This article originally appeared in Supply & Demand Chain Executive on April 15th, 2016. Follow this link to read the original article.
Global businesses constantly strive to make processes more efficient in order to save time and resources, and better utilize talent. While business-to-government (B2G) regulatory compliance measures may seem like the antitheses of this mission, recent mandates in Mexico are actually paving the way for automation and helping multinationals streamline operations.
Mexico, along with many other countries in Latin America, is enforcing an increasing number of e-invoicing mandates, fiscal reporting and tax requirements that require a high degree of standardization. A means to proactively combat tax fraud, these measures frequently require significant changes to business operations, but the end result can be a high degree of automation, decreasing error rates, and increasing productivity and efficiency.
Mexico’s Evolving B2G Landscape
Mexico began requiring Comprobante Fiscal Digital a Través de Internet (CFDI) e-invoicing in 2012, providing Mexico’s tax authority with visibility into financial transactions in order to minimize tax fraud. The return on investment was immediate, with the country receiving 61 pesos for every one peso it spent on audits. Based on this success, Mexico recently introduced e-accounting requirements, called eContabilidad, requiring companies operating in the region to provide their chart of accounts, monthly trial balances and journal entries to support tax deductions.
Combining these financial requirements, companies with operations in Mexico are required to show a direct link between their individual invoices, accounting reports and tax deductions. Any error or discrepancy can trigger fines, penalties and even operational shutdowns. The critical nature of this process on business operations requires a fundamental shift in the way many finance and accounting departments operate. For example, no more is a departmental line item for payroll acceptable—each pay stub must be individually linked from the accounting record to the original transaction.