I get a lot of questions on the differences between Latin America electronic invoicing in comparison to other regions of the world. And one of the confusing points for many people is the concept of “Contingency” – the question that comes up from many is – if I am forced to go electronic, why is paper still important. It’s not the same type of paper that most think of when they think of invoicing – it is all about shipping rather than sending your paper invoice to your end customer.
So I thought I would write an article on the importance of Contingency in Latin America to clarify some of the points.
In countries such as Brazil, you have to have a copy of the government approved invoice to ship. Yes, I wrote shipping – that was not a mistake for those unfamiliar with the process. In Brazil the Nota Fiscal is not just a fiscal document, it is utilized to help track goods in transit. It is feasible that at a weigh station or a police officer could ask to see the DANFe (this is the printed piece of paper that needs to accompany the truck) and scan it and compare the registered goods to what is actually on the truck. If there is a discrepancy, than the truck can be, and most likely will be, impounded.
So the government realized that although the business process added huge value to stopping illegal shipping and tax evasion, they didn’t want the business to stop because the IT systems stopped.
In Brazil, there are two levels of contingency.
- On Network – Currently if the web services are not working at the specific state you are trying to connect for approvals, then you can fall back “on network” to the federal web services.
- On Premise Contingency – the “Provisional DANFe” is an alternative to when no web services are working. This could be because the government systems are slow during peak times or your internal network is down and you can’t get outside your firewall. Amazing what can happen if some changes are made to the firewall settings in Brazil. So there is a concept of a “Provisional DANFe” which has a unique format with two bar-codes and can be printed and placed on the truck for shipping. And with the “Provisional DANFe” your organization can legally ship. So as long as your accounting system can send the PDF to the printer – you can ship. The catch is – you still have to register the Nota Fiscal after the fact when your network comes back on line.
There are similar contingency processes in Chile and Argentina. So when you look at solutions – pay attention to contingency and how the organization does this. The solution should automatically follow the process flow without any manual intervention. If you need people in this process, then it will become time consuming and increases the risks of errors in your financial and tax data.