Definitive Guide

to Ensuring
Compliance
Across
Latin America

Leveraging mandates to
improve supply chain
efficiency, lower IT costs
and optimize cash flow.
 Compliance is Top 5 Questions
to Determine If Your
simply a cost of Company Is Prepared for
doing business in Latin American
Mandates
Latin America
What began as an e-invoicing mandate
in Brazil less than 10 years ago has 1. Do you have the subject
matter experts in house
significantly transformed the way
to ensure you pass all the
businesses operate throughout the
requirements today and in
entire region. Similar mandates have
the future?
spread rapidly across Latin America,
with seven countries now enforcing
e-invoicing and fiscal reporting 2. How will your monitor and
maintain compliance across
requirements, and more on the verge
multiple countries and
of introducing similar measures. Now,
languages?
these mandates are transitioning to
impact even more areas of business
operations, including accounting, 3. Do you have contingencies in
place to make sure you can
logistics and human resources.
always ship?
Noncompliance is not an option -
companies will face millions of dollars
in fines and operational shut downs 4. Are you sure you have valid
XML to back up any value
for compliance errors.
added tax deductions you are
taking on your tax returns?
As legislation continues to expand
in both area and scope, its time for
companies operating in Latin America 5. Have you kept a history of
your invoices?
to take a hard look at the compliance
landscape. In this whitepaper, we will
explore the challenges these mandates You must understand the
pose, best practices to leverage entire process when selecting
the opportunities they present and a solution. Otherwise,
briefly explore each countrys unique you may find yourself with
requirements. operational issues, IT support
issues and at risk for audit
penalties.

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The The Latin American compliance landscape looks vastly
different than that in Europe, where only government
Challenges vendors are affected. In this region, all businesses
of Managing business-to-business and business-to-consumer are
required to comply with strict, specific processes and can
Compliance in face operational shut downs and severe fines and penalties
for errors.
Latin America
Latin American compliance is a challenge for all businesses,
especially those operating in multiple countries who are
attempting to manage these processes with internal
staff and on-premise software solutions. From significant
IT investments, internal support needs and the cost of
potential business disruptions and fines, inability to achieve
or maintain compliance can cost companies hundreds of
thousands of dollars, even millions, each year.

Top challenges include:

1.
Significant IT support and maintenance costs for on-premise
solutions
Compliance management is costly to maintain in-house, with annual costs approaching
$250,000 per year in Brazil alone. The IT infrastructure and internal support required for
compliance change management takes valuable resources away from business innovation.

In many cases, companies use different solutions for each different country in Latin
America, resulting in a myriad of systems and processes to implement and maintain. Not
only is it risky from an audit and data manipulation perspective to have data in separate
systems, but this approach also results in multiple potential failure points, where the
process can break down. If something goes wrong, there is no single source of support;
calls to the ERP, middleware provider, local solution and internal project teams are needed
to identify and mitigate the error. The risks of operational shut downs are significant.

2. Frequent Regulatory Changes

Once the compliance process is in place, its not likely to stay that way for long.
Governments in Latin America are known for frequent regulation changes, as often as twice
a year. Companies have to have someone monitoring these changes, and then interpret
new regulations within existing business systems. The monitoring alone takes a significant
amount of internal resources staff that companies often fail to designate and if an
update is missed, companies will face stringent government audits and fines.

These frequent regulatory changes result in constant change to the global ERP system,
throwing off global projects and resulting in a significant time investment from the ERP
management team. As a result, it becomes hard to focus on business innovation
because teams are constantly reacting to new legislation.

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3. Productivity Loss
Implementation and upgrades clearly result in productivity loss, but so does managing
and maintaining the compliance process itself. With multiple monitors throughout Latin
America, companies spend time constantly checking numbers to avoid fines. In fact, look
at a percentage of the functional analysts, middleware architects, project managers,
subject matter experts and system integrators required for a time period each year -
compliance requires up to 11 full-time equivalents!

General Ledger & Accounting

Funtional Expert
.20 FTE per country to deal with changes
annually

Materials Management Middleware Interfaces

& Procurement .20 FTE across region annually
Functional Expert
.20 FTE per country to deal with
changes annually

5-11 Record to Report &

Sales & Distribution Full-time Project Management
Functional Expert
.20 FTE per country to deal with
Equvalents .25 to 2 FTE to manage day to day
issues & upgrades
changes annually

Subject Matter Expert Financial Analysts & IT

Compliance expert per country Support Teams
- typically 1-2 FTE internally or 1-3 FTE time to review and adjust
System Integrator issues between ERP and 3rd party
systems

Implementing and maintaining compliance requires up to 11 full-time equivalents each year.

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4.
ERP systems lack functionality to support mandates
The hard truth is that ERP systems are unable to support the entire scope of these
compliance mandates, requiring IT teams to support compliance through country-
specific bolt-on solutions.

The result: multiple systems of record rather than a single common platform. What CFO
would want to spend millions on their ERP only to find out that all of their critical fiscal
reporting across Latin America is happening in random third party tool sets not their
corporate accounting system?

Lets get specific to SAP ERP

Customers relying on SAP updates for
compliance have found that they are
often introduced last minute and require
multiple OSS notes to fix bugs. Coupled
with the manual configuration required,
relying on ERP support demands a
significant investment from IT teams,
taking them away from more valuable
business processes.
These problems are amplified for
companies who dont maintain the most
current instance of SAP. Most global
SAP teams look at rolling out SAP ERP in
waves across processes and countries,
yet the pace of legislative change in Latin
America is constant and isnt timed to the
SAP upgrade strategy. Often, lead times
to get on the COE calendar can be two to
three months, and in many cases, the COE
only wants to do major upgrades once or
twice a year; yet without the most recent
upgrade, companies are left with deficient
compliance capabilities.
As a result, companies have to rely on
third-party solutions that vary by country.
When something goes wrong, internal
support, SAP, middleware systems and the
third-party vendor all have to scramble to
identify the error, determine who will fix
it and resolve the issue. Combined, this
process costs valuable time and results in a
heightened risk of business shut downs.

In the statutory compliance space, SAP is very

challenging. When we look at the strategic
roadmap, it doesnt look very clear, and the
solutions didnt appear to be very extendable
from country to country. You find yourself
spending a lot of time not only implementing
them, but continuing to maintain them from a
production standpoint.

-- Billy Sparks, Sr. SAP COE Manager, Lexmark

5
5.
Business disruptions
The cost of compliance from an IT
perspective is minimal compared to the
business disruptions that can result from
issues and errors. Shipments may literally
sit at a warehouse for days if the required
paperwork isnt on board, or be turned
around at their destination if the invoice
does not match the recipients records.

For example, in Brazil, Chile and

Argentina, companies cannot ship goods
unless a government-approved invoice
accompanies the shipment, acting as a
bill of lading. Data errors on the invoice,
signal disruptions during transmission to
Compliance errors can result in operational shut
the government server and malfunctioning
downs shipments being unable to leave or
printers can all shut down shipments for turned around at their destinations disruptions
days. Its also common for shipments to businesses cannot afford.
be rejected upon receipt as buyers will not
accept goods without a valid government
registered XML that matches the original purchase order. Companies dont want to absorb
tax issues that were created by their vendors mistakes.

6.
Audit risks can lead to fines and penalties
In addition to the business disruptions compliance
errors can also result in hefty fines. Penalties for
invalid XML invoices range from $250 to $3,000 USD
In Brazil, companies
each, and invoicing errors and omissions can severely
must be able to produce
impact tax reporting items and deductions not
XML invoices from the
backed up by an approved XML invoice cannot be
past five years. Failure to
reported, and penalties for erroneous deductions and
do so equates to a 500
tax reporting errors can cost 75 to 150 percent of the
Reais ($175 USD) fine per
tax value, which can quickly add up into the millions.
missing invoice.
For U.S. companies, these reporting requirements also
have implications under the Foreign Corrupt Practices 200,000
Act, as the transparency required in Latin America
can expose improper business dealings. In fact, tech
missing invoices
giant Hewlett Packard was recently forced to pay $100
million in penalties for corrupt practices in Mexico
x $175
and other countries. Cisco and Tyson Foods have also
been subjected to similar fines that could have been =$35,000,000
avoided with the visibility that proper compliance
ensures.

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Best Practices Compliance in Latin America can be daunting, but following
the best practices below can minimize the costs required to
for Managing manage compliance and eliminate the risk of business dis-
Compliance ruptions and penalties.

A few best practices include:

Leverage a regional solution

When companies manage compliance
locally, these multiple disparate solutions
require significant internal management.
As companies look to manage a regional
or global instances of their ERP, these
solutions rarely integrate fully, resulting
in data housed in separate systems and
increasing the risk of disparities and
ultimately audit risks.

Locally managed compliance systems

typically work like this, with multiple
monitors throughout Latin America and a
vast support system required to manage
the solutions.

In contrast, leveraging a regional solution

eliminates these issues, providing one point
of contact for support and one point of
system integration. A regional solution can
significantly improve internal productivity,
with companies reporting cost savings
of up to 80% when they move away from
disparate local systems.

Our local vendor strategy was creating a constant stream

of work for our internal SAP team as the majority of issues
related to day to day support and change management were
not addressed by their solutions.

-- Aldo Magenes, SAP Analyst, Sun Chemical

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 Uses ERP as system of record
Using multiple third-party compliance solutions has many By transitioning to a
drawbacks, including the time it takes to manage them, having solution using SAP ERP
to enter data manually into multiple systems and potential data as the system of record,
discrepancies between the systems. Philips achieved a 25%
increase in productivity
Companies invest heavily in their global accounting system, yet among employees
it often isnt used to its full capacity in Latin America. Third party across all the business
systems in each country are used to support accounts receivable, units.
accounts payable, HR and payroll compliance. Data is often
edited in these third-party systems and either never corrected -- Alexandre Quinze, CIO
in SAP ERP a serious audit risk or corrected with an army of Latin America, Philips
financial analysts during end of month reconciliations a severe
productivity drain.

Using a single monitor within SAP ERP for compliance not

only maximizes the ROI of your system and decreases manual
support, it also ensures tax accuracy. Maintaining all data
within the ERP ensures that all invoices, payments, shipments
and reports match, avoiding audit and potential FCPA issues
since there is no chance of data being manipulated outside the
system.
Utilize mandated processes to improve logistics
By automating NFe Despite inherent compliance challenges, these mandates can help
entry, the time spent companies improve their shipping and receiving processes. Leveraging
by employees in a solution that provides built in contingencies and backups, companies
receipt of goods fell can avoid the shipping delays caused by downed servers and system
50 percent. outages.

-- Eder Ramos, Plus, automatic integration with accounts receivable and tax reporting
Accounting Manager, ensures that the finance and accounting teams have clear and accurate
Helibras a division records. Companies can use e-invoicing to simplify the inbound
of Airbus Helicopters. receiving process, turning hours of manual data entry into a single scan
According to Ramos, the
company processes an
and click process. Since the XML invoice is on the truck and can even
average of 1,000 NFe arrive before the shipment, companies are assured that the invoice
entries per month. matches the merchandise, lowering the costs associated with receiving.

Optimize cash flow processes with

standardization
While some companies see mandates as a hindrance, the
standardization required creates an ideal environment for cash flow
optimizations. Invoices can be made available to the buyer to verify
even before shipments arrive. This accelerated matching and time
savings make the Latin America market an opportune target for supply
chain financing. Since all invoices are standardized, clearly stating
approval for payment, invoices can be cleared for immediate payment,
often as soon as goods arrive.

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The While requirements vary from country to country in
Latin America, there is one constant: change. These
Compliance mandates are updated frequently, getting more
Landscape: complex and stringent with each new iteration.
An Overview
of Individual
Requirements

Brazil Key considerations:

You cannot ship without the PDF
representation of the invoice on the truck.

Automated contingency (both on network and

Brazil is the most complex business
regulatory environment in the world, with
three key compliance initiatives.
1) Nota Fiscal: Government approved
e-invoices are required for all business
transactions.
2) SPED: This mandate requires companies to
submit detailed accounting records.
3) eSocial: Businesses are required to
document and report all labor, social
security, tax and fiscal information related to
hiring and employment practices.
paper) are critical to ensure you can always
ship.
Buyers must validate XML before receiving
goods. The government offers a recovery
XML service that allows companies to retrieve
missing invoices, but requires five year
archives during audits.
SPED accounting reports are the most
complicated in the world. A single report
could have over 1,300 pages of supporting
documentation.
The government is also beginning RFID
tracking of all shipments within the country
tracking shipments not only at their
origination and destination, but throughout
transit as well.

9
 Mexico Chile

Mexico mandates electronic invoices
for organizations generating more than
250,000 pesos annually ($24,000 US).
Organizations must comply with the
legislation for all outgoing customer
invoices, validate all incoming supplier XML
and sign all payroll slips. Mexicos newest
regulation, eContabilidad, also requires
companies to electronically file accounting
records, including the chart of accounts,
monthly trial balances and journal entries
to support IVA deductions.
Key considerations:
Customers can completely customize the
e-invoicing process, changing field map-
pings and PDF invoice designs. Companies
must have a flexible system that can adapt
to various customer processes.
Tax payers, with the introduction of eCon-
tabilidad, must have the corresponding
XML and government signature to sub-
stantiate all tax deductions for in-country
purchases, travel and expenses, and payroll
taxes.
Account payable teams often struggle
as the purchase order number is not a
standard field on the government XML.
All enterprises over ~$100,000 USD must
comply with laws covering e-invoicing for
account receivables, account payables and
provide libros reporting.
Key considerations:
The tax id of the sender, receiver and IT route
are included on all documents. As a best
practice, multinationals should certify their
systems rather than relying on the certifica-
tion of a third party. Who wants a third party
involved in a government audit?
Either the signed invoice or the bill of lading
(guia despacho) must be on the truck to legal-
ly ship.
You have to file monthly reports for all sales
and purchases, which are linked backed to
the government approved XML.
As a buyer, you must approve all supplier
e-invoices in less than eight days or the doc-
ument is locked in the government server.
The only way to adjust the tax obligation is to
have the supplier update the original invoice
with a signed credit/debit note.

We desired a single provider that complies with multiple Latin America

country requirements, has both project management and customer support
in Portuguese, Spanish and English, and simplifies the ongoing change
management of our SAP ERP. With Invoiceware Internationals solution, our
internal teams can focus on running our business rather than focusing on
researching, implementing and reconfiguring our SAP system to meet the
changes for Brazil Nota Fiscal and Mexico CFDI.

-Gustavo Lara, Latin America Regional CIO for Kelloggs.

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 Argentina
E-invoicing is now mandatory for all
companies in Argentina. The Administracin
Federal de Ingresos Pblicos announced
this transition at the beginning of 2015.
Additionally, following in the footsteps of
its neighbors, Argentina is implementing
specific fiscal reports (libros) for all sales and
purchases.
Uruguay
Uruguays Direccin General Impositivas
(DGI) model of electronic invoicing is
the Comprobante Fiscal Electronico,
which is slowly rolling out to companies
throughout the country.
Ecuador
Ecuadors tax authority, the Servicio
de Rentas Internas, requires certain
taxpayers, including financial institutions
and exporters, to issue and validate
electronic invoices for any invoice equal
to or greater than $4 USD. The country is
rapidly rolling out these requirements to
additional companies as well.
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Key considerations:
There are multiple invoice types including B2B,
B2C and Export invoices.
Whether it is the Export Invoice or the state
registered Remitto for domestic sales, a legally
signed government document must accompany
the truck to ship your goods.
Key considerations:
The DGI will provide your local finance team with
an email which mandates your organization to
transition to the electronic process. You have
six months to go live once you receive this
notification.
Each company must pass a stringent certification
to gain access to the governments production
servers.
There are multiple document types for consumer
invoices, B2B invoices, exports and in-country
shipping documents.
The law requires daily reporting from mandated
companies based on the transactions they have
used.
Key considerations:
Invoices must accompany all domestic shipments
domestically.
The archive period is seven years.
Buyers must collect and validate their vendors
XML invoices in order to apply for tax credits.
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 Peru Colombia

The SUNAT, Perus taxing authority,
requires select companies (based on
level of tax payments) to issue electronic
invoices, credit and debit notes, final
consumer invoices and an electronic bill of
lading.
Colombia recently announced that it will
soon introduce e-invoicing mandates.
While specific requirements are still being
developed, Colombia is using Brazil and
Chile as models for its processes.

Key considerations:
Two documents must accompany
shipments the factura/boleta (invoice)
and guia de remision (signed bill of lading).

All inbound invoices received from vendors

in electronic format must be validated and
used to support tax deductions.

All documents must be archived for four

years.

The SUNAT requires that each company

pass compliance tests prior to be given
access to the governments production
servers.

Fiscal reports (libros) for both sales and

purchases are required on a monthly
basis for any company doing more than
~$180,000 USD per year in revenue.

The SUNAT is mandating waves of

companies to migrate to e-invoicing. Your
organization should assume that if you are
not on a current list and you make more
more than $180,000 USD per year in Peru
that you will be in the future. This is based
on the level of revenue mandated for libros
reporting.

A company must make the XML and PDF

available to end customers via a web portal
for a minimum of 12 months.

12
Is Your Companies operating in Latin America typically fall into
three categories: reactionary, compliant or innovative.
Company Reactionary companies scramble to piece together
Maximizing Its compliance solutions with each new mandate and
change, often incurring fines as they get their systems
Compliance up to speed and investing significantly with each
change. Compliant companies have found a way to
Processes? stay on top of new mandates and update their systems
accordingly, but are often still investing heavily in their
solutions through internal resources at the expense of
business innovation.

The most progressive companies have realized

that compliance can be streamlined, and that this
government standardizations can provide significant
business benefits in the form of improved logistics and
cash flow processes.

If you are spending valuable time and money

managing multiple local solutions, using multiple
reporting tools and systems for your compliance
measures, and risking data discrepancies,
business disruptions and government penalties,
its time to reevaluate your solution.

13
Invoiceware Invoiceware International is the leader in Latin American
electronic invoicing and fiscal reporting, providing
International: solutions and services that reduce the risk and cost of
The Leading maintaining compliance across the region for the worlds
largest companies. Invoicewares expansive business
Latin network transforms constant, unbudgeted compliance
upgrades into a fixed, annual fee and provides end-to-end
American visibility directly within the existing corporate ERP system,
Compliance eliminating the risk of shipment delays and reporting
inaccurate data.
Partner
Instead of being reactive to new legislation, Invoiceware
empowers its customers to capitalize on this stringent
government standardization to improve supply chain
efficiency, lower IT costs and optimize cash flow.

Invoicewares clients include many of the top

Fortune 500 and Global 2000 companies operating
in Latin America, including:

Contact us to learn how we can

simplify and optimize your
Latin American compliance process.

www.invoicewareint.com
1-800-988-0728
info@invoicewareint.com

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