TUNGSTEN & GLOBAL E-INVOICING ENABLEMENT TUNGSTEN + GLOBAL COMPLIANCE [PRO] by Xavier Olivera While some would call e-invoicing a lowly operational task that CEOs, CFOs and CIOs shouldn t invest the time to understand or explore, anymore than they should care about the latest in accounts payable automation and optical character recognition (OCR), the Spend Matters team has adopted a very different view of it, especially in emerging and global markets. We re not alone it turns out that more senior executives are actually paying attention to the receivables (on the buy side, including receiving
processing electronic invoices and payment) and payables (on the supply side, including billing, e-invoice submission, early payment) areas. The impetus for this is government regulations are demanding greater compliance from companies, including implementing approved invoicing processes with data verification and integration to the ERP system in Latin America and other regions. And, as expected, the C-level wants to avoid any financial and tax penalties, causing these execs, in turn, to ensure the company s e-invoicing system is in order. Tungsten, an e-invoicing network provider, is front and center in facilitating global compliance, although it has done a rather poor job at marketing what it is actually up to. In this 2-part Spend Matters PRO analysis, we explain what Tungsten is doing in enabling global compliance efforts, going beyond the basics of what Latin America and the Rise of Compliance Corruption breeds radical approaches especially when it comes to making sure the taxman gets paid. Perhaps, then, it is no surprise that governments in Latin American countries are taking the lead in forcing companies to implement e-invoicing not just for basic compliance reasons e.g., to avoid money laundering risks by engaging with third-party companies without a proper verification process but also to have a real-time audit capability and to improve the battle against shadow economies. compliance Mexico is one of the success stories here, having eliminated 4% of the shadow economy in a single year by introducing e-invoicing mandates, according to the Mexico Federal Tax Institution SAT. Other countries in Latin America and around the world are following this lead, including Turkey, Russia, Chile and Brazil in implementing e-invoicing mandates to boost their own legitimate economies. The importance of complying with new federal and state government regulations is why the C-level is joining the e-invoicing discussion. The consequences associated with poor invoicing practices are also drawing the attention of the executives. Believe it or not, CFOs actually do risk time in jail if they fail to comply with government regulations in Mexico and other markets, which include the validation and use of electronic documents (invoices) and the match of their annual financial results to their reports to government.
Where Tungsten Comes In Tungsten s e-invoicing and global compliance approach leverages a combination of its standard onboarding and e-invoicing management capability with a truly localized (and global) supplier network model that creates comprehensive audit trails. The provider can also offer local financing in exchange for early payment, although this capability has been scarcely adopted to date. (Invoiceware is also targeting a trade financing offering for Latin American countries, which will create a fascinating invoicing and compliance payables/receivables financing battleground.) Tungsten is a rather unique supplier network no supplier can start transacting without going through a formal due diligence/ know your customer -like process. This insures that the supplier does in fact exist and has the proper credentials or certifications to transact with the corresponding client. This may sound like table stakes, but its competitors generally do not offer the same process or level of assurance on a regional basis. Most importantly, the process provides a checkpoint so multinational companies can feel comfortable doing business with suppliers that meet specific compliance requirements. Tungsten does not outsource compliance. Rather, its regional supplier onboarding process is done in-house and provides a level of control and transparency that is hard to match aside from the regional capabilities of Invoiceware and some of the local work Ariba/ Quadrem and SAP have done. Incidentally, Tradeshift loves to poke fun at Tungsten for the various elements of its processes, but Tradeshift itself has had to outsource its efforts entirely in certain Latin America countries. But How Does it Work? Each country where Tungsten offers its solution has different setup and onboarding requirements, which Tungsten makes sure are followed and reviewed by an official tax
advisor to ensure the solution is technically and operationally ready in that location. The Tungsten Network provides support throughout the onboarding process, including making sure all legally required data fields are available for completion, checking for the presence of data (e.g. VAT ID, addresses, etc.) and the accuracy of that data (e.g. supplier s directors), as well as making sure digital signatures are according to the applicable law, etc. Tungsten uses a process that confirms authenticity of the suppliers in two ways. First, it contacts all suppliers, including gathering all the necessary information. Second, it verifies and validates the information with external databases (D&B and others). Tungsten also does its own research as a regulated bank (Tungsten Bank plc, a wholly-owned subsidiary of Tungsten Corporation plc) depending on the level of rigor required in a particular customer or region. Archiving, too, is needed at times on behalf of the supplier and/or buyers, and Tungsten supports these activities as required in each country. Tungsten s service also supports suppliers in their responsibility to submit compliant invoices. However, Tungsten Network is not (and cannot) be responsible based on the law to identify the nature of the transactions or check the applicable tax mechanisms that rests with the finance, A/P and legal teams within a customer organization.
In certain cases, Tungsten partners with local service providers that are certified by the local governments to issue validated invoices. It is also investing tens of millions of dollars to become compliant in several countries inside Latin and South America, including Mexico, Chile and Brazil as well as other countries outside the region such as Turkey, Russia and India. Additionally, Tungsten is investing additional funds on a monthly basis to ensure ongoing maintenance support for changes of compliance requirements. In short, the Tungsten value proposition is to deliver a complete regional and localized e-invoicing service in what Spend Matters views is really a global managed service for its clients not just a technical solution, e-invoicing network or platform. At the core, this is in fact very different from what many of its competitors purport to offer. As our coverage continues in Part 2 of this analysis, we will explore in more depth how Tungsten enables localized compliance. THE DEVIL IN THE COMPLIANCE DETAILS Global e-invoicing compliance is hard. And few supplier network and e-invoicing providers are truly compliant in the actual manner in which they claim especially on a regional basis around the globe. Tungsten is one of the exceptions to the rule, in part because of its own paranoia surrounding all the nuances and minutia of making sure its customers are compliant on a country-by-country basis in Latin America, Turkey and elsewhere. In the second installment of a 2-part Spend Matters PRO analysis, we explore the details of Tungsten s global compliance approach, starting first with Tungsten s efforts in the area of content validation. How Far is Tungsten Going in Content Validations? In the area of global e-invoicing compliance, validations are typically divided between fiscal and commercial areas. But Tungsten packages both together in its offering to comply with the tax government institution requirements; it does this in certain cases by partnering with local certified service providers to avoid having customers fail fiscal validations. For commercial validations, Tungsten s service assures the compliance of any addendum(s) or commercial requirement(s) that its clients may need to provide for the invoices
integrates with ERP and government data. All client validations happen before data hits the system of record (i.e., ERP) or government systems. Tungsten has a set of rules that enables suppliers to create compliant invoices using the Tungsten platform. These rules are applied through the Tungsten Network Rules Engine. They include: Global population rules Country specific rules Global validation rules Buyer rules The goal of the collective set of rules is to control invoice content and accuracy to the greatest degree possible (even though the supplier remains responsible for providing the accurate invoice content that is required by applicable local law, buyers are on the hook as well). The Complexity of Regional Requirements complexity Tungsten positions itself a software-as-a-service (SaaS) provider by delivering a model in which it offers a full invoicing service (not a software solution). This includes electronic invoicing, invoicing financing and supplier onboarding with proper validations. However, Spend Matters would describe we believe more accurately Tungsten as a global e-invoicing managed service that takes on the heavy lifting of managing many of the regional requirements for customers. Regional requirements vary. For countries with highly complex taxation laws, like Brazil, for example, Tungsten partners with external tax validation system providers to ensure that the invoice tax integrity is accurate and payments will be made. Sophisticated workflow and integrations happenin the background, ensuring that the clients are comfortable with the invoices they are receiving and paying. Tungsten can also offer 3-way matching compliance integrated with regional e-invoicing approaches. However, customers need to have their workflow solution built to Tungsten s network offering (Tungsten offers its own module here, but procurement/ap can also use other systems).
Some countries have their own requirements that could affect how the Tungsten solution is configured. For example, Turkey will not accept the processing of invoices from outside of the country, so the computer or server that processes information must have a proper IP country address. Another unique country requirement is in Japan, which does not allow companies to store invoice information outside Japan. The archiving of invoices in this case must be done within Japan. As we discussed previously in our analysis, Tungsten has somewhat quietly invested large amounts of capital to maintain compliance with all the countries where its customers operate. Part of these efforts require engaging in regular maintenance that insures that if there are any modifications to the government tax or reporting requirements or to a law, its clients will make necessary changes (Tungsten will do as much as possible on its customer s behalf, with their permission). On some levels, this makes Tungsten more like an educational or information partner (providing content in bi-weekly newsletters, webinars, etc.). However, Tungsten is not a complete outsourcer (e.g., it will not get involved in any ERP modifications or customizations regionally or globally).
Summary Companies that think they are compliant globally especially in Latin America because their einvoicing provider has the TrustWeaver stamp of approval are potentially opening themselves up to material risk and even jail time for their executives. To truly globalize an e-invoicing service is not an easy task at least not in terms of compliance where complicated government tax and financing reporting regulations exist. Tungsten stands out from its peers by offering a truly global e-invoicing managed service that supports multinational companies (that operate in several countries) in compliance with local regulations. Nor is Tungsten sitting still its roadmap for 2015 includes adding new countries including Japan and India to its footprint. (Indian e-invoicing compliance alone is enough to make the head spin, but that is a topic for another day.) Tungsten has its sights set on other countries for the future as well. To expand its market reach and ability to serve customers locally, Tungsten partners with global BPO firms such as Infosys, Genpact, IBM and HP as well as local partners such as Estafeta in México.
Recommendations Spend Matters recommends that potential users of a global e-invoicing service/solution: Invest the time to work with on-the-ground partners (including tax/audit firms) to understand local compliance requirements Think about a global program/architecture at the core of any effort (if the organization is a multinational corporation) Get the time to know Tungsten s global compliance experts, who know as much about thetopic of regional e-invoicing compliance as anyone Do their due diligence on a country-by-country basis to insure that their e-invoicing provider meets all local requirements Look at Tungsten as much as a global e-invoicing managed services provider as a supplier network or SaaS/cloud-based service and make sure to compare Tungsten on an apples to apples basis in an evaluation process to other providers that offer (or claim) regional compliance support and capabilities ABOUT OUR PARTNER TUNGSTEN CORPORATION aims to be the world s most trusted business transaction network by using data intelligently to strengthen the global supply chain. Tungsten Network is a secure e-invoicing platform that brings businesses and suppliers closer together with unique technology that revolutionizes invoice processing, maximizes efficiency, and improves cash flow management. The netork also provides users with real-time spend analysis through Tungsten Analytics, and offers access to Tungsten Early Payment, a form of alternative finance for businesses. Tungsten serves 56% of Fortune 500 and 67% of the FTSE 100. CONTACT DETAILS Randy Randolph Vice president, business development T: +1 770 698 1452 E: randy.randolph@ tungsten-network.com W: www.tungsten-network.com