In order for businesses in Latin America to reduce their risks of fines, penalties and operational disruptions, it’s imperative to understand and manage the ever-changing eInvoicing and VAT reporting mandates sweeping throughout the region. While proactive compliance can improve operational efficiency, streamline processes and increase cash flow, many companies do not have strategic processes in place to combat common compliance mistakes.
Below are the top 10 compliance errors that are costing companies time and money.
- Failing to identify their ERPs as compliance system of record – Companies often use multiple solutions because ERPs alone do not offer business-to-government compliance without multiple third-party add-ons. This creates a support nightmare, as discrepancies between the corporate system of record, external systems and what is reported to the government create huge tax and audit risks.
- Not automatically importing supplier XML into the ERP – Companies need to identify a system that can automatically import invoices into the system of record as government-approved documents. In doing so, there will be a verifiable trail in the event of an audit.
- Utilizing manual data entry – Systems that require companies to manually enter data are not only inefficient and time-consuming but also extremely risky, as errors as small as typos can lead to unnecessary fines.
- Overlooking reconciliation – As a result of new reporting requirements, it’s crucial businesses sync their daily data with the reports submitted at the end of the month or specific filing period. For many companies, however, data used for transactional reporting is separate from systems that produce summary VAT returns. This makes reconciliation and determining the source of truth difficult.
- Failing to maintain archives – Companies should utilize a solution that seamlessly maintains XML archives and records. Failing to do so results in extra work to validate compliance documents and tax calculations in the event of an audit. In most cases, it also violates eInvoicing and eAccounting regulations, resulting in additional fines and penalties.
- Attempting to manually manage inbound receiving – A manual, paper-based receiving process not only requires significant internal resources, it also increases the risk of error. This process can and should be automated to improve efficiencies and ensure accuracy.
- Underestimating the pace of change – Compliance mandates are continually updated. With more business processes affected, including accounting, operations and human resources, your solution must be able to keep up with the continual changes.
- 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 total six figures – per country!
- Not having a contingency plan – In many countries, 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.
- Failing to work with solution providers that offer local language support teams – Compliance in itself is a huge undertaking, but imagine not having access to a local support team that speaks your language. This could make sorting out issues an even bigger nightmare for companies in Latin America.
To avoid making these common compliance mistakes, businesses in Latin America must work with a solution provider that offers a strategic and proactive approach to compliance management. Download our Definitive Guide to Latin American Compliance to learn how you can improve efficiency, lower costs and optimize your cash flow.