11 Jan 2013 The complex puzzle that is Latin American e-invoicing
We often use Latin America as an exemplar. I’ve used it as such but I have to say, I shouldn’t. “Europe should follow the lead of Latin America and mandate e-invoicing”. This is really the shorthand version. The long hand version is much more complex and it’s worth taking a little time to understand why Latin America is so different from Europe and North America so that we don’t just learn lessons, we learn the right lessons.
In Europe and North America, electronic invoices are merely electronic messages that take the place of a paper invoice. At it’s most simplistic level, they negate the need for paper and the manual processes involved in getting a demand for payment from a supplier to a customer’s finance and accounting system. It saves a stamp, an envelope and a little bit of time. It’s a great idea and it can be built ito a wider, holistic purchase to pay process to build huge efficiencies but it is in essence, it is just a way to automate a paper process. Not so in Latin America.
In Latin America the term e-invoicing is a misnomer. Whereas in Europe and North America it represents an electronic communication between a supplier’s AR and customer’s AP, in Latin America it consists of a complex web of connections and interfaces – real-time web service processes to multiple government agencies, each with potentially unique requirements. This is a whole new level of complexity.
The complexity is driven by the government. The reason why Mexico, Brazil and Argentina mandate e-invoices is because they want to manage tax collection more effectively. It’s not just the invoices that the government wants to track, it the associated logistics and customs documents too and they all have to be compliant. A compliance failure in Latin America doesn’t mean a slap on the wrist from an auditor, it could mean your trucks can’t leave the warehouse.
I don’t believe that the lesson to be learned from Latin America is to build government intervention at this level but the mandate lesson is clear. Give people a choice and they’ll take the line of least resistance which, in most cases, means do nothing and a mandate on e-invoicing for public procurement could act as a strong driver for further adoption of e-invoicing.
The headline on this article is a phrase borrowed from Scott Lewin at Invoiceware. The Invoiceware team understand, probably more than anyone else, the intricacies of compliance in those South American states that have mandated the use of e-invoicing and I would strongly recommend that those with an interest take the time to download the various white papers that Invoiceware make available.
Pete Loughlin can be found on twitter @peteloughlin