How Latin America Became a Global Leader in Electronic Invoicing

In 2003, Chile become some of the first international locations on this planet to put in force digital invoicing, and a number of other different international locations have since adopted swimsuit. Latin The us has lengthy been a world chief in digital invoicing, the observe of filing and formalizing each trade bill thru the federal government. Of the sector’s 36 billion digital invoices issued in 2017, 15 billion got here from Latin The us.

Digital invoicing (e-invoicing) has many benefits; amongst them greater transparency and keep watch over over taxable source of revenue. In a area characterised by means of casual economies, e-invoices permit governments to trace and tax trade transactions extra correctly. No less than 3 international locations are on their technique to making e-invoices obligatory for each corporate inside the following couple of years.

E-invoicing additionally is helping small companies take on the tax procedure extra successfully, getting rid of the want to rent further accountants and sophisticated tax-management instrument. Whilst processing invoices thru the federal government would possibly appear unusual, and even invasive, to trade homeowners in the United States, Latin American trade homeowners were 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. On the other hand, the time and capital they save because of this is worthwhile.

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

E-invoicing necessities have induced a variety of certain affects on native economies throughout Latin The us. For example, Mexico applied e-invoicing for all companies beginning in 2012 and made it obligatory in 2014. Between 2012 and 2017, Mexico greater the tax earnings price for the federal government from 37.four% to 57.7%.

Past bettering tax assortment charges, e-invoicing has allowed Latin The us to transform a world chief in factoring, particularly invoice-backed factoring. Factoring permits companies to get right of entry to liquidity by means of promoting their invoices at a cut price to lenders. Whilst conventional factoring in line with a couple of invoices ceaselessly calls for very top rates of interest (even though nonetheless a lot not up to unsecured credit score), obligatory e-invoices imply factoring corporations have the possible to get right of entry to extra information to again their loans . The potential of extra information way much less possibility and decrease rates of interest for small companies.

Latin The us’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 by means of the tip of this 12 months.

The usage of e-invoicing is on the upward push

One in all Europe’s main fintech corporations, OakNorth, automates the research of information from paperwork like e-invoices to offer loans to SMEs. The usage of a mix of device studying and detailed monetary information, OakNorth is in a position to supply between $500Okay-$25M loans in an issue of days, fairly than weeks or months. It is a important development within the SME lending trade the place SMEs these days face a credit score hole of $2.1-$2.6 trillion globally. A couple of corporations in Latin The us have already taken good thing about identical cases since many SMEs shouldn’t have get right of entry 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, despite the fact that Chile is thought of as the pioneer of enforcing the era in Latin The us. Chile handed a legislation in 2014 that required all corporations to offer e-invoices with the theory of slowly integrating all corporations by means of the tip of 2019. Ahead of that, many companies used e-invoicing, however it was once now not enforced.

Mexico completed their integration procedure by means of the tip of 2018, changing into a regional chief in e-invoicing, with nearly 100% of companies filing invoices digitally. Just about each nation within the area has made e-invoices to be had, however now not but obligatory. Brazil, Mexico, Chile, and Argentina are ceaselessly showcased domestically – or even globally – as examples of the alternatives that include popular e-invoicing utilization.

Colombia was once the latest nation to oblige all companies to offer e-invoices; the legislation regulating it got here into pressure on January 1st, 2019. Ecuador has a countrywide rollout plan to make e-invoices absolutely obligatory by means of 2023 by means of integrating new companies each six months. Nowadays, Peru calls for e-invoices for over 100,000 huge corporations and plans to come with SMEs by means of 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 sector

Regardless of its a lot of casual economies and occasional banking charges, Latin The us is a noteworthy chief of digital invoicing, and the area has been for a number of years. Now not handiest does this digitalization assist tax government stay monitor of transactions, however it additionally is helping trade homeowners save money and time. They are able to organize all in their price range on-line and retailer information that can be utilized to again factoring and lending operations.

Whilst the United States and portions of Europe nonetheless rely on legacy applied sciences in line with self-reporting and paper invoices, Latin The us’s e-invoicing techniques have soared forward, quashing tax evasion and making a direction 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 us.

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