Top 5 Mistakes During SAP Rollouts To Latin America
Over the last few years, I have spoken with many organizations who have implemented SAP ERP across Latin America as well as many that have either canceled the project or have support and change management nightmares on their hands. Here are the top 5 reasons I see projects fall off the rails.
- Thinking that Latin America is similar to European Rollouts — yes there is a similar concept of VAT tax; however, the complexity of the tax laws and the pace of change to those laws are often overlooked. I have seen projects that have been underestimated by hundreds of thousands of dollars to millions because the amount of localization requirements and unit testing were underestimated.
- Latin America can easily be moved onto a Financial Shared Service Platform — many companies are looking at consolidating repetitive business processes in centralized groups. And well Latin American countries can be transitioned, it is not as simple as just passing an invoice off to a global account payables team. Because the government is involved in literally every single invoice transaction, this also means that any changes (i.e. Credit/Debit or even product codes) has to be coordinated with the government systems. For example, in Chile, an AP team has 8 days to approve or reject a supplier e-invoice. After 8 days, this invoice is considered to be locked and can no longer be cancelled by a supplier. Instead, the invoice must be adjusted by the supplier registering a Credit/Debit Note that references the original invoice.
- An Invoice In Many Countries Acts as a Bill of Lading – In Brazil for example, one NFe equals one truck – meaning that you would not have an NFe spread out over multiple shipments (i.e. partial shipments). This is because the Invoice (Nota Fiscal in Brazil terms) acts as a bill of lading that allows the legal movement of the goods through out the country. If a truck were ever pulled over, a customs agent, weigh station clerk, or police officer could ask to see the PDF version of the Invoice accompanying the truck and do a real-time check to ensure the goods on the truck match what was registered with the government. Overlooking the linkage and importance of real-time support equals complete shut downs of your operations.
- SAP ERP is not the Financial System of Record — This one always amazes me. A company will spend millions on implementing and training staff, but all of the invoicing and government reporting is left to local providers. This leads to multiple issues:
- Data in your SAP system is often different than the 3rd party reporting system. Why? Because changes are often made to data to ensure the reports that are sent to the government are correct and those changes are done outside of SAP. Isn’t the purpose of implementing SAP to have visibility, governance, and control of your financial data.
- Violation of the Foreign Corrupt Practices Act — Remember that FCPA doesn’t just cover bribery. The premise of the legislation is all based on executive management having accounting visibility and controls in place to avoid fiscal issues. Almost 80% of all FCPA fines are due to accounting issues. Over 104 companies are officially being investigated for FCPA violations in 34 counties, including Mexico and Argentina – the two most investigated Spanish-speaking countries in the world according to Lexpan (www.lexspan.com) – a leading research firm on FCPA violations.
- MOST IMPORTANT — CONSTANT CHANGE AND SUPPORT — Because Latin America is constantly adjusting their invoice and tax regulations, global consolidations always underestimate the cost of support and change management after go-live. I spoke to two companies in the last week that just finished their Brazil SAP go-live in April/May only to find out they need to completely update the system for version 3.1 by December 1st, 2014. And in 2015, they will face an eSocial implementation. Change affects the SAP Center of Excellence in two ways:
- Fire-drills are often the response to change as the requirements often don’t get to the corporate teams until too late — expensive resources are pulled off innovation projects and piled on to fix the short term maintenance problem. This expense on top of new software updates and external subject matter experts runs into the hundreds of thousands of dollars a to millions a year for multinationals with operations in multiple, mandated countries.
- Global regression testing — as with all ERP vendors, the localization requirements are released for older versions (4.7 as an example with SAP); however, implementing those notes in your customized and highly configured ERP system that may have 35 countries running on the same template is not as simple as just uploading a note or two.
So if you are embarking on a SAP ERP Rollout to Latin America — ensure you partner with those that have done the implementation before, and make sure you do the cost analysis of the real cost of the rollout — the cost of supporting and managing the pace of change. It is after year 1 that the cost traditionally spike.