2016 Latin America Business-2-Government Compliance

Paper is not an option: Putting the ‘e’ into AR/AP

Scott Lewin - CEO Invoiceware International

INVOICEWARE INTERNATIONAL Global Compliance - Simplified

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Agenda

Why Latin America is Unique Government Mandates Control Tax Collections & Audits

Trends in the Region and Globally

Transforming Compliance into Savings

Latest Country Updates

Questions

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Tax Authorities Control an End To End Process Government standardized XML linked to VAT Tax reporting = Real Time Audits

Supplier Registers XML

Government XML Standard Only Legal document Registers VAT Tax Obligation

PDF Accompanies Truck

Copy of Invoice OR Signed Shipping Document

depending on country

VAT Tax Linked to XML

Buyer only able to take VAT tax credits that are linked to approval codes in supplier XML

Errors or corrections are the buyer’s issue to get fixed

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Latin America E-Invoicing & Reporting It is All About Maximizing Tax Collection Not Process Efficiency

Importance of VAT to Latin America Economies

Brazil NFe – allowed them to collect ~58 Billion USD in a single tax year Mexico SAT – 34% increase in VAT collections (~5 Billion USD) in 1H 2014

due to CFDI automation Colombia: 50% reduction in VAT and corporate tax evasion could bring

more than COP 15 trillion (USD 8 billion) in additional revenues.

VAT Tax Evasion range from 25 to 50% of total potential

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Business To Government Challenge Expanding Globally

2009

Brazil Nota Fiscal & SPED

2016 10 Countries in Latin America

2016 Cross Border Initiatives Move to Pilot

- US Mexico

- eVAT EU

- Br, Mx & Ar Cross Border via CIAT

2016 Country By Country Reporting: Target Transfer Pricing

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Confidential

Compliance Impact on the Business Issues Affects Revenues, Operational Costs & Cash Flow

Revenue Issues • Increased DSO as invoices

not paid due to compliance issues

• ~10% of invoices have collection issues

Logistics Issues • Missed Customer Shipments • 3PL penalties – resend the truck • Increase receiving costs upwards of 70%

Accounts Payable Costs • 300% increase in cost of

manual operation vs. automated

• 5%-7% missed deductions equals cash flow

Audit Penalties • 60-225% of the tax values in dispute • $50-$4,000 dollars per transactional

issue • Loss of tax status – e.g. company loses

favored status delaying VAT collections & increasing rates

VAT Issues – KPMG 2015 Study • 34% of company gross sales • 340% of Net income • One the company’s largest

cash flows

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Solution Requires – Reports Linked to Transactions VAT Remittances are checked by reviewing transactions & reports

Operational (Real-Time) Accounting (Monthly/Year-end) Brazil SPED, Mexico eContabildad, Libros, et al

Consistency

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ERP Process Automation

End customers always have customized or unique configurations (Z-Programs)

Require Automated Contingency so no shipping issues

Support Issues

Can’t ship without invoice on truck in most LATAM countries

Support needs to cover any issue from ERP to Gov’t and back

Maintain Issues

Each country has different legislation changing at least once a year

Affects global ERP upgrade schedules & regression testing plans

Best Practices Orders To Cash – Account Receivables Linked to Reports

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Okay To Deduct

Must collect & validate XML

VAT deduction is based on accurate XML with Gov’t

Approval codes starting to be linked to monthly reports (Mexico eContabilidad)

Okay To Pay

Must use 3 Way Match as issues on PO or Goods Receipt require supplier & Government updates

Supply Chain Finance opportunity

Maintain Issues

Each country has different legislation changing at least once a year

Affects global ERP upgrade schedules & regression testing plans

Best Practices Procure To Pay – Account Payables Linked to Reports

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Transforming Compliance Into Savings Employee Productivity, IT Cost Savings, Cash Flow Acceleration

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Latin America Transforming Mandates Into Working Capital Opportunities

Issue Addressed Common Roadblock Latin America

Paper Invoices Traditionally 80% of invoices are paper

around the world

Latin America MANDATES electronic

invoicing – Brazil, Mexico and Argentina

Supplier Rollout

US & EMEA require massive rollouts

and calling programs to convert

suppliers and have them send eInvoice

Latin America MANDATES that the

supplier make the electronic invoice

available to customer, email has become

common – Brazil, Mexico

Invoice Format US & EMEA could have 1000’s of

formats among suppliers

Latin America MANDATES electronic

invoice format, XML is standardized by

government – Brazil, Mexico and

Argentina

Invoice Accuracy Approximately 20% of invoices can

have matching issues internal to the

ERP matching process

As invoice is required for Tax deductions,

errors are corrected on front end of

process.

Financing Risk Only finance percentage of invoice

value due to risk short payment

As Invoice accompanies the truck, full

acceleration of 3 Way Match and you

have a Trade Receivable validated twice:

once by the government and again by the

buyer.

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Inbound Goods Receipt & Accounts Payable Automation – Brazil Step 1 – Data Integration: SEFAZ Certified NFE Data Arrives in SAP in real time Step 2 – Link Assignment: Tie NFE XML to SAP Purchase Order Step 3 – Commercial Compliance Match: Compare Line Items & Taxes to Backing Document (“pre-MIGO”) Step 4 – Goods Receipt Confirmation: Wait for Truck to Arrive, Confirm DANFE against “pre-MIGO” XML Step 5 – Accounts Payable: Generate MIRO “okay to pay” documentation Process Complete

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• Suppliers register for access and then select certain invoices to be

paid immediately – either directly, via “pay me now” link on email

notification or through web based supplier portal application.

• Suppliers have visibility into all invoices in real-time. No need to

contact A/P for payment status

Supply Chain Finance Opportunity How it Works - Suppliers

Supplier Invoice Portal

“Pay me now” – Email Notification

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Brazil 2016 Update

Recovery XML – Inbound Validation Mandates

Do you have all vendor XML back to 2009?

Fine is approximately $200 USD per missing XML

Gov’t released a new web service that you can download all of you XML from the SEFAZ web site – as a best practice you should do this prior to receiving goods if XML is not in system

Destinatario is becoming mandatory for more states & industries

SPED Reporting

June 2016 - ECF – new set of report due in September (1,300 pages of documentation)

January 2017 - Block K – for SPED Fiscal on Inventory and Production Movements

September 2016 - eSocial – HR & Payroll requirements 2016 Mandates

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Mexico 2016 Update

2016 Issues

3.3 CFDI Schema Change

Foreign Invoices – starting to share data with Canada/US for purchases from Mexico RFC.

Inbound Procurement – typically invoices doesn’t have the UUID, needs to match and align to the FI posting in SAP

Gastos (T&E) & Nomina (Paychecks) issues within Polizas

Expectation of end of life of Amparo for those that filed reports, even if an Amparo is granted – SAT will require eContabilidad XML – they will just come to your office to pick up the files.

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Colombia 2016 – Update Mandate is Law as of November 2015

Decree 2242/2015

April 18th – Pilot starting

2016 will be selecting Participants with ~50,000 tax payers tranistioning by 2017 which also equates to end of life of legacy electronic systems

Factura Eletrónica requirements:

Consecutive numbering of Document Types (Invoice, Credit, Debit, Export) & Contingency Paper Process

Validations (within 48 hours of Invoice generation) include a unique identification number CUFE

PDF representation w/ QR Code

XML necessary for verification and audit – UBL similar to Peru

Acuse de Recibo – Recipient Acknowledgement to Supplier

Libro for Sales & Purchases

Catalog of Participants will be announced by DIAN, once named will have 6 months to complete Homologacion & certification of process

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Contact Us Today info@invoicewareint.com

Learn more about Latin American Compliance at:

http://www.invoicewareint.com/learn-more

Q&A