase 2, standard B2B tax invoices are cleared by ZATCA in real time before reaching the buyer, and simplified invoices are reported within 24 hours. An invoice is no longer an internal document you can quietly correct later; it is on record with the authority from the moment of issue. An error in the buyer's VAT number or in the tax calculation now needs a formal credit or debit note.
What to do now: Confirm your wave, check that your accounting system supports ZATCA integration, and clean customer master data before you connect, since standard invoices require complete buyer details. Our guide to e-invoicing and ERP covers the details.
2. IFRS 18 Reshapes the Income Statement
The IASB issued IFRS 18 in April 2024 to replace IAS 1. It applies to annual periods beginning on or after 1 January 2027, with early application permitted. The main changes sit in the profit or loss statement: defined subtotals including operating profit, classification of income and expenses into operating, investing and financing categories, disclosure of management-defined performance measures, and clearer rules on aggregation and disaggregation.
Why it matters: Saudi companies report under IFRS as endorsed by SOCPA, adopted by listed entities from 2017 and other entities from 2018. When IFRS 18 applies, the chart of accounts must support the new subtotals and comparatives will need re-presenting.
What to do now: Follow SOCPA's endorsement position and timing, and review your chart of accounts. Can every revenue and expense account be mapped to the new categories without a rebuild? If not, the time to fix it is before the comparative year begins. For a wider view, see our article on IFRS financial statements in an ERP.
3. New Rules on Zakat and Commercial Records
New Zakat Collection Implementing Regulations apply to financial years starting on or after 1 January 2024. On 27 October 2026, the Council of Ministers approved a new Commercial Transactions Law that replaces the Commercial Law, the Commercial Papers Law and the Commercial Books Law, taking effect 180 days after publication in Umm Al-Qura. The current Commercial Books Law, dating from 1409H, requires year-end inventory to be recorded in an inventory book and books to be kept for ten years.
Why it matters: Record-keeping requirements may change under the new law, and companies relying on paper or scattered files will struggle to adapt.
What to do now: Track the law's publication and implementing rules with your legal adviser or auditor, and make sure records are electronic, organized and easy to retrieve, whatever the final details turn out to be.
4. Cloud Accounting, With Data Controls
On-premise accounting needs maintenance, backups and manual updates, and is often hard to reach from outside the office. Cloud systems move that burden to the provider, allow access from any branch and receive regulatory updates automatically, which matters when e-invoicing or VAT rules change.
Why it matters: Accounting data includes personal data on employees and customers, governed by the Personal Data Protection Law, in force since September 2023 and enforced from September 2024. The National Cybersecurity Authority has also issued Cloud Cybersecurity Controls. Moving to the cloud is therefore a governance decision as much as a technical one.
What to do now: Ask your provider in writing about hosting location, encryption, backup, access management and audit logs. Our article on the evolution of cloud accounting offers a fuller comparison.
5. Entries Generated From Operations, Not Typed In
In an integrated system, the accountant does not post the sales entry; it is generated when the invoice is issued. The same goes for cost of goods sold on delivery, purchases on invoice match, payroll on approval of the run, and depreciation at month end. The accountant's role shifts from entry to review.
A hypothetical example: a company issues 3,000 sales invoices and receives 600 supplier invoices a month. At just two minutes per manual entry, that is 7,200 minutes, or 120 hours a month, close to three weeks of one accountant's time. Automation does not remove the accountant; it moves those hours to reconciliations, analysis and collections.
What to do now: List the entries still keyed by hand and rank them by monthly volume. The top of the list is your first automation target. See our article on accounting automation with ERP.
6. Continuous Close Instead of a Month-End Crunch
A traditional close lets every reconciliation pile up until the last day, then the team works late for one or two weeks. A continuous close spreads the work across the month.
| Task | Traditional close | Continuous close |
|---|---|---|
| Bank reconciliation | Once at month end | Daily or every other day |
| Unmatched supplier invoices | Discovered at close | Reviewed weekly |
| Inter-branch balances | Settled at month end | Matched weekly |
| Accruals and prepayments | Calculated by hand at close | Automatic recurring entries |
| Typical close duration | One to two weeks | A few days |
7. Live Reporting and Cash Forecasting
Finance managers now get asked: what will our cash balance be in six weeks? Can we pay the large supplier instalment next month without drawing on the facility? Monthly statements do not answer that. A cash forecast built on live data does: receivables by due date, payables by payment schedule, payroll, and tax obligations.
Those obligations include the VAT return, filed monthly when annual taxable turnover exceeds SAR 40 million and quarterly otherwise, due by the last day of the following month, with a late payment penalty of 5% of unpaid VAT per month. They also include the wage protection file, which since March 2025 must be uploaded to Mudad within 30 days.
8. Payroll and Accounting in One Place
Payroll is one of the largest expense lines and its rules keep moving. For new entrants under the new Social Insurance Law, the GOSI annuity rate rises half a point a year: 9.5% each for employee and employer from July 2025, 10% from July 2026, reaching 11% in July 2028. End-of-service provisions should be accrued monthly, not just at year end.
A hypothetical employee earns SAR 12,000 a month all-in and has under five years of service. The annual entitlement is half a month's wage, SAR 6,000, so the monthly accrual is SAR 500. Across 200 employees, accruing monthly rather than annually changes the monthly profit picture noticeably. When payroll and accounting are linked, salary, contribution and provision entries post automatically on approval, by department and cost center.
9. Sustainability Disclosure Enters the Finance Function
The Saudi Exchange issued ESG Disclosure Guidelines for listed companies on 28 October 2021; they are voluntary. The ISSB has also published its general sustainability and climate disclosure standards, and interest in them is growing across the region. In practice, finance may be asked for non-financial data, such as energy use or workforce figures, held to the same controls as financial numbers.
What to do now: If you are listed, or your lenders and large customers ask for this data, identify the sources and owners before the request becomes urgent.
10. AI in Accounting, With Controls
AI tools are entering everyday accounting work: reading incoming invoices, suggesting account codes, flagging unusual entries such as a large payment to a new supplier late on a Thursday. They are useful, but they do not shift responsibility. An entry suggested by a tool is still owned by whoever approved it, and an auditor will not accept "the system proposed it" as an explanation.
A sensible rule: use automation and AI to speed up repetitive work and surface exceptions; keep human review for judgments, estimates and non-routine entries.
11. Internal Control Moves Into the System
On paper, control meant signatures. In a digital environment it means system settings: who can create a supplier, who can approve payment, what each user's limit is, who changed an entry after posting. Auditors now ask for access reports and change logs as readily as for vouchers. Three controls every modern accounting system should enforce:
- Segregation of duties: no single user creates a supplier, approves its invoice and releases its payment.
- Period locking: once a month is closed, posting into it needs special permission and a recorded reason.
- Audit trail: every create, edit and delete logged by user and time, with no way to switch it off.
12. Accountants as Decision Partners
All of the above frees up time that used to go into entry and manual matching. The question is where it goes. Finance teams that benefit use it for product, customer and branch profitability, collections follow-up, and support for pricing and investment decisions. That calls for different skills: understanding operations, reading data, and explaining numbers to non-accountants in plain terms.
A 12-Month Roadmap
| Quarter | Priority | Output |
|---|---|---|
| Q1 | E-invoicing readiness; clean customer and supplier data | Tested ZATCA integration and complete master data |
| Q2 | Automate the highest-volume entries; daily bank reconciliation | Clear drop in manual entry hours |
| Q3 | Chart of accounts review for IFRS 18; weekly cash forecast | Mapping ready for new presentation; regular cash view |
| Q4 | Access and audit-trail review; shorten the close | Faster close and a control file ready for audit |
The Trends at a Glance
| Trend | Driver or date | Suggested action |
|---|---|---|
| E-invoicing for small firms | Wave 25 due from 1 February 2027 | Confirm wave, test integration, clean customer data |
| IFRS 18 | IASB effective date 1 January 2027 | Map chart of accounts; follow SOCPA endorsement |
| Zakat and commercial records | 2024 zakat regulations; new Commercial Transactions Law | Track rules; keep records electronic and retrievable |
| Cloud accounting | PDPL and NCA cloud controls | Written security questions for the provider |
| Automation and continuous close | Transaction volume and time pressure | List manual entries; spread reconciliations across the month |
| Cash forecasting | Management and lender demand | Weekly forecast from receivables, payables and obligations |
| Sustainability disclosure | Voluntary Saudi Exchange guidelines; ISSB standards | Identify data sources and owners |
Skills Worth Building in the Team
- Operational understanding. An accountant who knows how the warehouse and sales teams work finds the cause of a variance faster than one who only sees the numbers.
- Data literacy. Using filters, comparisons and reports to spot patterns, not just to produce schedules.
- Regulatory awareness. Keeping up with e-invoicing, VAT, zakat and labor rules, since each one lands in the books.
- Communication. Turning analysis into a clear recommendation that a sales or operations manager can act on.
Training the team on the system and on these skills is part of the change, not a separate budget line.
How Tranquil Supports Finance Teams
Tranquil is a cloud ERP whose accounting and finance module works with ZATCA e-invoicing (Phase 1 and Phase 2 compliance, real-time integration, automatic validation, scheduled reports and deadline alerts). Because accounting sits in the same system as sales, purchasing, inventory, payroll and assets, entries are generated from operations rather than typed in, and asset depreciation is calculated automatically in line with accounting standards.
Frequently Asked Questions
What is the most pressing accounting change for small Saudi businesses?
Phase 2 e-invoicing. The latest waves cover businesses with turnover above SAR 187,500, and the deadlines are binding.
When does IFRS 18 take effect?
For annual periods beginning on or after 1 January 2027 under the IASB timetable, with early application permitted. Check SOCPA's endorsement to confirm local application.
Is ESG disclosure mandatory in Saudi Arabia?
The Saudi Exchange guidelines issued in October 2021 are voluntary for listed companies. Some lenders and large customers still request the data, so early preparation helps.
Will AI replace accountants?
No. It speeds up data capture, coding and exception detection, but responsibility for entries, estimates and financial statements stays with the accountant and management.
Where should we start modernizing our accounting system?
With regulatory requirements and their deadlines, then the most frequent manual entries. Contact the Tranquil team to discuss your needs and get a quote within 24 hours.