Colombia DIAN UBL 2.1 E-invoicing Mandate Reminds SAP Shops Why Compliance Matters

Andres Camacho
May 24, 2019

Colombia’s new electronic invoicing mandate serves as another reminder to SAP that compliance has to be at the heart of digital transformation efforts and migrations to SAP S/4HANA.

The South American country, following the lead of Latin American neighbors Brazil and Mexico, is moving from a reporting e-invoicing model to a clearance model. Effectively, that means that the Colombian tax authority, the DIAN, will have to validate an invoice before a supplier sends it to a client. Companies must use the UBL 2.1 XML protocol to transmit invoices for validation. Without validation from the DIAN, the supplier cannot invoice the purchaser of goods, and the purchaser cannot receive a shipment, impacting AR, AP, and logistics business processes.

From e-invoicing reporting to clearance

Previously, Colombia employed a reporting e-invoicing model, with the DIAN validating invoices within 24 hours of a transaction taking place. The new mandate, scheduled to roll out gradually for a year starting August 1, will have a profound effect on companies doing business in Colombia. Companies currently invoicing electronically will need to go live by November 2. SAP shops with operations in the country will need to make sure that their accounts receivable (AR) and accounts payable (AP) systems will function with SAP to facilitate real-time e-invoice clearance.  

That’s not necessarily a simple talk. In recent years, businesses have started to move away from paper-based processes to different types of electronic systems to automate and streamline their sales and purchasing transactions with suppliers and buyers, which means that decisions around e-invoicing tax compliance need to involve many different stakeholders within a company. In addition to ERP systems, business transaction management software such as procure-to-pay (P2P) or order-to-cash systems may be generating invoices that need to be integrated for real-time approvals by the tax administration’s platform.

Often in such situations, SAP shops end up putting pressure on various software and cloud vendors that are involved in the end-to-end invoicing flow in parallel, which can lead to both dangerous compliance process duplication and even to non-compliance.

The challenge of managing global e-invoicing and SAP S/4HANA migration

On a broader scale, the new Colombian mandate exposes the challenges of staying compliant while moving to SAP S/4HANA, and specifically to the central finance system that’s designed to consolidate financial information. An SAP system designed to provide a long-sought single source of financial data is effectively useless if it can’t keep up with changes in global e-invoicing compliance such as the Colombia mandate. And as Colombia demonstrates again, those changes happen rapidly and with little notice around the world.

The temptation for SAP shops has long been to try to tackle compliance issues country-by-country, but that’s a recipe for disaster. The cost to build, monitor and maintain disparate systems is prohibitively high, and having a separate system in each country only serves to put a roadblock in the consolidation of data that is supposed to be the big breakthrough for SAP S/4HANA.

What SAP customers need is a solution that can facilitate continuous compliance across the globe by automatically working country-by-country mandate changes into a single system. Without compliance, e-invoicing is doomed to fail, and e-invoicing cannot fail when it literally becomes the lifeblood of a business by enabling a company to bill customers and receive shipments. Colombia’s new mandate won’t be the last in that country, and it certainly won’t be the last around the globe. More changes are coming, and SAP shops need to be prepared.

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Andres Camacho

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