Real-time electronic audits are increasingly common throughout Latin America, requiring companies to maintain 100% accuracy in their electronic documents and record-keeping. This process all starts with the eInvoice – audits are triggered if an invoice isn’t submitted correctly or if it is inconsistent with eAccounting reports and other electronic filings from a company’s buyers and suppliers. That’s why it’s essential for IT and finance teams to overcome common eInvoicing challenges to effectively manage compliance in Latin America.
IT and finance departments bear the brunt of the burden ensuring that eInvoicing is accurate and delivered in compliance with each country’s unique regulations. Here are some of the key challenges these departments face:
- Errors and discrepancies - With greater audit automation, as well as the government essentially being a third party in every transaction, errors and discrepancies are easily discovered in eInvoices, eAccounting reports and other electronic records. Mistakes are costly. Mexico, for example, enacts a fine exceeding US$4,000 for each invoice that does not match accounting records. More significant problems can even result in a shut-down of operations.
- Audit trigger points – Key audit triggers include sales, purchases, payments, payroll, and travel and expenses. Each line item in an expense report, each paycheck and each credit/debit note needs its own valid XML – a vast departure from traditional accounting methods.
- Validation - Companies need to validate data to ensure all reports are backed by valid XML. Often, errors occur when there are cancellations or credit notes - which account for approximately 10 percent of transactions. Other common errors that can be caught with validations include missing payment classifications, foreign invoices and non-deductible expenses.
- Required automation – What were previously paper-based reports and manual procedures must be replaced with standardized, automated processes to eliminate errors and data discrepancies, and ensure that the tax authorities have clear visibility into all transactions. Most Latin American nations now require a real-time, full integration with the government, complete with strict process standards for eInvoicing.
- Insufficient ERP support – Managing compliance within your ERP is the best way to ensure accuracy and maintain a centralized system of record. However, SAP and corresponding OSS notes alone don’t protect against real-time audits – failing to provide necessary functionality, like UUID validations.
- Constant change management – Whether it’s a major legislative change or smaller field and labeling updates, tax compliance rules are constantly evolving. IT is often responsible for translating these frequent changes into software to ensure that the company maintains compliance without disrupting operations.
Effectively Address Finance and IT Challenges with Intelligent Compliance
While these challenges may seem daunting, particularly for multinational companies operating in several countries, there are several steps that can dramatically minimize the burdens related to VAT compliance and eInvoicing. When exploring solutions, consider those that:
- Serve as a single source of truth for all transactions.
- Offer economies of scale for the cost, support and monitoring connections to government web services.
- Provide a single source for support, whether it is for a local team that needs assistance in their native language or the global SAP team that may prefer English.
- Deliver regulatory analysis to keep you up-to-date with the local requirements in each country, eliminating fire drills associated with managing change internally.
- Provide multi-country connectivity so you can comply with the mandatory requirements in all the countries you do business via a single provider.
- Eliminate time-consuming, manual process with automation and built-in validations.
To find out more about the risks and opportunities associated with mandated eInvoicing, download our Definitive Guide to Latin American Compliance.
About the Author
Gustavo Jimenez is the Product Marketing Manager for Sovos’ solutions in Latin America and is based in Atlanta, GA. Gustavo is responsible for go-to-market strategy for Sovos LatAm Reporting solutions in countries with existing and upcoming eReporting mandates. He has more than five years of experience in eInvoicing, middleware integrations, and regulatory research. He works closely with the product management and development team as well as sales and marketing to facilitate compliance process transformations for Sovos clients. Prior to joining Sovos, Gustavo was responsible for marketing activities and strategy at Invoiceware International, a leading eInvoicing solution for businesses with operations in Latin America. He focused on the go-to-market strategy of their solutions as well as communications with the LatAm market about regulatory changes and new solutions.More Content by Gustavo Jimenez