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In the third part of our series examining how the transition to Brazil Nota Fiscal Version 3.1 can be simplified using a hybrid cloud compliance model, let’s review how managed services offer economies of scale to reduce annual support costs.  On-premise solutions force you to monitor, design and implement all Nota Fiscal issues, requiring significant SAP customization and maintenance.  This is a complex task for any company, but especially those operating on a single global instance of SAP ERP.

With so many complicated SAP issues, it’s inefficient to designate internal staff to keep up with the legislation and constantly implement the changes, especially when the requirements are largely the same for all companies.  Managed service providers provide two huge benefits over on-premise solutions:

  1. First, managed services - hybrid cloud deployments in particular - can offer economies of scale extended across their install base which turns into a hard cost savings in annual support and maintenance costs.

  2. Second, managed services - and more specifically hybrid cloud solutions - can buffer the global SAP Center of Excellence (COE) from changes. Some issues, such as extended attributes and customer customizations, are absorbed by the service provider. Additionally, most upgrades can be done without affecting the core SAP ERP platform.

By transitioning to a managed service, your internal teams can:

  • Avoid the burden of research, design and implementation. With an on-premise solution, the IT organization must figure out how the Brazil changes will affect their SAP deployment.   A service provider will take over these tasks in their entirety.
  • Eliminate fire drills. Most global SAP teams look at rolling out SAP ERP in waves across processes and countries, yet the pace of legislative change in Brazil is constant and isn’t timed to the SAP upgrade strategy. Often, lead times to get on the COE calendar can be 6 to 8 weeks, and in many cases the COE only wants to do major upgrades once or twice a year.  A managed service provider that guarantees your systems are maintained eliminates unforeseen fire drills as they know when the legislative changes occur and coordinate the updates.
  • Reduce upgrade timing issues for companies running an N-1 maintenance strategy. It is common for the SAP maintenance teams to run at least one support pack behind the latest releases.  Yet, when SAP releases new country requirements, they are released in the latest support packs. Companies running older versions face non-compliance unless they enlist their maintenance teams to decipher what is needed and how it will affect the SAP system they are running. A managed service provider understands your company’s unique systems and assists with the changes.
  • Simplify problems with SAP customizations and extended attributes. It is not always easy to get the data from your SAP configurations into the Nota Fiscal format. And in some cases, the data doesn’t come from SAP at all, but are required to complete NFe transactions. For example, when you bring in goods to the country, you must declare the fiscal value of the goods, which often comes from the Freight Forwarder. Despite not being a typical SAP field, this information must be transformed, validated and tracked.
  • Reduce the cost of maintaining compliance. With fewer dedicated internal resources needed, software maintained by the service provider, and minimized failure points (and therefore fewer business disruptions), hybrid cloud compliance solutions can reduce support costs by 80%.  For example, when Philips transitioned off an on-premise software for Brazil Nota Fiscal compliance, it reduced annual maintenance costs by upwards of 80% and increased productivity of local Brazil business business users by 25%!

Companies over the last 6 months have been working diligently on upgrading Brazil Nota Fiscal environments to version 3.1 . And while the IT projects is almost over, the business impact has yet to begin.

 

Are you at risk of not being able to ship?

If you are relying on the new on network contingency models of the SEFAZ, you are at risk of not being able to ship. There have already been issues with the Sao Paulo web service back up known as SVC.  Over the last 6 months, the government has been changing the way that they manage contingency as they have eliminated SCAN and DPEC.

 

Today there are three options.

  1. SVC (replacement of SCAN): SVC is a backup web service that has the benefit of not requiring reconciliation and after the fact registration at the state. However, it is not an end companies’ choice but rather the government’s decision to switch. Key takeaway: If this is your only backup plan, then you are at risk of not being able to ship.
  2. EPEC (now managed under Eventos): EPEC is the ability to connect to a national web service, when you choose, if a particular state web service is down.  The problem many people have, and the reason many companies have not implemented this is that even after you register with the national web service, you still need to get approval from the state servers. In other words, you need to reconcile your documents.Key takeaway: If you have not built this into the process – it can mean spreadsheets and nightmares for controllers so that they don’t find themselves at risk of audit.
  3. FS (provisional DANFe): FS is actually the only true way to ensure you can always ship.  It is your choice to switch at any time. And if you have configured your solution correctly, you can ship as long as you have connectivity and power to your printers.  Key takeaway: Much like EPEC, you must reconcile your invoices with the state servers once you come back on line.

 

Do you have all your vendor XML since 2009?

If you ask this of your local finance teams in Brazil, you will find in over 90% of the cases the answer is a resounding NO! This is more than likely due to the fact of changing ERP systems and manual processes. However, the law does state that you should collect, validate and archive these Nota Fiscals for a period of 5 years.  The penalty is approximately 500 Reais (250 USD) per XML issue. I spoke with a company the other day that was missing 100,000 XML since 2009 – that is an amazing 25 Million USD potential fine based on the law.

 

Fortunately, the government released a “Recovery XML” option. Organizations can and should use this event to ensure that they have all of their invoices registered to their CNPJ tax id.  Now, this is important. Don’t wait to do this recovery.  There is a limit of how many XML you can download from the servers, so it will take time. And if you are audited, they won’t wait for you to go back and collect. Look at this new web service as a good thing (you can get all the XML registered to your name in your archive) but also look at it as a bad thing (the government took any excuse away of not having the XML because they provided this new service). And the SEFAZ, provides this automation for their benefit.  In our next blog, I will discuss how this Recovery XML process can be used to drive Inbound Logistics, but in the short-term ensure you address these issues immediately.

The Hybrid Cloud Compliance Model Eliminates Failure Points and the Need for Constant Monitors

As we continue to examine the benefits of leveraging a hybrid cloud model for Latin American e-invoicing compliance in preparation for the transition to Nota Fiscal (NFe) Version 3.1, let’s take a look at the traditional failure points that can be found in the typical NFe architecture.

Typical corporate compliance architectures were developed as IT teams faced three distinct realities:

  • Corporate IT desired to centralize all financial processes on a common SAP ERP platform and replace local ERP solutions for consistency and controls.
  • Because many multinationals achieved growth by acquiring companies in Brazil, there were legacy systems already in place. With the centralized SAP transition, the standard operating procedure was to integrate the existing local compliance system. This created an integration project that was often outsourced to local consultants.
  • Many companies use a common SAP maintenance strategy known as (N-1), meaning they stay one support pack back from the latest release. Often multinationals are many service packs behind because applying OSS notes to a highly customized and configured SAP systems is a significant undertaking.

 

With these three factors in play, companies are usually left with three distinct silos of support and change management, equating to three (or more) potential failure points each with their own support teams:

Brazil3Tierarchitecture.png

Layer the day-to-day support and constant change management that Latin American compliance requires on top of these silos, and you’ve got a complex, expensive and time-consuming compliance infrastructure.

Problems can occur in any functional area, requiring a “search and rescue” mission as teams first have to find the problem and then have to identify the functional area that needs to fix it, which may involve:

  • The SAP support team
  • The middleware support team or the 3rd party system integrator that built the connector
  • The local e-invoicing solution support

 

As this “search and rescue” mission takes place, shipping is delayed, or worse, shut down. Many companies experience shut downs for 3-7 days a year when on-premise solutions stop working due to technical issues or government changes.

 

Luckily, there is a better way. When you consider the potential issues and the overall cost to support these three components, it’s apparent why the constant changes in 2015 represent a good time to consider managed service providers that implement, monitor and maintain all three components as a complete end-to-end solution.  Wouldn’t it be nice to pick up the phone and call one expert, rather than going on “search & rescue” missions to find and fix the problem every time there is an error?

 

Invoiceware International’s hybrid cloud model lets your company benefit from significant local expertise, lessons learned and economies of scale.  After all, why try to manage something individually that is the same for all companies operating in Brazil?