Over the past few months, I have written a lot about the dreaded compliance mandates in Latin America. Unlike the US and Europe, Latin American countries including Brazil and Mexico have forced the adoption of electronic invoicing. And yes, most people when they first realize the complexity are more then taken aback by the workload ahead. However, there are huge benefits for Accounts Payables organizations that are driven by these mandates.
Straight-Through Processing (STP) is a term that has been written about a lot, especially in an age where corporations are looking to technology to drive process efficiency. What Straight Through Processing does, is that it takes electronic data from the invoice to match to the Purchase Order and receipt data and automatically completes the three way match (where the match is exact) without anyone in AP being involved. This enables individuals to focus their energies on those invoices which are more problematic, which in turn allows companies to become more profitable and streamlined. Capturing the line item data electronically from an invoice is the major hurdle for STP and Latin America (Brazil and Mexico) eliminated it. There is no need for the dreaded scanning and OCR technologies, as the government has mandated the use of an electronic invoice. More importantly governments like Mexico and Brazil have standardized the invoice XML and data format.
For Shared Service centers that really want to focus on simplifying their operations, why not focus on the Latin American operation. Most of the projects I have been involved with over the last 4 years have always had a focus on Europe. But European e-Invoicing is plagued by the fact that your organization must convince suppliers to move to an electronic invoice. This is either done through internal resources or outsourced to expensive Supplier Networks that tout their supplier base coverage. Often there is a goal to get a base of suppliers onboard over a 3 year period, and unfortunately the reality is that most organizations struggle to reach more than 25% of their suppliers by the end of that 3 years unless they are able to mandate the use of e-invoicing (and there are few companies that can do this without seeing repercussions from the supply base).
My case for Latin America rides on these following facts:
- Electronic invoicing is mandated in countries such as Brazil and Mexico, so you don’t have to worry about OCR/Scan, supplier tiers of capability, long rollouts
- The XML is defined by the government, so it is always the same data structure
- Your suppliers must make the e-Invoice available to your organization by law
- The Buyers as of April 2012 in Brazil and with CFDI 3.2 in Mexico must validate the invoice with the government anyway. As long as you have to do some automation, you might as well automate the 3 Way Match and gain the benefits
- The invoice in both Brazil and Mexico must be placed on and accompany the truck prior to shipping, so it is possible for the AP team to get the invoice prior to the goods arriving
- You can do the pre-match to a PO prior to the goods arriving
- Once the goods arrive, a warehouse manager can scan the mandated bar-code which will finish the 3 way match automatically
In short, if the goal of STP is to have an invoice be received, validated, matched and released for payment with no human intervention than Latin America has figured out how to set up the perfect technical environment. This is only the first step of automation – there are huge advantages to come in the form of financial supply change management. Remember, the barrier to supply chain financing has been the slow processing/approval times for paper based invoices which deplete the payment terms. Being able to accurately state that the invoices is approved for payment, in some cases as soon as the goods arrive from the supplier, creates the perfect environment for Dynamic Discounting and Supply Chain Financing.