invoiceware/america economia latam survey

Global Executives Weigh In: Latin American E-Invoicing Heavily Shapes Business

Outlook; Few Companies Prepared

Invoicewareint.com | 800.988.0728 | @invoicewareint | Linkedin.com/company/invoiceware-int

Table of contentsLatin America: The most complex compliance landscape in the world ......................... 3

Latin American Global Business Survey: Purpose and respondents ...............................4

The Results: Compliance heavily impacts business outlooks ............................................5

The Results: Challenges inherent in compliance ................................................................. 6

The Results: Proving the need for a centralized approach ............................................... 7

Conclusion: The proactive approach to Latin American business compliance ............. 8

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INTRODUCTION

Latin America: The most complex compliance landscape in the world In the past decade, Latin America has emerged as the most complex region in the world for global businesses to operate. Lured with compelling incentives, low infrastructure costs and affordable labor, companies operating in Latin America are now under increased government scrutiny as tax authorities seek to maximize revenues. With sophisticated requirements and technology, these governments have implemented electronic and automated processes in order to collect detailed information on business transactions and ensure accurate tax reports. The successes heralded by these tax authorities are leading to a global shift toward similar business-to-government requirements. Read on to learn how companies operating in Latin America are impacted by this complex business environment and how they are adapting to constant regulatory change.




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Latin American global business surveyPURPOSE AND RESPONDENTS

In a survey of 650 business executives with operations in Latin America, Invoiceware International and America Economia sought to define just how significantly businesses are impacted by this volatile, complex compliance environment. This research also sheds light on just how deeply it seeps into day-to-day operations and decision making. The results are significant. With respondents from a range of industries – from consulting and banking to retail and manufacturing to telecommunications and logistics – they agreed that the compliance landscape is a significant factor in their business outlooks, presenting challenges that interrupt processes and directly impact the bottom line. In this whitepaper, we’ll examine what respondents had to say about how government mandates proliferate business operations and performance.

ABOUT THE SURVEY SPONSORS

Invoiceware International, the leader in Latin America electronic invoicing and tax reporting, provides solutions and services that reduce the risk and cost of maintaining compliance across the region for the world’s largest companies.

America Economia is Latin America’s leading business magazine. Headquartered in Santiago, Chile, it features a region-wide monthly edition published in Spanish and Portuguese and regularly updated articles online, as well as country-specific editions in Chile, Brazil, Ecuador and Mexico.

SNAPSHOT OF THE RESPONDENTS:

Operations 43.4% C-Suite 4.9% Technology 13.1%

Finance 32.0% HR 1.6% Legal 4.9%

Role

<US$500 Million 59.8% US$500 Million – US$1 Billion 10.7% >US$1 Billion 29.5%

Company Revenue

43.4%

4.9%

13.1%

32.0%

4.9%1.6%

59.8%

10.7%

29.5%




Of respondents report that government-mandated e-invoicing shapes their business outlook

E-invoicing issues caused operational delays for

of companies responding

LATIN AMERICAN GLOBAL BUSINESS SURVEY RESULTS

Compliance heavily impacts business outlook• Accounts Payable – Tax liability and accuracy both start with the accounts

payable team. Once a vendor invoice is accepted, the government views it as accurate and complete. If an invoice includes errors and tax liability is inaccurate, correcting these mistakes is a complex undertaking.

• Accounts Receivable – The frontlines of e-invoicing compliance, any breakdown or error in the invoicing process can result in the inability to ship goods and fulfill orders, shipments being refused by buyers, and severe government fines and penalties.

• Finance/Accounting – Ultimately responsible for tax liabilities, finance and accounting teams must ensure the accuracy of their journal entries and tax reports. Governments are demanding details never reported before, requiring fundamental shifts in the ways these teams compile reports.

• Shipping – In many countries, a government approved pdf invoice is required to accompany goods. Errors or delays in the invoicing process can disrupt operations and supply chains.

• Inbound Receiving – Accepting shipments signals acceptance of vendor invoices – and therefore tax liability – meaning that inbound receiving teams are also responsible for ensuring accuracy.

What may have been thought to be a “local” problem when e-invoicing initiatives were first announced has proven to impact multinationals at all levels – from local shipping and receiving teams to shared services, ultimately affecting thier bottom line.

90%

The survey results were overwhelmingly consistent: 90% of respondents reported that government-mandated e-invoicing is important in determining their business outlook for the region. Why? These businesses are seeing the real implications of compliance-related errors. In fact, 15.4% of respondents have faced penalties or temporary shut downs as a result of a government tax audit or failure to comply with mandates, and 38.5% have had an invoice error that caused a delay in operations. The costs associated with these penalties and operational shutdowns can equate to millions of dollars in sunk costs.

The impacts of these measures ripple throughout global businesses, can’t be siloed or managed from a single department. Currently, compliance involves:

• IT – It’s essential that compliance is run through your existing corporate ERP to reduce the risk of errors, but with frequent legislative changes and unique requirements in every single country – sometimes even in each city – IT implementation, updates and management can be a costly use of internal resources.

38.5%



http://ecommerceandb2b.com/b2b-e-commerce-trends-statistics/


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Challenges inherent in complianceCompliance should be managed within your ERP – providing a single source of truth and minimizing the time that AP, AR and accounting teams spend learning new systems and importing data – but ERP-issued compliance solutions lack critical functionality. In response, some companies manage compliance internally – requiring up to 15 full time equivalents – or move compliance measures outside of their ERP. These are costly mistakes. Internal compliance management requires significant internal resources, as the survey reports, taking time away from core job functions and strategy. Yet maintaining compliance outside of their ERP leaves companies at risk of audit-triggering errors and discrepancies.

Outside of internal system management, maintenance and costs, the costs and efforts associated with managing multiple local third-parties is the next most common challenge reported. Some companies manage compliance through multiple vendors – segmented by each country in which they operate or separate vendors for e-invoicing versus accounts payable, etc. But again, this approach is risky – leaving companies without a central source of truth and causing management and troubleshooting headaches.

With penalties that can cost global companies millions and shut down operations, e-invoicing compliance presents several challenges to businesses operating in Latin America. Survey respondents noted the following key compliance challenges.

Do not feel confident in maintaining compliance with ongoing changes 10.0%

The need to work with multiple local third-parties 24.6%

Updating systems / on-boarding team to new processes and formats 47.7%

Costs to update systems throughout the year 40.8%

Costs associated in working with third-parties 27.7%

Staff cost associated with managing mandates 23.8%

Technical implementation was the most commonly reported challenge, followed closely by related costs. With frequent updates in requirements, compliance can be a technical nightmare, requiring constant fire drills to ensure accuracy.





Proving the need for a centralized approach

[The risk of FCPA infractions means Latin American compliance MUST be treated as a corporate issue.]

Perhaps the most insightful, and troubling, survey results came from responses regarding the current approach to compliance in Latin America.

Trending toward local-level, third-party approachThe majority of respondents - 73.1% - are handling mandated e-invoicing at the local level with no corporate coordination. Further, more than half do not manage compliance within their ERP. The risk of such decentralized strategies are profound.

Most notably, without a centralized process and corporate oversight, the risk of errors, discrepancies and even data manipulation increases. Some enterprises have received penalties under the Foreign Corrupt Practices Act for infractions unveiled in compliance reports – meaning e-invoicing compliance MUST be treated as a corporate issue, not simply a local task.

Further, a decentralized approach means that critical data is often housed outside of corporate ERPs, presenting two problems. First, duplication of effort increases the staffing costs associated with compliance. But more profoundly, it means that there is not one centralized record system. In the event of an audit, companies using this approach will not have the records needed to support their reports and tax deductions.

Managed and coordinated from Global HQ 26.9% Managed independently at country Level 73.1%

How does your company currently manage e-invoicing and fiscal reporting requirements?

26.9%

73.1%




Unawareness and lack of preparation abound When asked if they were fully aware of the latest mandates in Colombia, Mexico, Peru and Brazil, almost half of respondents – 49.2% – indicated that they have little or no understanding of the new mandates. Only 27.7% indicated that they were fully ready for these impending requirements.

As showcased in the results to questions surrounding challenges, compliance is not a simple endeavor, requiring significant time, personnel and technological resources. Being “unaware” is not an excuse that tax authorities will forgive, so it is imperative that companies with operations in Latin America have an understanding of the full scope of the mandates and take a proactive approach to manage these initiatives.

Call out: Being “unaware” is not an excuse that tax authorities will forgive.

CONCLUSION

The proactive approach to Latin American business complianceThere are two ways to approach compliance in Latin America: 1) as a must do, or 2) as an opportunity. Companies who see compliance as a “must do” are often faced with constant fire drills to update their processes and respond to issues, sinking time and money into approaches that merely get them by – but that often leaves them vulnerable to errors.

Companies who see these initiatives as an opportunity for innovation and to streamline processes, however, are reaping rewards. With government-mandated standardization, proactive companies are improving internal processes, increasing supply chain efficiencies and optimizing cash flow. Global technology leader Philips, for example, has realized a 25% increase in productivity, while reducing maintenance costs by 80% by looking at compliance from a strategic, centralized, proactive perspective.

Are you aware of the latest mandates rolling out in Colombia, Brazil, Mexico, and Peru?

Yes; fully understand & ready 27.7% Pretty sure; need to research, not ready 23.1% Not exactly; heard about it but know little 35.4% Not at all; not ready 13.8%

27.7%

35.4%

23.1%

13.8%



Contact Invoiceware to learn how a proactive compliance approach can benefit your organization.

Invoicewareint.com | 800-988-0728

Invoiceware International standardizes complex compliance regulations in Latin America for the world’s largest companies, including The Coca-Cola Company, Philips, Kellogg, DuPont and Siemens.