This article originally appeared in Spend Matters on June 17, 2015. Follow this link to read the original article.
Spend Matters welcomes this guest article by Steve Sprague, vice president of product strategy at Invoiceware International
Multinational companies operating in Latin America know that compliance with strict electronic invoicing legislation is a part of doing business in the region. However, despite the IT and processing challenges that these mandates present, companies operating here can capitalize on the resulting standardization. Through required e-invoicing, companies are able to realize business efficiencies and facilitate supply chain financing, ultimately improving liquidity in the entire region.
Today, 95% of business transactions in the largest Latin America economies are electronic, as mandated by government legislation that imposes standardized reporting formats and approval processes. Specifically, suppliers must use a standard XML invoice that is transmitted and approved via government servers. This invoice often acts as a bill of lading that must accompany all shipments, and buyers must validate and approve the invoice in real time – as soon as shipments arrive. These requirements have led to a high degree of automation throughout the region. Accounts payable, receivables and logistics can all be streamlined and automated based on the processing and approvals mandated, reducing operational costs and opening the door to supply chain financing.
Government mandates eliminate traditional barriers to supply chain financing, streamlining implementation and adoption. Paper invoices require too much time to process, leaving a small financing window, and traditional e-invoicing networks require onboarding, education and recruitment to convince suppliers to submit invoices electronically. Since all suppliers in countries including Brazil and Mexico are required to send e-invoices using the same format, supply chain financing opportunities can be offered to all suppliers – not just a small subset that choose to go through the onboarding process. Plus, the real-time processing required accelerates buyer approvals from weeks to hours.
By implementing supply chain financing, companies strengthen their supplier base by providing the option for suppliers to get paid early. This process allows buyers and suppliers alike to better manage their cash flow through increased visibility into financial transactions. Buyers can automate payments once invoices are approved, often as soon as shipments are delivered. Suppliers can check the status of their invoices online in real time and select the ones that they would like to be paid immediately, eliminating the need to inquire about payment status.
Individual buyers and suppliers aren’t the only ones to benefit from the supply chain financing opportunities afforded by e-invoicing standardization throughout Latin America. Ultimately, the implementation of supply chain financing will improve free cash flow throughout the region and ensure the availability of supplies. In this volatile emerging market, wider adoption of supply chain financing can help to stabilize supply chains in the entire region and accelerate economic growth. Companies who convert compliance processes into business innovations are optimizing cash flow not only within their own companies, but throughout Latin America, further strengthening their investments in these economies.