Strategic Components for the Mass Validation of Electronic Invoices in LATAM

Freddy Mercado March 9, 2021 Industry Analysis

electronic-invoicing-LATAM

While Brazil and Mexico have led in the adoption of electronic invoicing, since its inception a little more than 20 years ago, the rest of the region in Latin America (LATAM) is advancing in short steps, at a pace that we can safely describe as slow.

The recent events related to the pandemic have pushed many companies over the ledge, by not being able to maintain a minimum volume of business, especially related to the drop in consumer interactions, along with heavy regulations around human resources that forced them to keep payrolls going, leaving businesses with no alternative other than to declare bankruptcy.

Argentina, the forerunner of electronic invoicing, has been one of the economies hardest hit by the global health crisis, reaching 11.8% in the unemployment rate for the 2020 fiscal year, as reported by the media citing the International Labor Organization (ILO).

Despite available data that describes a difficult outlook for the LATAM economies, the region is projected as one of the most advanced in terms of electronic invoicing, ahead of economies in Europe or even North America, which describes a more open attitude towards information technologies in the financial field (FINTECH).

In fact, FINTECHs have emerged in the marketplace serving a variety of emerging needs, creating food delivery applications, consumer commerce (B2C) portals, and in many cases enhancing customer experience as part of their business value proposition.

What is Electronic Invoicing?

Electronic invoicing is the set of regulatory and technological resources that companies, and businesses, use to optimize the exchange of goods and services, through data transactions between businesses (B2B) or between the company and the consumer (B2C), in order to comply with the legal framework established by regulatory organisms that each economy has on fiscal matters.

In a way, electronic invoicing offers benefits in terms of costs, notably reducing the consumption of resources that favors the environment, as well as company finances.

Another immediate benefit consists in the reduction of processing time for each transaction, which in terms of money represents lower costs, all whilst reducing errors introduced by the people in tasks such as transcriptions, reception, and document filing, up to vendor payment processing.

Contrary to what could be inferred as an opportunity to replace accounting personnel with technological resources, electronic invoicing allows people to be reassigned to tasks of financial analysis and profiles with higher productivity, by incorporating additional tools for business intelligence (BI) and similar.

Finally, it is important to mention that electronic invoicing increases the levels of security and the emerging confidence in the use of these solutions, creating an ecosystem of companies that by adopting this type of technology position themselves as capable of reducing costs for the benefit of their customers, increasing in the process the levels of customer satisfaction.

Importance of Electronic Invoicing in the Value Chain (SUPPLIERS = ALLIES)

The systemic business approach of the present and future implies a very close relationship with customers and suppliers, the latter being no less important when it comes to generating value and generating strategies for the delivery of services and end products.

Taking care of suppliers is as important as the attention we provide to customers, which matters so much to us.

In the B2B environment, there are relevant tasks such as the billing processes that suppliers perform for the company in order to collect for services and goods provided. A healthy relationship in the cycle from the issuance of the invoice to the completion of the payment in agreed times generates a synergy that in difficult times can be an additional ingredient to get ahead.

A great advantage of electronic invoicing is that once the supplier issues the electronic invoice, to be sent to the purchasing company, normally by email, said invoice can be validated by digital means to certify that it is an authentic document and that it has been issued in accordance to government regulations and structures so that later the accounting and financial areas can credit the deduction of the payment of taxes. The problem becomes complex when the billing volume of all the suppliers as a whole is large, increasing the level of chaos (entropy) given the exchange of emails due to manual validations of each of the files carried out by the accounting areas of the company.

Steady yet uneven progress

The largest economies in the region have by far been the best adopters of electronic invoicing as part of the widespread commercial technology, with Brazil and Mexico being the markets where these solutions have performed best. An important exception in this first group is Chile, which despite having a moderate market size in comparison offers one of the most advanced and open technological platforms in the region.

In the second group are countries such as Argentina, Bolivia, Colombia, and Peru, along with their counterparts in Honduras, Costa Rica, Panama, and Paraguay. These countries, from a wide range in terms of market sizes or technological penetration, have in common regulatory models applied in a disciplined manner at various levels of state presence, which is why they have managed to keep electronic invoicing growing.

In the group of laggards are countries such as Venezuela, Cuba, and Nicaragua, where different factors attributed to a late start in regulatory levels, or challenges related to technological infrastructure, as well as an unfavorable relationship between formal and informal market players, are reflected in the low adoption of these technologies

Crisis and opportunity

Many of the great mobilizations of humanity have occurred in times of crisis, whether in the arts, health, culture, and of course in the economy.

From confinement in their homes, many people have been dedicating their time, effort, and knowledge to the development of products, some have managed to offer services through online work platforms, others have taken their culinary knowledge to the innovative business models of the “dark kitchen”.

A volatile economy and the ensuing consequences in the labor market show a high degree of correlation between the ability to adopt digital transformation strategies to survive the crisis.

Some of the technologies required are essential to maintain operations and optimize conventional processes, such as electronic invoicing.

We believe that an opportunity to generate value is raised in this time of challenges, and it is only necessary to connect with the appropriate partners to implement the most rewarding technologies for each industry and market segment.

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