The Ministry of Trade and Industry of Colombia has joined forces with the major e-invoicing service providers, among them EDICOM, with a view to developing a factoring project. The meeting is framed within the working group set up a few months ago to carry out the pilot project for widespread use of e-billing in the country. The group brings together the leading providers of tax data transfer software, big businesses from different production sectors and representatives from the DIAN tax authority.
The aim of this new tax initiative is to ensure that the new electronic invoice acts as a security when companies ask for an advance on their payments from credit and financial institutions.
Factoring as a funding mechanism is increasingly used worldwide by businesses to cope with lengthy invoice payment terms, as in many cases companies are obliged to wait for up to 90 days. Through factoring, the banks advance these payments to businesses in exchange for a small commission, which improves the liquidity of companies.
In this regard, countries like Chile or Peru have taken advantage of e-invoicing to boost this funding mechanism. Through it, financial and credit institutions can quickly check the validity of invoices and even exchange them online internationally. In other words, the process becomes much simpler and quicker.
For now, Colombian businesses will have to wait until the project for the e-invoice as security gets the green light. The Ministry plans to release the draft version soon and estimates that a 6-month term will be needed before the final decree comes to light. Even so, it is already foreseen that those taking part in the transaction will be the issuer of the e-invoice, a registration authority that validates it (selected by the DIAN) and a final holder, which will be the financial or lending institution.
Factoring status in Colombia
Despite the benefits it provides, factoring today is still an underused system in the country. In 2014, the business of buying and selling bills in Colombia accounted for 8 billion pesos, but only some 40,000 SMEs benefited from this system, compared to the 600,000 operating in Colombia. These figures from Confecámaras have to be placed in the context where, in that same year, some 98,000 production units cancelled their mercantile registration, mainly due to the lack of liquidity.
Taking the figures into account, factoring, driven by the spread of e-invoicing, emerges as an opportunity for Colombian businesses to tackle the economic issues caused by payment delays. Soon, we shall have further details on its application.