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

Andrés 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.

Take Action

Learn more about Sovos integration with SAP for e-invoicing compliance.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Andrés Camacho

Andrés Camacho es Strategy Program Manager en Sovos. En su cargo, Andrés es el responsable de conocer cada mercado donde Sovos tiene clientes, específicamente en Latinoamérica y Europa, y de desarrollar la estrategia para la producción de soluciones de cumplimiento. Andrés se unió a Sovos cuando en 2016 la compañía adquirió Invoiceware International. En esta última se desempeñaba como Product Manager y estaba a cargo de gestionar el desarrollo de los productos de facturación electrónica de la compañía.
Share This Post
Share on facebook
Share on twitter
Share on linkedin
Share on email

E-Invoicing Compliance EMEA Italy VAT & Fiscal Reporting
May 10, 2021
Italy: A New Way to Report Cross-Border Invoices

When Italy introduced its mandatory e-invoicing system, cross-border invoices weren’t included in the scope of the reform. To introduce the mandate, Italy asked the European Council for a derogation from the VAT Directive and the country was granted permission for the introduction of a mandatory clearance system for domestic transactions performed between Italian taxpayers. It’s […]

North America Unclaimed Property
May 10, 2021
Unclaimed Property Reporting for Retail Businesses

The evaluation of retail unclaimed property compliance can be quite complex when taking into account the nature of the business.  On one hand, the organizational and accounting structure of a retail company presents challenges in the form of determining which state properties should be reported and remitted to, per the priority rulings.  On the other […]

E-Invoicing Compliance EMEA Tax Compliance Turkey VAT & Fiscal Reporting
May 9, 2021
Turkey: The Significance of Effective E-transformation for Enterprises

Digitization has become more prevalent, especially because of COVID-19. Companies looking to improve efficiency via digital transformation are taking advantage of the benefits tax technologies can provide their business processes. Although they’re not within Turkey’s e-invoicing mandate scope, companies have been using e-document applications as part of their operational processes to save time, costs and […]

North America Sales & Use Tax
May 7, 2021
How to File Sales Tax as a Multi-Level Marketing (MLM) Business

Direct selling companies and multi-level marketing (MLM) businesses have numerous complexities to consider when it comes to sales tax calculation and reporting requirements. Along with an expansive physical nexus footprint, direct sellers must know how their products and services are taxed around the country. It’s a daunting task when facing it alone.  Where are you […]

E-Invoicing Compliance EMEA Italy VAT & Fiscal Reporting
May 6, 2021
Italy: Understanding the New E-Document Legislation Requirements

In September 2020, the Agency for Digital Italy (AGID) introduced new requirements for the creation and preservation of electronic documents, which will be enforced from 7 June 2021. This blog discusses the requirements and how they affect the issuance and storage of e-invoices. Electronic Documents in Italy The AGID is responsible for the Italian digital […]