Mexico’s E-Accounting Legislation Drives Accounts Payable Efficiencies

Spend Matters welcomes this guest article by Steve Sprague, vice president of product strategy at Invoiceware International.

As Mexico’s e-contabilidad (e-accounting) mandates go into effect this quarter, companies operating in this country need to take a hard look at their compliance platforms and financial processes. In addition to the previous e-invoicing mandate required by Mexico’s tax authority, the SAT, the government has added accounting reports to its list of required business processes. Companies now have to provide their chart of accounts, monthly trial balances and journal entries to support tax deductions.

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Of course, systems managing the required e-invoicing and e-accounting processes should ensure compliance in order to avoid the fines and penalties that reporting errors can incur, but companies should look beyond the requirements to see how leveraging this new legislation can enhance their business processes.

First, let’s talk about the risks associated with this e-accounting mandate. In the first 6 months of 2014, for every peso that Mexico's tax administration service spent on audits, it recovered 61.1 pesos (US$4.65), according to BNamericas – that’s a huge return on investment, one that the SAT will look to increase further as it begins enforcing e-contabilidad this year. So, with these fines and Mexico’s increased focus on audits, it’s clear that non-compliance or compliance errors are not an option. The question becomes, will your company do what it takes to get by, managing compliance at the bare minimum to avoid these fines? Or, will you see the opportunities that these mandates provide?

E-contabilidad augments Mexico’s existing e-invoicing requirements. Now, the government will not only review and approve invoices, but also ensure that those invoices match the general ledger. Although some companies may see this process as cumbersome, companies can actually use this standardization to drive automation and transform cash flow processes. Three hidden benefits to this requirement are:

  • Tax accuracy: Automating the reporting of XML invoices into your tax reporting ensures that all of your tax deductions and credits are already government approved, eliminating the risk of audits. Such automation assures that for every journal entry, there is a verified, matching invoice.
  • Accounts payable processing improvements: Companies can improve their inbound receiving efficiencies by as much as 50% by verifying invoice fields even before goods arrive. These mandates force companies to collect supplier XMLs and ensure a 3-way match between the invoice, purchase order and goods received. Automating this data into the general ledger ensures all financial records are in sync.
  • Cash flow optimization: Because these XML invoices must be verified before goods are received, invoices can be approved for payment as soon as goods arrive. Optimizing working capital in this way drives liquidity into the supply chain base.

How will your company approach e-contabilidad implementation? Will you simply react to the legislation, implementing systems to comply with the mandates that don’t integrate with your existing systems or provide business value? Or will you respond to these mandates strategically, leveraging the standardization they require for accounts payable enhancements and cash flow improvements? Companies implementing the ladder are realizing significant process improvements and return on investment. Will you be one of them?

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