CFDI or Mandatory e-Invoicing in Mexico: Challenges and Opportunities
México, one of the largest economies in Latin America, is joint world leader in electronic invoicing along with Brazil.
This North American country, which began to define its digital billing system through the so-called CFD (Digital Tax Invoice) gave a definite boost to this system in 2011, developing it into the CFDI (Digital Tax Invoice via Internet), making it today the only system used in practice in the country in the billing processes of businesses of all shapes and sizes.
Electronic invoicing in Mexico is now an unstoppable, well established reality and in an ongoing process of review. A reality with numerous lights, the occasional shade and, most of all, major challenges still looming ahead.
Between 2005 and 2013 in Mexico, some 10 billion electronic invoices were issued. Taking into account that these data have been growing exponentially in recent years, it is easy to suppose that this figure will have grown considerably by the end of 2014
But what is the reason for such widespread use of e-billing in Mexico? Mainly the fact that use of the CFDI, which is how the electronic tax document used to issue invoices is designated, is mandatory. Nobody can have missed the fact that the monitoring of invoices, as a support to document business transactions, will prove very useful to the tax authorities to ensure due payment of the taxes associated with every trading operation.
In this sense, the SAT or Mexican Tax Administration Service has developed a system whose principal raison d'être was to exert this control, in such a way that only those bills declared online to the SAT with the pertinent electronic certification will be legally valid for tax purposes.
But beyond the obligation, electronic invoicing provides key competitive advantages for companies: Better control systems, greater efficiencies, lower costs, shorter response times, etc. Achieving this level of efficiency calls for something more than simply issuing electronic invoices of an obligatory nature. An improvement in management processes is also required, along with greater technological development and a culture of ongoing improvement. It requires a decisive boost for e-commerce among companies in general, private individuals and public administrations, and which would be achieved largely by placing the focus on two major objectives:
Sending 100% of bills in electronic format
If practically 100% of invoices issued in Mexico are electronic, why are so many still printed on paper today? The paradox arises that a high percentage of these documents have to be printed out in order to reach their destination. The same technological solutions employed in the issue of CFDIs should also be prepared to receive them, thereby automating the delivery and integration of the invoices into management systems. On many occasions the problem is not so much technological as procedural, and calls for diverting the control systems based on workflows of authorizations around the document on paper towards parallel models based on electronic systems.
Integrating new electronic transactions
The invoice is a key document in business relations, but it is still just another and the final link in the chain.
Why not take advantage of the same technology used for issuing electronic invoices to manage purchase orders or dispatch advices in electronic format? Why not extend technology-based models such as EDI (Electronic Data Interchange)? The possibilities of keeping track of a bill with its corresponding purchase orders and delivery receipts would help to automate sending, reception and query processes and make them more efficient.
Building an electronic society is hard work, which in the case of Mexico already has a solid foundation thanks to e-invoicing. Continuing to taking steps to overcome the fiscal requirement of issuing invoices, and making it a real opportunity to make the Mexican economy even more competitive and efficient, is the big challenge that lies ahead both for public administrations and private initiatives.
This article is part of an analysis of electronic invoicing in Mexico, performed by the online magazine, The Paypers.
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