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On September 3rd, multinationals will be required to submit their first journal entry (polizas) reports as required under Mexico eContabilidad legislation. These journal entries must date back to July 1, 2015, meaning now is the time to evaluate your processes to ensure accurate reports. Yes – processes. Simply relying on your technology (SAP, ERP or OSS notes) to extract the report isn’t enough. Ultimately, the challenges presented by the polizas requirement are fundamentally related to your internal processes – how data is input and how it’s connected to the correct internal and external reports. Once those processes are in place, the data extraction to produce the actual report should be seamless.

First, let’s examine the function on the polizas report. Consider this the teeth of the eContabilidad legislation. This is where the SAT, Mexico’s tax authority, will determine the need for fines and penalties. This report must match your XML e-invoices (every. single. one.), and is required to support VAT tax deductions.

The SAT will start audits on September 3rd, so it’s imperative to uncover and address potential hidden issues in these polizas reports, including:

  • Inbound procurement: Many companies are still paying invoices off of a PDF – not the XML. This opens the door for inaccuracies on eContabilidad-required reports. Often, if a supplier has to make an adjustment to the invoice, they only do so on the PDF. In fact, we’ve found that upwards of 10 percent of PDF invoices don’t match the XMLs. However, when it comes to reporting and tax deductions, XML is the only invoice that matters. As a result, companies still using PDFs for accounts payable and tax reporting need to update their processes to eliminate this practice. Otherwise, they will face audits when their reporting fails automated government checks.
  • Travel and expenses: One key area of focus for the SAT is fraud within travel and expenses. Typically, journal entries are done at the expense report level. For polizas reporting, however, it’s critical that each XML that contributes the expense report – for hotels, cars, flights, meals, taxis, etc. – is linked to the journal entry.
  • Payroll: Common practice is that journal entries for payroll reports on each cost center (marketing, accounting, operations, etc.). Much like expense reports though, there are multiple – often hundreds – of individual XMLs that contribute to this line item. Each employee’s pay stub is associated with a unique XML, and each must be linked to the journal entry.

 

With fines for inaccurate and incomplete information costing $3,000 per XML, you must get your processes in order now to avoid such penalties when the SAT begins enforcing polizas reports in September. Consider, for example, that an expense report for a single trip could have 10 corresponding XMLs, and you’re looking at the potential of a $30,000 fine – for just one expense report.

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