Brazil’s Nota Fiscal eletrônica (NF-e) regulations clearly have had impact beyond technical e-invoicing processes, up and down the supply chain. As an SAP customer, what technical and strategic questions do you still have about NF-e, and what are your next steps to ensure compliance?

My colleague Gary Byrne of SAPexperts recently moderated an online Discussion Forum on Brazil Nota Fiscal compliance on October 11 here in the Compliance Forum. E-invoicing experts Steve Sprague and Jason Jones of Invoiceware International answered questions on chief challenges and best practices & skills needed to assure NF-e compliance.

To follow the discussion, you can review the full, archived discussion forum or read this edited transcript here:

Gary Byrne, SAPexperts: Welcome to today’s forum on Nota Fiscal with Steve Sprague and Jason Jones of Invoiceware International.

Steve and Jason are experts on Nota Fiscal and e-invoicing requirements in Latin American and around the world. They’re here to answer your questions on  recent changes to Brazil’s NF-e regulations,  and how they impact financials processes and configuration in your SAP systems.

Welcome, Steve and Jason, and thank you for joining us today. I have a few questions from SAPexperts readers that I do want to get to today. 

Let’s start with a quick overview of the key issues on Nota Fiscal – what are the top concerns you hear from your clients when it comes to Nota Fiscal compliance?

Steve Sprague: We really see 3 key issues that companies need to address. The first is SAP localization, the second is keeping up with the legislation, and the third is recognizing that this process affects your ability to ship as well. It is not just finance.

To elaborate on the most common problems; the first is with localization. The most common issue is that centralized SAP COE tend to underestimate the implementation and localization. It is not just implementing OSS notes. You really need to ensure you have resources that have done this before. As the localization will affect your SPED as well as the ability to get NFe approved.

On the legislative side, we see a lot of organizations struggling with the connectivity with the cities as well as keeping the SAP system up to date to meet the changes. For example, the current issue right now we see in Brazil is the Manifestação do Destinatário and the Eventos.

As for the shipping process, I think the most underestimated issue is really the support for an SAP team that is out of Latin America (i.e. in the US or Europe).  We find many companies turning to manage services to assist with not only managing contingency but also having multi-lingual support that can manage both Portuguese and English.


Gary Byrne: Could you give a quick overview of the key concerns and issues for companies that are getting a handle on Nota Fiscal compliance?

Jason Jones: The biggest concern is finding a way to prevent the government mandates from interfering with the operational side of your business.  The NFE process is a “real-time” process that requires a message go to the SEFAZ (the Brazilian IRS) and that you receive an approval code back before you can ship product out the door. This is a real-time, mission-critical business process, much akin to a credit card transaction.   

Business struggle with the best ways to implement robust, reliable real-time integrations that can automatically invoke the contingency modes provided by the government to keep their business running in the face of power outages, network disuptions, etc.  

Steve Sprague: I also want to add to Jason’s points as we see the Correction Notice, the new Cancellation process and the overall Manifestação do Destinatário as the current legislative concerns. Organizations are really looking to tackle these processes as the receiver — just quick overview:

What is an Electronic Invoicing (NF-e) event?

The Electronic Invoicing event is any fact related to a Nota Fiscal Eletronica. Examples include: the Letter of Electronic Correction (CCe) and Cancellation. The events for an NF-e can be queried on the Internet and represent an overview of facts relating to a particular NF-e. They be viewed by everyone involved in the operation or only by the Tax Administration.

Events allow a NF-e recipient to acknowledge their commercial participation in a business transaction by confirming the information provided in an Issuer’s tax document. This process has four events:

  • Emission Acknowledgement
  • Operation Confirmation
  • Operation Registration Unfulfilled
  • Operation Declined or Ignored

Initially, the “Recipient Acknowledgement” process will be voluntary keeping with the rollout philosophy of other NFe updates. The mandatory use of the process is planned to start in 2013 for some selected types of goods.

We are seeing large multi-nationals implement for the following reasons even before the mandated process:

Recipient’s of goods will receive the following benefits by implementing the process:

  • To know which NF-e’s were issued across the country using the company as a recipient
  • To prevent misuse of your State Registration by NF-e Issuers by preventing “Ghost Transactions” where Issuers use your CNPJ to cover up fraudulent operations when shipping goods to a different recipient than is listed on the tax document
  • To obtain the NF-e XML that has not been forwarded by its Issuer
  • For legal certainty in a tax credit, since an invoice confirmed cannot be canceled by the Issuer
  • To acknowledge with their suppliers that the merchandise was received and formally establish that the commercial invoice for the trade was legal, without the need of the signature printed on the stub of the DANFE.


Gary Byrne: So Steve, just to clarify some terminology: Are the Eventos that we’re hearing about and these NF-e events you mentioned referring to the same thing? 

Steve Sprague: The concept of events is where we see the SEFAZ moving.  For example, the first two which are bot
h mandatory were surrounding the CCe (Correction Notices) as they wanted to eliminate the paper corrections that were being abused, and also the new cancellation event.

The Eventos (Events) which is the set that I describe as the Manifestação do Destinatário are really the SEFAZ’s answer to “ghost transactions”  I think the key for a buyer and supplier to understand in this process is the Confirmed Operation. 

It is important to note that after the recipient confirms the operation (i.e. the the goods were received and matched the Issuer NFe), the Issuer can no longer cancel the NF-e.  

I also want to mention that their are some advantages to the Buyer/Receiver events and validations that many companies overlook. My case for straight-through processing and simplifying the triggering of the MIGO/MIRO events in SAP are made much easier because of these common traits of Brazil NFe:

  • The XML is defined by the government, so it is always the same data structure
  • Your suppliers must make the e-Invoice available to your organization by law
  • The Buyers must validate the invoice with the government anyway. As long as you have to do some automation, you might as well automate the 3 Way Match and gain the benefits
  • The invoice in Brazil must be placed on and accompany the truck prior to shipping, so it is possible for the AP team to get the invoice prior to the goods arriving
    • You can do the pre-match to a PO prior to the goods arriving
    • Once the goods arrive, a warehouse manager can scan the mandated bar-code which will finish the 3 way match automatically



Gary Byrne: Where are the biggest risks with invoicing e
rrors in Nota Fiscal? For example, I’m hearing concerns about fixing processes but then facing invoicing errors from suppliers and vendors. What are best practices companies can follow? 

Jason Jones: Couple of areas:  

First, for outbound NFE, companies should review their customer master data information to ensure that it’s accurate and up to date, since this is a common source of rejections from the SEFAZ. 

Next, you might need some cross reference tables to “normalize” the classifications codes used for things like transport mode or product type to government standardized naming schemes. 

Beyond that, having a good list of invoice scenarios is helpful to anticipate the types of erros that can occur in advance.  (Things like intercompany invoices, import invoices, credit/debit notes, cancellations, for example).

Finally, it’s important to keep in mind that the SEFAZ is continually updating and strengthening their validation rules, so things that might have gone unnoticed before might get validated and rejected in the future.  This happened earlier this year, when they started validating the math underlying an invoice to make sure that the sum of line items equals the total amount at the bottom, etc. 


Gary Byrne: Which teams, roles, and skill sets do you want to see involved at the start of a Nota Fiscal project?

Jason Jones: The need for customer side resources are pretty limited in most of our projects, with the primary need being on the business/functional side during testing.  As you might imagine, we get asked this resource question fairly frequently, so here’s some additional thoughts on the subject below, broken out by resource area:

omer IT/Networking (3 to 5 days): Customer infrastructure resources are needed up-front to provision initial REAL-TIME connector hardware and to establish connectivity and remote access for development.  Once complete, such resources are no longer needed except perhaps tactically, for debug/troubleshooting assistance should network access or connectivity issues arise during testing.

Customer SAP BASIS (3 to 5 days up front, ad-hoc as needed during testing): Customer SAP BASIS personnel are also needed up front, to deploy the tracking monitor into a DEV environment and to establish connectivity to the middleware. Once provisioned, BASIS resources are no longer needed except during testing and production launch activities. Note: It’s important to have good test data in DEV to validate key business scenarios.  This limits need for frequent change requests between DEV and QA during testing.

Customer SAP FUNCTIONAL (5 days up front, tactically if needed thereafter): Once access and connectivity has been established, the next (and most important task) is Gap Analysis.  Here, ABAP developers work with the Business and Functional team to compare the extraction logic embodied within IWI’s NFE ABAP templates to the Customer’s unique SAP configuration.  Differences are identified for accommodation via the “delta” file ABAP program to be developed by IWI as part of the engagement.  Sometimes customers have dedicated IT/SAP-Functional resources who are the most knowledgeable experts assigned to discuss such gaps.  Often, fiscal/business users are able to do this directly.  Again, this is a design/blueprint activity with resourcing needs focused mostly up front and then supplemented tactically thereafter as issues/questions arise during testing.

Customer Fiscal/Business (half-time, thro
ughout):  The Customer’s fiscal/business managers or “power users” are by far the most important resources needed for the project.  They are authoritative experts on the list of billing documents or NFE scenarios needed for testing, they coordinate the cleansing/update of customer master data needed for success with the SEFAZ, and they provide iterative feedback on the results of testing up to and including final acceptance go-ahead on each scenario for production.  Once the up-front access and gap analysis activities have been completed, the project becomes very focused between the IWI technical and business consultants and the Customer’s fiscal team.

Heather Black: Steve, Jason,

You mention some process benefits that Nota Fiscal might bring. You also have mentioned some Financial Supply Chain Management benefits too. Any specific examples where you see companies could take this compliance issue and leverage it for its potential financial benefits?

Steve Sprague: Yes, let me give you a real world example of Petrobras, the NOC of Brazil. They launched a program called Progredir to inject capital into their supply chain. Often when companies evaluate Accounts Payable’s eInvoicing, they only look at Operational issues (basically cost reductions):

For example, the most common requests in Accounts Payables are:

  • Help me eliminate Paper processes for Invoicing & Payment (checks)
  • How can we automate expensive manual reconciliation process
  • Can we shorten long cycle times (45-60+ days) so that our FTE’s are more efficient
  • I need to comply with  the Tax Authorities around the globe to avoid audits

But because the Brazilian government has basically eliminated the common rollout issues in getting suppliers to send an eInvoice, your organization can focus on the strategic issues of the Treasurer and CFO:

The common issues I hear on the Strategic level include:

  • Inability to optimize cash flow (e.g., Missed Discounts)
  • Liquidity concerns for  supplier operations
  • Short-term investment of Cash

“General Concept of Progredir– The program seeks to foster a favorable environment for the provision of credit backed by future receivables (payment for services yet to be provided or equipment still to be delivered) under each contract with supply chain participants. Any supplier involved in the chain is, in principle, eligible to join Progredir and obtain an advance from participating banks against future receivables. 

In order to improve financial and risk conditions, Petrobras is the anchor of Progredir and will contribute with the entire production chain by transferring its better credit perception in the market to participants. Thus, the use of the receivables generated by the Company will provide greater support and assurance for the granting of unperformed credit to Petrobras’ entire supply chain, allowing access to these resources quickly and in amounts that will give the suppliers financial strength.

Simplified access – Small and midsize companies currently face difficulties in obtaining funding against future receivables. A major impediment is the lack of reliable historical information on each supplier’s performance. This causes uncertainty that prevents the banks from evaluating their actual risks in advancing funds based on creditor performance expectations.”…


Gary Byrne: You mention automating the 3 Way Match for invoicing. Is that process complicated? Is there a lot of configuration to automate this process?

Jason Jones: This is one of the more exciting areas in eInvoicing in the world today.  Because the SEFAZ mandates that all companies must do real-time eInvoicing, they have effectively digitized their economy from the top down.  This means that the onboarding bottle-neck that typically stymies einvoicing initiatives in other parts of the world does not apply to Brazil because the government has made everyone do e-invoicing – and do it in the same way. 

This is great for automation because with that assumption, from a buyer point of view, you can use this data to streamline your receiving and A/P processes dramatically.  For example, it’s realistic to expect to be able to receive the government approved NFE XML from your suppliers into SAP system within 60 seconds of the truck leaving from your supplier.  If you bounce that data (which much be right because it was registered with the SEFAZ) against your PO, you can quickly confirm that the right product has been packaged by the supplier for delivery.  If not, you can call the supplier and have them turn around to fix it.  If so, then you wait for the truck to arrive at your shipping dock.  Once there, the receiving manager compares the printed DANFE bill of lading against the contents of the truck and if all is there and accounted for, can scan the bar-code on the DANFE to have “one-scan” MIGO and “one-click” MIRO based upon that data. 

We are seeing a lot of activity here because not only are the governments tightening up regulations in this “inbound einvoicing” area, it’s a place where companies can streamline to cut down costs and time in operations.

Steve Sprague: Of note, this process that Jason describes is what makes the SCF that I describe below — whether its Dynamic Discounting or SCF — see my comments on Petrobras. We are seeing more companies looking at how to utilize cash on hand for working capital reduction.  These SCF solutions have always been plagued by paper processes, as if it takes 25 days to process a 30 day term invoice, then their is nothing to finance.  Again, having upwards of 100% of your invoices electronic — should mean you transition your focus in Brazil and Mexico to the benefits.  You can only do this when you have eInvoices, you have them early, and you can match and mark them as “Okay to Pay” through the MIGO/MIRO processes in SAP.


M.S. Hein: Hi, Steve and Jason, With the constant changes to the regulations being a challenge, do you recommend any resources from SEFAZ or elsewhere for updates on changing mandates?

Jason Jones: For global companies in particular, this issue of changing mandates can often be the most challenging. In Brazil, the SEFAZ is actually pretty good about keeping the public informed on future updates.  They have publically available web sites that are current and provide advance notice of changes.  Other markets (most notably Argentina) are not so helpful.  Of course, knowing what the changes are and then staying on top of them from an implementation and testing perspective is quite another thing.

This is where the benefits of a service provider can provde helpful.  A
s an example, for our customers, we have a hybrid architecture where provide native, real-time integration with SAP on the one hand, while also managing and supporting the transactions that flow through it operationally as part of a service on the other, (including support in the local language and time zone, etc).  We also include compliance updates (both software upates and consulting services) as part of the service so whenever the SEFAZ changes things customers remain in compliance without impact.  Again, for global companies, this is quite helpful because it allows them to focus on thier “fiscal configuration” globally (often in a single global instance) while leveraging a service provider in Brazil and throughout Latin America for the compliance overlays. 


Gary Byrne: Thank you to Steve Sprague and Jason Jones of Invoiceware International for taking these questions today!

A full summary of all the questions will be available here in the Compliance Forum
and the Compliance Group on Insider Learning Network. For more information on
Nota Fiscal, you can read Steve’s blog on Insider Learning Network.

I also invite you to explore the new SAPexperts, where recent articles (subscription required) on trade compliance and invoice processing include detailed tips and how-tos on:

If you’re not yet an SAPexperts subscriber, you can sample some of our articles

Again, special thanks for Steve Sprague and Jason Jones of Invoiceware International.