Proactively managing compliance in Latin America doesn’t just mean avoiding the significant fines and penalties associated with e-invoicing and reporting errors. It can also help your company free up cash flow and streamline business operations.
It’s no secret that the risk of non-compliance with Latin America’s strict business regulations is severe. Errors can mean fines of up to 150% of the tax value on invoices in violation, which can equate to millions in penalties. We know of one company that was fined $100,000 for four missing XML invoices – that’s $25,000 for a single error!
The good news is that there are hidden benefits to the streamlined operations made possible by compliance requirements throughout Latin America. By automating internal processes, companies can eliminate three of the top audit risks in Latin America, and free up cash flow at the same time:
1) AP validation – Since approved XML invoices are required before a payment can be processed,automatically pulling the inbound AP validation from these XML eliminates the risks associated with manual data entry. When you consider that typing in invoices manually results in an average of 3 percent data errors, it’s clear that a manual AP process is risky. If your books don’t match the government approved XML, you will be fined. Plus, automating this process frees up valuable internal resources.
2) Inbound receiving – If the goods you receive from suppliers don’t match the XML they sent – whether damaged in transit, lost, etc. – you are responsible for the tax obligation and having the supplier adjust the XML in the government servers. As PDF versions of the invoice must accompany your suppliers’ shipments in many countries, your inbound receiving team can use these documents to eliminate data entry at the unloading dock while automating the 3-way (Purchase Order – Invoice – Goods Receipt) match with a single click on a scanner, meaning invoices are marked “okay to pay” as soon as goods arrive, ultimately speeding up the AP process.
3) Accounting and tax reports – Reporting on data that is different from what is submitted to the government via XML, or manually re-entering that same data, results in increased risk for audits and severe penalties. Automating the reporting process eliminates this risk and makes these processes seamless for AP and accounting personnel.
Once these automations are in place, not only have you streamlined internal resources and minimized your audit risk, but you’ve also opened the door for supply chain financing opportunities. Since invoices are approved to pay in real time and automatically entered into your ERP, the payment approval process is reduced from weeks to hours. Companies can offer supply chain finance opportunities to their suppliers and improve supplier stability and liquidity, all while reducing audit risk and ensuring compliance with the stringent business requirements in this region.