In the first blog in our series, we introduced SAP Clean Core concept and how much is being made about its impact on business, specifically the ability to customize an ERP to meet operational needs.
In part two, we addressed how businesses can use the SAP Clean Core principles to create a system that better supports their business objectives and positively impacts their tax and compliance management.
For our third installment in this series, I’d like to spend time talking about your business’ path to Clean Core and what that means for your tax and compliance programs and initiatives.
As outlined in our first two posts, aligning with Clean Core holds a number of significant advantages for companies including making them more nimble, efficient and cost efficient. It is a move I would encourage any business using SAP to consider sooner than later.
With any large-scale update, migration or platform change, getting your business ready for Clean Core is a process that takes advanced planning, a sound strategy and buy in from the highest levels of the organization to execute effectively.
In assessing your business’ readiness to adapt to Clean Core, it is important to understand both the short and long-term goals of the project and outline the specific actions that you will need to take to get there. My recommendation is to determine what your ultimate goal is, and then work backwards from there. This will help to ensure that no important steps are missed in the planning process.
With a project of this size and scope, it’s also critical to detail which parts of the project will be assigned to which departments and determine a method of oversight to ensure that all areas of the business are making progress and on track to meet associated deadlines.
When you are dealing with large, multi-faceted organizations, it is not uncommon for departments to move at different paces. This is where having executive buy-in becomes critical as it ensures that the project remains an organizational priority.
No two organizations are exactly the same in terms of their makeup and infrastructure. Therefore, you will need to conduct a self-assessment of where you are before you can determine which transformation trajectory makes the most sense for your business.
It is important to realize that an ERP transformation journey is a commitment that will require change. Assessing your organization’s appetite for change and the pace at which these changes can be implemented are critical success factors.
For organizations with the ability and desire to move faster, they will accelerate their time to modernization and be in a position to reap the benefits more quickly. However, I will caution that moving faster than your organization can realistically support can have serious consequences as well, which makes your initial assessment such an important part of your transformation journey.
Embracing the tenets of Clean Core can ensure that critical Tax and Compliance functions and decisions are no longer driven by complex and often difficult to maintain customizations within core ERP functions. Moving to an infrastructure with reduced complexity will enable your organization to more easily integrate specific tax solutions that are automated and maintained by third parties. This is an issue of great importance as governments and tax authorities around the world embark on their own technology journey and implement systems that are far more complex than previous generations.
Many countries have moved towards the complete digitization of tax compliance which requires real-time transactional data and complete transparency into your end-to-end transaction processes. Meeting these requirements can be the determining factor in your ability to conduct business within certain regions. Aligning with Clean Core is an important step in enabling your technology to react to changing regulatory conditions faster and more efficiently.
This type of transformation project should always be supported by and aligned with a solid business strategy. Having a set criterion of what you are trying to achieve and how you will measure effectiveness should be established up front. And global tax compliance should be a foundational element of any transformation event.
Tax and compliance are a great place to start your journey to begin unlocking the full power of aligning Clean Core principles with best-in-class tax solutions.
For more guidance on your journey, please download our free ERP Transformation eBook.
In the first blog in our series, we introduced SAP Clean Core concept and how much is being made about its impact on business, specifically the ability to customize an ERP to meet operational needs.
For part two, I’d like to address how businesses can use the SAP Clean Core principles to create a system that better supports their business objectives and positively impacts their tax and compliance management.
In an article in Forbes last year entitled, SAP: Why Modern Software Needs A ‘Clean Core,’ the author makes the argument, correctly so in my opinion, that the old way of adding functionality by customizing the core has often become overly complex, cumbersome and costly. He explains how a new model was developed that decouples two components: one focused on predictability and the other on exploration. This evolution model is known as ‘bimodal IT.’
Now, bimodal IT is not a new term. According to TechTarget it was coined by Gartner back in 2014 and was the subject of a Gartner report in April of 2015 entitled, “How to Achieve Enterprise Agility with a Bimodal Capability,” by analysts Simon Mingay and Mary Mesaglio.
So, why the history lesson on the subject matter? I think it’s important to establish the fact that over-customization of technology platforms is not a new concern. It has been around for a while, but what has changed is the environment surrounding it.
Today, digital economies are moving at a pace where traditional methods and countermeasures are no longer effective. Today’s environments demand more structure, standardization and flexibility so that they can react fast when called upon.
Over the last decade, we have seen an explosion across core areas of the technology sector that makes agility critical. Whether it is preparing for cyberattacks, or the ability to quickly analyze data to take advantage of business opportunities, agility is an essential tool in your arsenal and old methods simply aren’t cutting it.
Today’s digital economies are demanding the rapid adoption of new technologies. A crucial step in keeping up with these changes is to adopt agile business-critical connected technologies that aligns with the principles of SAP Clean Core.
Adopting a global compliance solution that aligns with Clean Core principles will become critical to ensure you can keep up with the pace of digitization as it continues to evolve.
There is perhaps no other business segment that has felt the impact of technology on a global scale more than the area of tax and compliance. Heavy investment by government tax authorities over the past decade has completely changed the process of collecting and remitting tax obligations.
In an effort to close or eliminate tax gaps, gone or soon to be gone are the days of collecting and analyzing tax data and remitting after the fact. Today, it’s all about real-time analysis across the complete spectrum of the transaction. This requires the use of automated tax platforms that can quickly adapt to changing regulatory environments, ensuring compliance across every transaction.
Through applying the principals of Clean Core businesses can now attach dedicated and highly functional compliance platforms into their technology stacks without the need to customize their core SAP environment. This eliminates the need for long testing cycles, customization and many of the manual process updates that would otherwise be required.
Stay tuned for the next part in this series, where we will dive deeper into how Clean Core impacts specific tax processes. Upcoming segments will cover:
Part III: Your business’ path to Clean Core
Part IV: Clean Core benefits and business performance
Part V: Eliminating Tax’ dependency on IT
Much is being made about the introduction of SAP’s ‘Clean Core’ concept and how it will impact a business’ ability to customize its ERP to meet the unique needs of its operation. In this first blog in a series taking on the issue of Clean Core, I’d like to focus on the realities of what it is, why it’s important and the reasoning behind it.
SAP defines ‘Clean Core’ as a method of integrating and extending systems in a way that is cloud-compliant, while ensuring governance over master data and business process. In simpler terms, the move to SAP Clean Core helps protect the integrity of the SAP platform by limiting the extent of customization. And for good reason.
As a software vendor, you can’t lose control of your own code because you’re allowing so much customization and additional code to be added by your customers and or their consultants. These customizations are often intended for very specific use cases that may impact only a small number of customers. A ‘Clean Core’ architecture protects the SAP platform and its customers by limiting these excessive customizations.
When a platform becomes overly customized, SAP, the platform owner, must deploy a tremendous amount of development and support resources to ensure that they are accounting for all the changes and capturing feedback from the field.
This generally requires the platform owner to be in a perpetual state of developing hot fix code patches to repair ‘breaks’ in the system brought on by over customization. While customers would only be required to implement the code patches there were relevant to them, SAP was still on the hook for developing thousands of these patches. The cost and resources of doing so were growing exponentially, and needed to be reined in.
As anyone who has worked in or with IT for any period of time can attest to, the most complicated environments are ones where there is a great deal of customization. Early on in Information Technology, it was the Wild West, where based on the knowledge and experience of your architect, is how your businesses network would be constructed.
Then, thankfully, platforms and standards entered the discussion and businesses were able to construct environments that enabled them to operationalize new capabilities quickly, while simultaneously lowering costs and driving down dependencies within IT departments. The position SAP is taking here, and one that I agree with, is that clean core will be the next stage in making your environment more productive and efficient.
One of the most significant implications of Clean Core is in tax compliance. Clean Core opens up new possibilities for businesses to employ personalized tax technology outside of their traditional SAP environments. Rather than trying to build complex coding to tackle increasingly complex tax rules within their ERPs, they can integrate dedicated tax engines that are automated and seamlessly update to changing regulatory environments.
SAP Clean Core offers businesses the opportunity to simplify their IT environments, reduce customization, and improve system stability. The implications of Clean Core on taxes are especially promising, as businesses can now leverage specialized tax technology that integrates smoothly with their SAP systems, ensuring compliance without added complexity.
Stay tuned for the next part in this series, where we will dive deeper into how Clean Core impacts specific tax processes. Upcoming segments will cover:
Part II: The Need for a Clean Core
Part III: Your business’ path to Clean Core
Part IV: Clean Core benefits and business performance
Part V: Eliminating Tax’ dependency on IT
Many companies utilise SAP for their tax processes, but limitations in native software functionality add a layer of complexity.
Custom coding is often required for businesses to achieve their desired results, producing the need for ongoing customisation and optimisation – this creates a hefty burden for companies, in addition to their tax compliance obligations. SAP-certified add-ons can lighten the load.
Have you considered purchasing an add-on for the SAP S/4HANA system that you have? Ensure that SAP certification is a top priority, including checking the certification of any umbrella modules that a service provider offers.
The following points highlight the importance of using certified add-ons.
When an add-on is certified by SAP, both the vendor and SAP share some level of accountability and confidence in the add-on. Before deciding on a non-certified alternative, it is essential to conduct adequate research because not all add-ons are subjected to the certification process.
Consider the vendor’s past success in deployments similar to yours, as well as their customer references and reputation. Complete due diligence against prospective vendors to ensure they are financially stable and invest in certification and continuous research and development.
Remember to make a decision based on the prerequisites and potential risks of the SAP S/4HANA environment you work in.
At Sovos, we make it a point to guarantee that all of the modules that make up our SAP product line are certified against the latest releases from SAP. Examples of these modules include VAT Determination (including Sales, Purchasing, Monitor & Reporting and VAT ID Validation products) and Continuous Transaction Controls (CTC) frameworks for SAP.
Download our free eBook on SAP S/4 migrations and tax compliance for more information.
On May 2, 2017, we held a webinar titled “Mexico SAT Lessons Learned from Complemento de Pagos” and we would like to share with you some of our most frequently asked questions around Mexico’s upcoming mandate.
The Complemento de Pagos requirement is newly mandated by the tax authorities in Mexico requiring companies to generate a payment receipt (a complemento de pago) every time they receive partial payments from a client. This will help Mexico’s tax authority better track payments and tax liability.
Q: How long does it take to issue the payment receipt once the payment of an invoice has been received?
A: Once data is available, the receipt can be generated based on business processes whether it is a batch or manual function.
Q: For SAP, do you use the IDOC solution?
A: Yes, data is extracted out of SAP via IDOC, then sent to the REAL-TIME connector to process the data.
Q: What is the go live date for Complemento de Pagos?
A: Starting December 1st, 2017, all taxpayers will be required to comply with CFDI version 3.3 and the Complemento de Pagos. The process is optional for businesses beginning July 1, 2017.
Q: How does the cancellation of the payment receipt work?
A: Under the new regulation, the taxpayer cannot cancel any ingreso CFDIs when there are payments (pagos) associated with the original CFDI. However, you can cancel a payment receipt but it must be replaced with a new one.
Learn more: https://www.sat.gob.mx/consultas/92764/comprobante-de-recepcion-de-pagos
Q: In case the business allows a discount for the payment, how would it be recognised by the government? The invoice is $1,000 but I received $900 where the business allowed a $100 discount.
A: You will be required to generate a credit note to record the discount provided to the customer referencing the original document. Then, create a receipt note to register the $900.
Q: Is this needed only for partial payments or for all payments, even if the payment is in full?
A: The only scenario when you don’t need the Complemento de Pago is when you receive full payment at the same time of generating the CFDI.
Learn more: https://www.sat.gob.mx/consultas/92764/comprobante-de-recepcion-de-pagos
Q: What is the timeframe to implement your solution?
A: Generally, depending on business scenarios, it can take about 8-10 weeks.
Q: We are using our own CFDI solution, would it be possible to only buy the “Complemento de Pagos” solution from Sovos?
A: Yes, as long as the CFDI data exist for matching purposes within SAP.
Q: Do I have to generate two Complemento de Pagos referencing the same invoice (perhaps in two different periods)?
A: Yes, you will need to reference the original CFDI in all the Complemento de Pagos generated.
Q: In SAP, how do you trigger the Complemento de Pagos message?
A: Our process is based on a clearing document. Accessing our Tcode, you will see all the documents ready to be posted, manually or batch.
Q: Do you have to provide a copy of the payment receipt to your customer?
A: Yes, you will have to provide the government output to the customer.
Q: When payments are for an amount greater or less than the value of the CFDI how do you make the adjustment? It is common for our foreign customers to automatically apply charges for difference in price, quality, or missing information.
A: You must adjust via a credit or debit note based upon the correct amount.
Q: What is Metodo de Pago?
A: This is the way in which the operation was carried out, meaning in “one exhibition” or “partially”.
Q: What is Forma de Pago?
A: This is the way in which the payment was made for the operations – cash, check, credit card, electronic transfer, etc.
Q: How does the Complemento de Pagos work for partial payments?
A: You would issue a CFDI for the total value of the operation at the time it is performed, and metodo de pago should be PEP (pago inicial y parcialidades) or PPD (pago en parcialidades o diferido).
Subsequently, you can issue a CFDI for each of the payments that are received, in which it should be noted:
The amount of the payment shall be applied proportionally to the items included in the voucher issued for the total value of the operation.
Sovos offers the only end-to-end, SAP-native solution for CFDI v3.3 and Complemento de Pagos which allows companies to maintain a centralised source of truth in SAP.
Contact us today to learn how we can help you reduce the risks associated with these new requirements in Mexico, while maintaining SAP as the core system of record.