With fines, penalties and operational disruptions as consequences of an inadequate approach to managing e-invoicing and reporting mandates in Latin America, multinationals in this region should take note to avoid common errors. Not only does proactive compliance eliminate these risks, companies can improve operational efficiencies, streamline processes and improve cash flow through a strategic approach.
Managing Latin American compliance for hundreds of clients, here are the top 10 mistakes Sovos sees in compliance management.
1) Maintaining multiple, local compliance solutions throughout the region.
Companies often use varying solutions in each country in Latin America because no ERP offers business-to-government compliance without multiple third-party add ons – creating a support nightmare!
2) Not using your ERP as the central system of record.
Most compliance solutions, including SAP’s own third-party bolt ons, house critical information outside of the ERP. Any resulting discrepancies between the corporate system of record and external systems and what is reported to the government creates huge tax and audit risks.
3) Not understanding the cost of ERP change management.
Most corporations have highly customized global ERP applications that don’t match government requirements. Mandates directly affect accounting systems, requiring specific naming structures and character limits, and the inability to adapt to these individualities results in compliance errors.
4) Not having a contingency plan.
Government-approved documents are needed to ship legally. Built-in back up processes are required to ensure there are no disruptions to your business operations and that you can always ship and receive goods.
5) Using PDFs as the invoice of record.
Many accounts payable teams rely on PDFs instead of government-approved XML invoices, but this process opens the door for discrepancies between internal records and the government’s files, triggering audits and fines.
6) Manually managing inbound receiving.
A manual, paper-based receiving process not only requires significant internal resources, it also increases the risk of error. Since PDF copies of the XML invoices accompany your supplier’s trucks in Latin America, this process can be automated to improve efficiencies and ensure accuracy.
7) Thinking it’s a local technical issue rather than a $100 million cash issue.
Fines, penalties, operational shut downs and missed tax deductions all have a direct impact on the overall bottom line, and with VAT remittances averaging 18% of sales revenues – the problem is hundreds of millions of dollars for billion dollar companies. A local, technical approach reduces corporate visibility into local finances, making them vulnerable to irregularities and increased scrutiny under the Foreign Corrupt Practices Act.
8) Relying on ERP technical notes to perform updates.
Companies running SAP for compliance, as an example, rely on support packs for the latest solutions, but these updates affect the entire global system, a process most companies don’t want to undergo frequently. Even with the latest updates, systems including SAP still requires certain information – including 30+ digit alphanumeric government IDs – to be entered manually, increasing the risk of errors.
9) Underestimating the pace of change.
Compliance mandates have spread from three to 10 countries in less than two years, with more business processes affected, including accounting, operations and human resources.
10) Overlooking maintenance and support costs.
Managing compliance internally requires up to 11 full-time staff, including personnel to monitor and manage regulation updates, middleware issues and ERP, as well as developers, financial analysts and more. Couple this with the hard IT costs associated with change management, and compliance easily totals six figures – per country!
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Sovos customers avoid these mistakes, benefiting from our proactive approach to compliance management. Contact us to learn how Sovos can eliminate common compliance errors and help you take advantage of the opportunities standardization in Latin American e-invoicing and reporting requirements presents.
