How Latin America Became a Global Leader in Electronic Invoicing

In 2003, Chile was one of the crucial first international locations on the planet to enforce digital invoicing, and a number of other different international locations have since adopted go well with. Latin The usa has lengthy been a world chief in digital invoicing, the apply of filing and formalizing each trade bill via the federal government. Of the arena’s 36 billion digital invoices issued in 2017, 15 billion got here from Latin The usa.

Digital invoicing (e-invoicing) has many benefits; amongst them higher transparency and keep an eye on over taxable source of revenue. In a area characterised through casual economies, e-invoices permit governments to trace and tax trade transactions extra as it should be. A minimum of 3 international locations are on their method to making e-invoices obligatory for each corporate inside of the following few years.

E-invoicing additionally is helping small companies take on the tax procedure extra successfully, getting rid of the wish to rent further accountants and complex tax-management instrument. Whilst processing invoices via the federal government would possibly appear abnormal, and even invasive, to trade house owners in america, Latin American trade house owners had been open to the method and its advantages. A number of international locations now require e-invoicing for each transaction, such a lot of small companies have needed to adapt briefly to conform. Alternatively, the time and capital they save consequently is worthwhile.

Some great benefits of e-invoicing for Latin American governments and trade house owners

E-invoicing necessities have prompted plenty of certain affects on native economies throughout Latin The usa. As an example, Mexico carried out e-invoicing for all companies beginning in 2012 and made it obligatory in 2014. Between 2012 and 2017, Mexico higher the tax income fee for the federal government from 37.four% to 57.7%.

Past making improvements to tax assortment charges, e-invoicing has allowed Latin The usa to turn into a world chief in factoring, in particular invoice-backed factoring. Factoring permits companies to get admission to liquidity through promoting their invoices at a bargain to lenders. Whilst conventional factoring in accordance with a couple of invoices ceaselessly calls for very top rates of interest (even supposing nonetheless a lot less than unsecured credit score), obligatory e-invoices imply factoring firms have the possible to get admission to extra information to again their loans . The opportunity of extra information way much less possibility and decrease rates of interest for small companies.

Latin The usa’s developments in those two fields have rubbed off on different international locations over the last few years. South Korea followed obligatory digital invoicing in 2011, Denmark in 2005, and Italy and Finland would require e-invoices for each B2B transaction through the top of this 12 months.

The usage of e-invoicing is on the upward thrust

One in all Europe’s main fintech firms, OakNorth, automates the research of knowledge from paperwork like e-invoices to offer loans to SMEs. The usage of a mixture of system studying and detailed monetary information, OakNorth is in a position to supply between $500Ok-$25M loans in an issue of days, fairly than weeks or months. It is a important development within the SME lending business the place SMEs these days face a credit score hole of $2.1-$2.6 trillion globally. A couple of firms in Latin The usa have already taken benefit of equivalent cases since many SMEs would not have get admission to to formal monetary establishments, like banks, that might supply them with loans to develop.

Argentina and Brazil declare to be the first within the area to make bill digitization obligatory in 2007 and 2008, respectively, even if Chile is regarded as the pioneer of imposing the generation in Latin The usa. Chile handed a legislation in 2014 that required all firms to offer e-invoices with the theory of slowly integrating all firms through the top of 2019. Prior to that, many companies used e-invoicing, however it was once no longer enforced.

Mexico completed their integration procedure through the top of 2018, changing into a regional chief in e-invoicing, with virtually 100% of companies filing invoices digitally. Just about each nation within the area has made e-invoices to be had, however no longer but obligatory. Brazil, Mexico, Chile, and Argentina are ceaselessly showcased locally – or even globally – as examples of the alternatives that include fashionable e-invoicing utilization.

Colombia was once the latest nation to oblige all companies to offer e-invoices; the legislation regulating it got here into drive on January 1st, 2019. Ecuador has a countrywide rollout plan to make e-invoices totally obligatory through 2023 through integrating new companies each six months. These days, Peru calls for e-invoices for over 100,000 huge firms and plans to come with SMEs through 2020. Uruguay, Paraguay, Bolivia, Guatemala, Panama, Honduras, and Costa Rica all have plans in position to combine e-invoicing into their tax laws as smartly.

A blueprint for the remainder of the arena

In spite of its a large number of casual economies and occasional banking charges, Latin The usa is a noteworthy chief of digital invoicing, and the area has been for a number of years. Now not simplest does this digitalization assist tax government stay monitor of transactions, however it additionally is helping trade house owners save money and time. They may be able to organize all in their funds on-line and retailer information that can be utilized to again factoring and lending operations.

Whilst america and portions of Europe nonetheless rely on legacy applied sciences in accordance with self-reporting and paper invoices, Latin The usa’s e-invoicing programs have soared forward, quashing tax evasion and making a course for SMEs to jump ahead within the virtual age.

Andres Abumohor

Andres Abumohor

Co-Founder and COO of OmniBnk, a neobank that gives monetary products and services to SMEs in Latin The usa.

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