Mexico’s New E-Invoicing Requirements: Supply Chain, Archiving, Integration Compliance

Mexico recently accelerated the implementation of its e-invoicing requirements. The compliance requirements under the Comprobante Fiscal Digital por Internet (CFDI) are complex by any electronic invoicing standard. In a multi-part series featuring an interview we recently conducted with Invoiceware’s CEO Scott Lewin and VP of Marketing/Product Strategy Steve Sprague, we’ll explore the impact of the legislation and how it came into play based on the latest announcement.

Spend Matters: Am I responsible in any way for lower-tier (i.e., not tier 1) supplier e-invoicing requirements in Mexico?

Invoiceware: You are not responsible for the supplier. But the taxes that are registered by any supplier with the SAT will be the taxes you are responsible for in coming up with the proper tax remittance to the government for the value added tax. Remember that most companies pay their VAT on the net to the government: subtracting what they are charged by their suppliers in aggregate from what they charge their end customers. This net equals their VAT liability. If suppliers register an invalid VAT, or you are deducting non-registered VAT, it is considered tax fraud for the buyer which is accompanied by fines and criminal charges up to jail time.

Spend Matters: Does Mexico present (with the new requirement) the strictest archiving requirement that you have seen? Who should be responsible for archiving? Could you comment on the standard policy of the well-known supplier networks when it comes to archiving to meet regional compliance requirements?

Invoiceware: Mexico is not the strictest; however, similar to Brazil – the XML is now what counts. Paper is not a legal document during an audit, so the validating and archival is critical. The current law states the XML from your supplier needs to be archived for 5 years.

Interestingly enough, the common networks referred to on Spend Matters have taken little to no action. Tradeshift is currently the only globally focused network that has made a significant investment in a Latin America Strategy. Tradeshift embedded the Invoiceware International compliance engine into their business platform as they saw these changes coming and realized the importance of the Latin America market. To this day, most of the traditional eInvoicing Networks – including the largest are not active, have not established businesses in the region, don’t carry the detailed ERP knowledge required to implement the requirements and fail to address both the outbound and inbound requirements.

Also, you often hear companies state that they will just embed a signing partner from Europe. This should be a massive red flag as explained in a previous section – the process is not similar at all.

Lastly, supplier fees have been an issue for these networks (outside of Tradeshift) in many rollouts.

Spend Matters: What type of buy-side integration and linkages are required given that my suppliers must be compliant? How can I integrate a Mexican-specific approach with a global e-invoicing strategy? Should I even do this)?

Invoiceware: It is possible to integrate Latin America into a global approach as long as you understand the following:

You can’t do a PO Flip approach or just force a company to use your network/portal. As the supplier has to do e-invoicing from a government perspective, they are already doing it. Additionally, there are sequencing requirements that are fundamentally unique in countries like Brazil.

  • Lesson: don’t focus on eliminating paper or supplier rollouts. Focus on the easiest form of collection of the invoices (email and portal uploads)
  • Lesson: suppliers already have to create a standard electronic invoice – how is charging them a transactional fee to send it or a percentage of spend a value just for e-invoicing?

Your organization should understand the process flow (i.e. posting invoices) because an invalid invoice (whether for government or commercial purposes) needs to be canceled by a supplier or adjusted later with a validated credit/debit note depending on the country.

  • Compliance is not just a signature – you need a comprehensive change management program in place as the mandates are always evolving (this will be the fifth major change since 2008 in Mexico)
  • Separate Collection combined with Validation from Processing. These invoices have a different collection and validation need, but once they are in the corporate system, you can use your workflow tools that are standard for the corporate.

Latin America has a huge opportunity for businesses on the account payable track:

Transparency – including lower costs of audits, personnel for tax issues, auditability for FCPA compliance (Foreign Corrupt Practices Act) – this is more for US companies doing business in Mexico, real-time understanding of VAT remittances, and taxes owed to the government, etc.

Business Process Efficiency

  • Days Sales Outstanding – customers will know this is a valid, government approved invoice and can be safe in paying if it matches commercial terms and deducting VAT on remit to government
  • Accounts Payable – can do straight through processing (i.e. touchless invoice processing) by automatically matching eInvoice to Purchase Order and Goods Receipt
  • Simplify warehouse – inbound receiving using the PDF on the truck with the bar code to simplify data entry and get goods into the warehouse and off the unloading docks fast
  • Cash management and trade receivables financing  

Check back for the concluding post in this series when we explore the Invoiceware’s approach to Mexican compliance, pricing models (e.g., buyer/supplier fees), compliance guarantees and solution interoperability (Ariba, Basware, etc.) 

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