For companies currently or considering managing compliance in Latin America on-premise, it can be difficult to fully calculate the total cost of compliance. Between hardware, software, middleware, implementation and support staff, troubleshooting, change management and more, in-house compliance takes multiple internal resources, and costs can add up quickly.
When evaluating your compliance costs, have you taken all of these factors into account?
Annual Support Costs
- Software and Hardware Maintenance
- Middleware hardware
- Middleware maintenance for connecting systems
- Local hardware for compliance server
- Local annual maintenance for compliance server
- Cost for 3-tier environment (internal support cross charges, data center fees, etc.)
- Annual Support Staff Costs
- Staff to monitor and support local server
- Staff to monitor and support middleware issues
- SAP sales & distribution
- SAP materials management analysts
- SAP FICO analysts
- Local business users supporting e-invoice distribution to customers
- Local business users supporting invoice receiving from suppliers
- Local business users supporting inbound receiving
- Local controller costs to fix and resolve discrepancies
- Cost of reconciling contingency e-invoices
- Additional Costs (will vary by country)
- Customer specific customizations
- Multi-country ERP customizations/integrations
- Multiple printing locations or printing distribution rules
- Annual archiving costs
- Use of a freight forwarder or 3rd-party warehouse
- Service invoices
Change Management Costs
- Software upgrades or new license requirements
- Subject matter experts/project management
- Project manager for the ERP upgrade requirements
- Cost of regression testing on ERP system
- Solution architect – middleware
- SD analyst
- MM analyst
- FICO analyst
- Local server expert (internal or consultant)
- ABAP development
- Costs for end-to-end testing of each component
- PDF updates
- Printing & distribution testing
- Cost of internal business users’ time for internal unit and end-to-end testing
- Cost of running in parallel (running new version and connections to test new version with old version still in production prior to switching)
Potential Costs/Risks
- Operational shut downs (delayed shipments, impounded goods on a truck, return orders)
- Fines and penalties
- Audit risks for non-compliance (both local and FCPA)
Further complicating the cost of compliance calculation is the pace of change in government regulations throughout Latin America. Since the end of 2014, Peru, Ecuador and Uruguay have mandated e-invoicing; Brazil added SPED reporting and Block K requirements; Chile added DTE and Libros reporting, and Mexico updated its CFDI legislation and added eContabilidad measures. Plus, at least 10 new mandates are expected this year alone.
Now, multiply all of these integration, support and change management costs by the total number of Latin American countries in which you operate, and it quickly becomes apparent that compliance can be a complex and costly undertaking. It is not a process that should be managed locally with no corporate oversight, as the risk of compliance errors are immense, and can have ripple effects across an entire organization. Therefore, it’s imperative that finance teams take a proactive and comprehensive approach to compliance.
Taking a hard look at these numbers makes the value of a dedicated regional compliance partner clear. On average, we reduce FTE support costs by up to 80%, reduce the FTEs required for change management by 67% and decrease IT support costs by 87%.
Contact us to learn more.
