The changes involved in the new process for cancelling electronic invoices in Mexico are not trivial. There are major ramifications for both accounts payable (AP) and accounts receivable (AR) operations.
The new mandate, which fixes a major gap in Mexico’s e-invoicing policy, is aimed at enabling the SAT, the Mexican tax authority, to recover money lost through unjustified or fraudulent cancellations. For companies doing business in Mexico, is ushers in a host of new functional requirements.
Bringing buyers into the Mexican e-invoicing process
Under the old system, companies could cancel e-invoices unilaterally, without notifying the other parties involved. As such, they could avoid paying some income taxes by hiding revenue. On the other side, meanwhile, customers that paid for the goods or services could not deduct the expense of value-added tax (VAT) paid as they normally would.
The new mandate brings buyers of goods and services directly into the cancellation process. Sellers must send a notification to their clients before cancelling an invoice. In turn, the client must accept or reject the cancellation either via the SAT portal or through an e-invoicing provider within 72 hours. If the client does not respond, the invoice is cancelled.
New risks for companies handling e-invoices in Mexico
For companies doing business in Mexico, the change in the cancellation process requires making sure that e-invoicing solutions are up to the task of compliance. On the AR side, companies need to be sure that they can submit cancelation requests, validate cancellation status and cancel e-invoices within the parameters of the new system. On the AP side, they need to be able to consult, and to approve or deny, cancellation requests.
For AP operations, the ability to approve or deny requests is especially important. This new wrinkle in e-invoicing policy is what enables them to deduct VAT expenses when appropriate, making the new process a potential cashflow issues for organizations. Mishandling cancellation approvals can lead directly to unnecessary costs. AP users need to be able to manage cancellations requests while avoiding the risk of manual error, fines and penalties, and disputes with business partners.
Failure to master e-invoicing cancellations could also leave AR departments exposed to fines and penalties that were less of a risk before the new mandate went into effect. The SAT has further inserted itself into business relationships between buyers and sellers, and companies need to be in compliance in order to keep those relationships, as well as their communication with the government, running smoothly.