The Mexican E-Invoicing Mandate And Its Impact on Business

If your company does any business in Mexico, you need to be clued up about the recent Mexican e-invoicing mandate.

By the end of 2013, hundreds of thousands of companies are going to have to make significant changes in order to be compliant with the new legislation.

The mandate now impacts companies earning more than 250,000 Pesos annually (approximately $20,000 USD) which includes most of the companies that interact with shared services. The major burden of this legislation is on suppliers, so AR operations in Mexico have a lot of work ahead of them. But the buyer and AP side shouldn’t be overlooked.

Here is an overview of some of the changes that will impact shared services:

The mandate removes the right to self-generate invoices.

The major change in this mandate is that it removes the right for suppliers to self-generate invoices.

Previously, companies could produce self-generated CFD invoices (Comprobante Fiscal Digital). As of January 1st 2014, companies will only be able to issue XML e-invoices in the specified CFDI format (Comprobante Fiscal Digital por Internet) generated by an authorized service provider.

Invoices will only be created by accredited service providers and all of them will be validated and authorized by the government. The organizations that can provide the authorized government signatures that the invoice requires are called PACs (Proveedor Autorizado de Certificación). Companies must work with a PAC or use an e-invoicing provider that partner with PACs. For example: OB10 partners with Buzón E and Invoiceware International use Diverza, amongst others. Tradeshift is partnered with Invoiceware International to ensure compliance. There are 67 PACs listed on the SAT website.

The supplier burden

Steve Sprague, VP of Product Strategy & Marketing at Invoiceware International said about “80% of the burden is on the AR side”. Just some of the things that they need to do to issue legally compliant invoices include:

• Suppliers must have a solution provider that can map invoices into XML format that the government requires
• The supplier has to make XML available to the government and to the buyers immediately
• Suppliers must create a PDF, and the file must be printed and must accompany the goods as they are shipped. If while en route the goods are inspected and don’t match the invoice, the shipment can be impounded

There is a good list of the basics explained on Invoiceware International’s site

This is now a real time process. Invoices will need to be sent to the government immediately, and ERPs will need to be configured to produce the invoice correctly and store the right information.

Changes to archiving requirements

At the 12th June 2013 AMEXIPAC event, the Mexican government also announced changes to archiving requirements. The Mexican government will become the storage facility for all legal invoices, allowing the government to reconcile stored invoices against a company’s tax returns. Markus Hornburg, OB10’s VP of Compliance, who attended this event said in his latest post “This is a big step towards real-time auditing and removes the possibility for anybody to tamper with stored invoices… Tax payers will be able to access their invoices online through apps that the government will create, which made me smile as most governments shy away from new technology like this.”

Hornburg said this move came as “quite a surprise.” He said this threatens to make those who provide just electronic archiving obsolete as “the government mainframe will be the one place to archive invoices.”

The impact on shared services and buyers

On the buyer side, companies need to be ready to receive the XML format, they will need to be able to validate the invoice and archive it for 5 years. Steve Sprague of Invoiceware International warned that “validation is crucial. There are lots of rules about what makes a valid invoice” These include rules such as the invoice must be certified within 72 hours of first being generated. If the invoice is incorrect in some way, it is not a valid invoice.

Because suppliers will have to make a lot of changes, AP departments must be aware that they may be receiving invoices that aren’t fully compliant. Sprague said that he has seen some cases where 15-20% coming into buyer in the new CFDI format were not valid for one reason or another. When an invoice is not valid, a supplier can’t just change an invoice, the supplier has to cancel, revalidate, re-process the invoice.

Sprague warned that companies do not want to process government invalid invoices as this will create audit risk and tax deduction implications.

The wider impact of the mandate

The major motivation for e-invoicing is to prevent fraud. Without introducing new taxes, this should ensure the government is getting the revenue from taxes, and hopefully reduce the amount of time spent on audit. Hornburg said “It was really interesting to see how forward thinking the Mexican government is and what they are trying to achieve. This is beyond what is happening in Europe at the moment.”

Plus, e-invoicing should create slicker finance processes, and as companies have higher three-way-matches, they should be in a place to pay earlier, opening up opportunities for dynamic discounting and supply chain financing.

Sprague said “this is the biggest e-invoicing change since Brazil in 2010”. We recommend if you do business in Mexico to get clued up about these changes. Ask your providers about what they are doing to make sure you are compliant.