Recognizing the Weak Link in your Latin American Solution Strategy

Scott Lewin
March 18, 2013

I had an interesting conversation, concerning Latin America eInvoicing,with a CFO for a Fortune 500 multi-national yesterday. And this time, the conversation was not about the legislation that I typically write about or discuss. This time it was about the risks associated with solutions external to the ERP from local vendors to manage eInvoice compliance. Here were the key take-aways from that conversation that should be discussed with your global procurement, corporate IT and legal organizations before contracting with a vendor – there are always underlying issues that go beyond technical requirements and feature — functions.

If you are installing a 3rd party solution in LATAM that separates the mandatory financial reporting function from your ERP system, you are losing two of the main value propositions of a Global ERP solution, visibility and control.

These are the risks you face with a 3rd party solution that manages the process outside of the ERP:

  • The 3rd party system, which has no visibility to corporate now becomes the system of record for government financial reporting.
  • Your ERP system is no longer your system of record for operationaleInvoice data to the government. All of the important information that is required for auditing is now kept in a 3rd party technology without the oversight and controls that you probably spent millions of dollars on inside of your ERP.
  • Data synchronization was also a large issue — how do you ensure that the data in the 3rd party database is consistent with your ERP system, especially when the processes are linked but not integrated. For example, in Mexico and Brazil you have to cancel an invoice that is now found to be invalid. If you have a 3rd party solution that sits outside the ERP tables, then you have to remember to cancel the billing document once you have canceled the process in the 3rd party solution.
  • Support challenges or data issues when trying to close the books at the end of the month or end of the quarter. With stiff government penalties for mistakes, organizations need to ensure they have robust support for the corporate IT and Finance teams that need to roll up global numbers. This is mission critical for public company. The CFO described a situation where they were unable to report 20 Million dollars in invoiced revenue in LATAM because the eInvoicing solution broke down and no one from Corp. IT could help because they did not have visibility into the solution and could not communicate with the local vendor. The invoices were never processed for that month.

In summary, Latin America eInvoicing is mission critical and affects your global financial processes and ERP deployments. Make sure you understand the effect of working with 3rd party solutions (ones that manage mission critical processes outside of your ERP) will have on your business and ensure you have procedures in place to recover. Otherwise, the lack of control due to data quality, an additional system of record outside of the ERP, support and language challenges could affect your financial reporting.

Take Away: multi-nationals should look for enterprise class solutions that are tightly integrated to the ERP system.. The process is difficult enough to implement, monitor, and maintain — let alone having to do that with 3 systems: your ERP, a middleware connectivity layer, and a standalone compliance box.

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Author

Scott Lewin

Gain timely insight and important up to the minute information about the current legislative changes in Latin America, including Brazil Nota Fiscal, Mexico CFDI, Argentina AFIP and Chile DTE. Learn how these changes affect your operations, your finances and also your Information Technology teams.
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