Hirschmann Automotive: Mexican CFDI legal requirement

 

Thanks to the necessary SAP adaptions, Hirschmann Automotive complies with the CFDI legal requirements and can do business in Mexico

Hirschmann Automotive made a strategic decision to open a plant in Mexico. One of the challenges that came along is to meet the local Mexican legal requirements. Hirschmann Automotive chose PIKON to support the process of adapting their SAP system to the local CFDI regulatory requirements imposed by the Mexican federal government. This resulted in an integrated and fully automated e-invoicing process and a maintained e-accounting procedure that enables Hirschmann Automotive to do business in Mexico without worrying about high penalties.

 

About Hirschmann Automotive

Hirschmann Automotive is an internationally respected automotive supplier. Customers include renowned global automotive manufacturers and suppliers. Since more than 50 years, Hirschmann Automotive have specialised in contacting and connector systems, sensor systems, special cable assemblies and overmoulded technology. If it is about standard products or individual customised solutions, their product spectrum ensures reliability under the most extreme conditions and in highly demanding areas within a vehicle. Hirschmann Automotive operates on a global scale with production facilities in 7 different countries, including Mexico.

  

Why Hirschmann Automotive needed to adapt its SAP system to do business in Mexico

In order to serve the American market more quickly and more directly, Hirschmann Automotive opened its Mexican plant in Guanajuato in 2016. As this Mexican strategy came into focus, among others, the following new challenges arose for the business departments:

  • The Mexican business processes needed to be integrated in the central SAP system
  • The cultural differences needed to be managed
  • New employees needed to be trained
  • Mexico-specific legal requirements needed to be met

One of these Mexican legal requirements is CFDI (Comprobantes Fiscal Digital por Internet). Since 2014, the Tax Administration Service (SAT) of the Mexican federal government have made this electronic billing regulation come into force, requiring any company that generates an annual revenue of more than 250.000 pesos (approximately EUR 11.000) to use a digital tax receipt called a Comprobante Fiscal Digital por Internet (CFDI) - essentially an electronic invoice that allows immediate verification of the identity and tax eligibility of the person signing the document. Next to the e-invoicing, the following e-accounting requirements need to be fulfilled:

  • The account mapping with regards to the Mexican legal account grouping (done by the Chart of Accounts) needs to be initially registered at the SAT. Each subsequent modification to the Chart of Accounts needs to be declared as well.
  • All account balances need to be submitted monthly to the SAT
  • If requested, detailed journal entries, including E-Invoicing information, must be made available to the Mexican government

If you are also doing/ planning to do business in Mexico and using SAP ERP as a digital backbone for the automation of your business processes, it is strongly recommended to adapt your SAP system accordingly to comply with the CFDI regulation.

For many years now, PIKON has been able to create an added value for Hirschmann Automotive by optimising and implementing their financial and controlling processes in their SAP ERP system. Because of this long-term SAP support partnership, Hirschmann Automotive asked PIKON to make the necessary e-invoicing and e-accounting adjustments in their SAP system as required by the Mexican CFDI regulations. This enabled Hirschmann Automotive to focus on overcoming the other challenges that came along with opening their Mexican plant.

 

"Opening a new plant in a country where you haven’t done business before, is a strategic decision bringing along new challenges. In this context, complying with local legal requirements is often a complex matter. We could rely on PIKON to make our SAP system CFDI-compliant and are able to do business in Mexico according to the regulations of the Mexican federal government."

Josef Summer, CIO at Hirschmann Automotive GmbH 

 

 

How PIKON made Hirschmann Automotive’s SAP ERP system comply with CFDI

In order to have Hirschmann Automotive’s SAP system CFDI-compliant, PIKON started this project with an in-depth analysis of the existing invoicing and accounting process. This was followed by the design, testing and documentation of the new electronic invoicing and accounting process.

For this, PIKON made sure that the affected outbound documents, such as sales invoices, were automatically created as IDocs in their SAP system, containing both the required legal information and customer-specific data. These data are details on the sales invoice that are required by the customer (such as a purchase order number for an easier handling in the customer’s system) but not needed for the SAT to verify the document.

In order to fulfill the Mexican e-accounting requirements, PIKON made sure that the necessary information of Hirschmann Automotive’s chart of accounts, account balances and journal entries can be submitted to the SAT in an XML data format, as required by the Mexican government.

Next to that, PIKON also conceptualised a program to extract the UUID and RFC from the incoming invoices of purchase orders that arrive in the correct electronic XML-format. At this point, the invoices were already approved by the Mexican federal government during the verification process on the supplier side. While the supplier invoices are processed, the UUID and RFC codes need to be maintained as well. They consist of multiple characters and therefore maintaining them manually is very error-prone. In this context, it is important to know that each error that occurs during the e-invoicing process, will be fined with high penalties when a tax audit takes place. The developed program automatically extracts and stores the UUID and RFC codes whilst the supplier invoices are being processed in Hirschmann Automotive’s SAP system.

The Mexican federal government regularly releases new regulatory specifications to improve data consistency, process automation and to reach a better control over the tax accounting. This generally results in updates to CFDI. The always changing character of this legal requirement brings forward one of the biggest implementation challenges: each CFDI-implementation in SAP ERP needs to be preceded by a thorough analysis of all the specialties of the most actual CFDI version and by defining a procedure on how to implement these specifications.

 

CFDI standard sales e-invoicing process overview with SAP
CFDI standard sales e-invoicing process overview with SAP

 

How the SAP adaptations enable Hirschmann Automotive to do business in Mexico

On March 30th, 2016, everything was set in place to do the official opening ceremony of the Mexican Hirschmann Automotive plant. This glorious day was preceded by many challenges that needed to be overcome to set foot ashore on Mexican soil.

PIKON helped Hirschmann Automotive become compliant with the CFDI regulations. This resulted in a smooth and reliable process for e-invoicing and electronic accounting according to the CFDI standards. The automatic processing of all documents that are affected by the CFDI requirements (such as sales invoices, incoming purchase invoices, etc.) eliminates the risks of human error.

Thanks to these SAP adaptations, Hirschmann Automotive is fully compliant with the Mexican regulations and can do business in Mexico without worrying about being exposed to six figure penalties that are currently being imposed on quite a few organisations.