Depending on where in the world we’re talking about, the local tax authority may mandate the companies use e-invoicing when dealing with local clientele. Latin America, in particular, has a lot of governments that attempt to control the economies of their respective countries centrally. The result is that all through Latin America, e-invoicing compliance has been built into the taxation system. But this part of the world is not the only place where e-invoicing is tied directly to taxation. In Italy, if one fails to validate one’s invoices with the local tax authority’s real-time e-voicing system, then no client is going to pay for it.
Managing e-invoicing requires understanding the local stipulations for electronic invoices as well as following the law regarding how those invoices are verified. E-invoicing makes the processing of payments and determination of taxes less of a task for overburdened and short-staffed government tax offices. Refusing or being unable to comply with the demands of the local authority could put a business in hot water. Several cases exist that could negatively impact a business due to mismanaged e-invoicing.
Case 1: Inability to Implement Structured System Upgrades
Most SAP clients look at S/4HANA as their next logical upgrade step. The draw of using this software is that it simplifies purchasing and integrates supply chain management with innovative tools that apply to a specific industry. It also consolidates all the invoice management systems under a straightforward program interface, making it simpler to generate invoices as well as track wherein the payment process a particular invoice has gotten to.
Non-compliance with e-invoicing standards forces clients to want to switch to S/4HANA to forego using the invoicing system within their SAP suite. Compliance with e-invoicing standards can make the switch over to S/4HANA a straightforward exercise, but the more disparate systems that a company manages, the more difficult the change becomes. As businesses try to simplify their operations through the adoption of S/4HANA, the ability to keep up with local demands for e-invoicing becomes even more critical. A company can’t plan for an upgrade when it doesn’t know where it is right now regarding its invoicing process.
Case 2: Stagnation through Lack of Innovation
Most tax compliance systems that large enterprises operate seem great when viewed as a whole. However, the closer one looks at these systems, the more it becomes apparent that they’re cobbled together pieces of tax compliance software that were forced to work together. As companies expand into new frontiers, each country they add to their coverage adds one more type of lawyer compliance that they need to conform to.
Some of the recommendations from local authorities for changing of e-invoicing standards also come with ridiculously small warning. Smaller companies might not be definitively affected since their business is usually on a local or regional scale. Foreign companies end up having to spend a lot of merely getting their tax systems compliant within the given time frame, sacrificing resources they might have otherwise dedicated to innovation and improvement.
Case 3: Complexity with IT Infrastructure
Simplification makes a business more comfortable to operate. The more moving parts or running systems a company integrates into its business structure, the more human resources, time, and effort it takes to monitor and maintain those systems. Companies have started to view simplification along the lines of paring down multiple disparate systems into a single business information system, either using an offline SAP installation or S/4HANA.
As a company starts to expand into new markets, new tax compliance rules come into effect, forcing companies to find unique pieces of software to cobble together to deal with these new regulations. The result is that the company ends up with a maze-like structure for its e-invoicing system, which might give the right answer for an invoice, but is frustratingly complex to maintain.
The Consequences of Mismanagement of E-Invoices
SAP users can leverage the software’s ability to consolidate tax compliance functions across the board. Ultimately, by doing this, a company allows itself the workforce and resources to innovate and upgrade at will. SAP’s simplified architecture reduced multiple different tax compliance systems into a single unified database that generates compliant e-invoices for the company in any market that it finds itself in. The simplification of compliance systems crystallizes the promise of SAP S/4HANA to provide a single source of truth that a company can rely on.