Latin America continues to show why they lead the world in electronic invoicing. Below I cover the basics of the Chile eInvoice. Chile was one of the first movers in electronic invoicing and they have one of the more complex environments. The model is unique but does take into account some similar processes from other Latin America countries. As you look for solutions in the market place, be sure you understand Brazil, Mexico, Argentina and Chile which lead the world in eInvoicing adoption and usage.
The Chilean electronic invoicing model combines elements of the batch-oriented folio scheme used in the legacy Mexican CFD model along with the real-time communication as found in Brazil and Argentina. The process begins in two steps - first a delivery document (the “Gia Despacho” or “bill of lading”) is generated and registered with the government as the initial transport event, and then the other fiscal documents (like invoice or credit/debit notes) are generated and registered with reference to that event as follow-on activities occur later in the process.
Currently, there are 12 types of electronic fiscal documents, referred to collectively as “Documentos Tributarios Electrónicos” or DTE. Each document type has its own series of government issued folio numbers, which are consumed by the company in sequence as each DTE is produced. The fiscal data required for each document is packaged in a DTE specific XML format, and then signed and registered with the government in real time via web services exposed by the Chilean tax authority.
Additionally, at the end of each month, a set of up to four compliance reports are uploaded to the government web site, either manually or through automated web service. These reports summarize the DTE transactions produced during the month and specifically account for each folio used or destroyed as well. Folios can be skipped or voided through automated web service and any paper DTE’s issued in contingency must appear on these reports as well.
Customers registered for outbound DTE must be able to receive it inbound also. This involves providing a XML response back via email to the email address registered by the supplier on the SII website. There are currently no requirements for inbound fiscal compliance validation, though the XML structure fully supports it.
Last week while at the SAP Insider Financials conference I wrote about the “calm before the storm” – basically what will happen when the Mexico tax authority mandates the use of CFDI. As I stated in that blog, more than 90% of all invoices in Mexico are still on a legacy version called CFD, not the version of CFDI which requires real time government validations. In conversations with a few companies this week, I realized that organizations were not only unaware of this huge change; they also were unprepared into how to plan internally. So to net it out – there are five mission critical points you should plan for as you look at migrating from CFD to CFDI.
First and the most important: there are thousands and thousands of companies that will need to transition when the change takes place. You need to ensure you are starting conversations with your vendors soon in order to understand the level of effort, impact to your SAP system, and resource availability given the expected number of companies needing to move. My experience in these situations is companies who wait to the last minute will miss out on the deadlines imposed (Brazil Nota Fiscal 2.0 implementation and Mexico CFDI v3.2 July 2012).
Implementation –For an SAP account this will not just be a web service connection, it will be a change to your SAP system configuration.
Who will do this work – you, your SI, or does your CFDI provider take care of this task?
Will you have to manage a middleware (i.e. SAP PI) in order to exchange the IDOC with the CFDI provider?
How will you manage the integration of customer specific Addenda?
How will you manage the real time processes of printing, cancellations, et al…?
Monitoring – The CFDI process can affect your ability to ship just like in Brazil.
Will you have one single monitor in SAP?
Or will you have three separate monitors: one in SAP ERP, another monitor in the middleware, and another monitor in a 3rd party solution?
Maintaining –As the mandates take hold, they will not be static. They will be constantly changing and evolving. In the last 18 months, the Mexico SAT came out with multiple announcement. The most recent one required the buyer to validate and archive inbound XML (December 28, 2012).
Who will keep up to speed with the fiscal changes and the impact to SAP?
Accounts Payable Validation – Many companies are still validating there invoices manually with the Mexico SAT. This may be fine for a few XML per day. But when the government makes the changes to CFDI, your organization will see a dramatic increase in the amount of XML received. For most multi-nationals, the volume will require automation.
How will your organization address transitioning from manual validation to a fully automated solution internal to the SAP system?
This transition should not be overlooked – the question is – will you be prepared or one of the companies that waits to the last minute. Remember, failure in the compliance markets translates into fines, criminal penalties, customer collection issues and potential delivery/shipping delays.
As I was preparing to leave for the SAP Insider Financials conference on Monday of this week, I was welcomed by the transition into Spring. And in Atlanta, this means thunderstorms and flight delays. There is always a strange moment in the south that precedes most any thunderstorm -- a quiet calm. And then all of a sudden, the wind picks up and the rain pours.
I couldn't help of think of this metaphor for what is about to happen in Mexico when the transition of CFD (legacy eInvoicing legislation) is replaced with the new CFDI legislation. I say this because much like the calm before the storm, there are signs that your organizations that operate in Mexico should not avoid:
The SAT established a free CFDI portal for the smallest of suppliers at the end of last year
The SAT discontinued the use of Folio's and instead of electing for CFD, made all transition to CFDI
The CFDI legislation was relaxed in Q4 to make it easier to implement CFDI
As of December 28, 2012, the SAT wants companies to archive the XML CFDI invoices for audit purposes -- making inbound validation a requirement
With this information at hand, the question will be what does your organization do about it. Last time this happened (i.e the transition from CFD to CFDI in July 2012 for a select set of companies that weren't grandfathered) there was a mad rush to implement. There were many companies that weren't able to comply in time and faced fines, audits and worse -- shut downs of their operations.
So the question now is -- are you prepared? We are taught growing up in Atlanta to have an emergency plan when you hear the sirens. You need a place to go that is secure and dependable so that you come out of the storm safely. Many organizations are doing the same thing when it comes to the CFD to CFDI transition. They are appropriately - creating budgets, project plans, teams, and gap analysis -- and most importantly they are speaking with solution providers to understand what and when they could implement when it happens. Remember, 90% of all invoices including those by most multi-nationals are still CFD. When the storm comes, will you be prepared or will you be scrambling for a solution. Just food for thought.
Over the last year, many companies have been re-evaluating their strategy for managing Brazil Nota Fiscal and Latin America eInvoicing in general. These changes are due to Production Support issues and costs of in-house solutions. Many companies don't fully understand the issues with purely in-house software, so in this blog we are covering some of the most common issues and negative business affects. If you are running an in-house solution make sure you understand the true cost of operating that solution.
Common support issues:
Inability to print the DANFe because there is no monitoring of the printers at offsite locations. This causes delays in shipping and potential lost revenue from customers
Too many monitors cause issues in resolving the problems as they arise. This is a huge issue for solutions that have too many software components. For example, many companies are running a process that has
SAP NFe extensions to the ERP system
Monitor for EAI - SAP PI to connect the ERP to the NFe box which is a separate install
Application Server for the production of a digital signature and signing component
A secondary monitor for SAP PI to the SEFAZ
With four distinct monitors for an end-to-end process, how is your organization dealing with small errors, let alone process errors such as the coordination of cancelling a Nota Fiscal. These issues cause shipping delays, fire drills at the SAP COE, and in some cases shutting down a plant and customer deliveries. Can your organization really afford to have your plant shut down, what is the cost of this to your operations?
Changes from the government also cause chaos for in-house solutions. A common complaint we hear all the time is: what is my 22% maintenance fee really covering when the updates are delivered at the last minute and I still have to have internal resources or an SI install these patches in my customized ERP environment. This problem is compounded when you are running multiple in-house solutions in many countries. See the diagram below:
Who do you call when there is an issue?
Is Spanish, Portuguese and English support available?
Is support responsive to an SLA?
Who is responsible for keeping system compliant?
Who manages the ERP configuration?
Who coordinates all the pieces and testing?
In summary, make sure you understand your Nota Fiscal solution beyond just functional check boxes. The real issues and costs are in the implementation, monitoring, and maintenance of the solution. Look for solution providers that solve all three issues including production support and ongoing change management. Many Fortune 500 companies are turning to hybrid offerings that place the burden of production support and change management on the provider. The elimination of multiple NFe hardware boxes, middleware instances, constant ERP configurations, day to day monitoring and fixes, and reallocation of staff to growing the business can have a huge ROI. With the new 2013 changes and forced licensing for new inbound processes, let alone the implementation costs -- it is time to re-evaluate your Latin America compliance strategy, especially Brazil Nota Fiscal.
Over the past two weeks, I am seeing more and more planned implementations of SAP in Brazil. Many companies are either looking to consolidate legacy systems onto a centralized SAP system, or they are looking to transition Procure To Pay processes into a Shared Service environment. Regardless, I wanted to provide the key considerations for SAP Brazil implementations. Many of these are often overlooked during the discussion of bringing Brazil into the SAP or Shared Service process.
There are 3 primary evaluations you have to consider:
Localizations - this is actually the most underestimated part of the project, and this is critical to the success of the next two topics. Your organization needs to ensure you have local Brazil/SAP experts. This project is much more than installing a few J tables. Ensure you have solid and current tax advice from your tax advisor and you have individuals that have implemented SAP in Brazil before.
I have seen companies underestimate the implementation by as much as 6 months of work.
Reporting - understand how you will be managing the SPED reporting for your company. Many organizations, especially as the Brazil government pushes more standardization with the SPED reports, are looking to have this installed in their SAP system.
Operational Nota Fiscal -- now that you have your system configured to produce the correct fiscal data and you have the ability to formulate the weekly, monthly, and quarterly reports; it is time to review your day to day NFe solutions. Ensure you review the following, as they are all unique and have different issues:
Nota Fiscal Entrada
Outbound NFe Goods & Contingency Printing
Outbound NFe for Services - 120 different city issues
IMPORTANT Note: because of the inbound validation requirements or Shared Service center consolidations, I am seeing AP only projects. Ensure you reach out to the AR team as well, there will be synergies with the project teams although they often run separately.
Companies can be very successful in implementing SAP in Brazil, but you need to understand the unique nature of the Brazil compliance processes as well as how they affect your SAP templates. If you research these 3 key functional requirements, you will be well on your way to a successful and on time go live.