Accounts Payable Processing in Latin America – The Case of Mexico

In my previous blog post, we started our journey through Latin America talking about my experiences and observations regarding vendor invoice processing focusing in Argentina. Today I would like to turn my attention to Accounts Payable (AP) in Mexico, arguably the most advanced electronic invoice market in the world in terms of adoption and sophistication.

How Electronic Invoicing Works in Mexico

From the perspective of vendors, all companies are required to issue electronic invoices (CFDIs) intended to replace standard invoices (CFDs). In the new regime, the burden of reporting tax information falls on intermediary organizations called PACs (Authorized Certification Providers). The justification for implementing electronic invoices is similar to the rest of the region:

  • Electronic is more efficient and safer than paper;
  • Electronically signed documents are unique: and,
  • It allows the government to enforce the tax code more effectively.

The process starts with a vendor forwarding an invoice draft for certification to the PAC. During the (online) certification, the PAC performs many checks and validations on the document, and declares the applicable taxes to the SAT (Tax Administration Service). If everything goes well, the PAC will add a digital addendum with attributes that include a folio number or UUID, time-stamp of certification, and a digital signature for the CFDI. This addendum (Timbre Fiscal Digital) then completes the CFDI that is sent to the customer as a pair of files, one XML and one PDF.

Why is Esker’s AP Automation the best way to process Mexico’s CFDIs?

From the perspective of accounts payable departments processing Mexico CFDIs, it is very hard to validate manually a transaction where more than one file is involved. Consider the data needed to validate and post the invoice. Some of the data is in a PDF file:

Additional data needed for posting the invoice will be present in the XML addenda:

  • UUID (this is a 32 digit hexadecimal string)
  • RFC
  • Invoice Date
  • Total Amount, etc…

Esker’s validation form takes data from both files and uses them to create an invoice in the ERP. Esker can use XML data to validate the transaction and store the data that the SAT will require for compliance—while the solution then uses the PDF purchase data to perform a two or three-way match and allow AP analysts and approvers to visually follow and validate the transaction in a way that is meaningful to them. In a traditional scenario (with no automation), we see AP analysts copying and pasting the UUID from the XML document, a 32 hexadecimal character string—It is very easy to make an error.

Why is it important to consider automation now?

The SAT has recently issued a mandate on Mexico businesses called “Contabilidad Electronica” (electronic accounting) that would require them to have all the transactional data that we talked about in this post available for reporting in their ERP starting with the 2014 fiscal year. This means that businesses that were not storing a piece of data like the UUID in the past need to go back and include it in all the invoices they posted to their accounting systems since January 2014. The date when this mandate goes into effect is still in debate, but according to this article from SAT, it appears that it will be as early as January of 2015 for a large number of taxpayers.

Alex Cereghini

Alex has worked for over 15 years in South Florida and Latin America as a consultant helping organizations put together solutions that enhance SAP, Oracle and Microsoft ERP environments. The primary focus of Alex’ career has been finding business value in process improvement for large multinationals that have complex shared services organizations, high transactional volumes and complexity. Alex is a frequent speaker at ASUG events in Brazil, Argentina and the US. Alex holds a BS in Computer Science from University of California at San Diego. When Alex is not transforming business processes, he enjoys the outdoors, endurance sports and wine tasting.

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