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Project Management and Collaboration

Rolling Out SAP to Brazil - Key Steps and Challenges

Brazil is the world’s seventh largest economy, and one of the fastest growing over the last decade. This has led to many new, fast-growing organisations in Brazil, and major international firms establishing local operations.

Many companies are therefore building, rolling out or maintaining SAP enterprise solutions in Brazil or for their Brazilian entities. Global expansion entails significant complexity, risk, and a need for country-by-country knowledge.

Brazil is the perfect example for a heavily regulated country, with restrictive taxation requirements. The local culture and language are additional factors to consider, which increase projects’ complexity.

Many of these issues are common across other enterprise software projects. Let’s look at some of the key challenges, organized by project phase.

Preparation phase

Every SAP project starts with a design phase. Designing a template for Brazil is fundamentally different from that in other countries, due to SAP’s localization and legal requirements. Program management experts and solution architects with local IT, business experience and language skills need to be involved as early as possible, even before the international template is built.

The greatest challenge at this stage is matching the SAP global solution with Brazil’s requirements:

  • Fiscal calendar – according to Brazilian legislation it is mandatory to use fiscal calendar K4: Gregorian calendar from January to December.
  • Payables and receivables processes are almost 100% done by interfacing the ERP with banks – electronic banking in Brazil is a reality.
  • Revenue recognition – principles in Brazil differ from US GAAP. Those principles basically define when a company can recognize a sale. In Brazil the revenue recognition may vary due to fiscal and financial standpoints – when the goods are received by customers, when the Nota fiscal is issued and so on.
  • Material ledger – the actual costing/material ledger is a legal requirement for Brazil and is used to calculate actual product costs for each material at the end of the period.
  • Duty drawback – to stimulate the economy, the Brazilian government has created initiatives to enhance exports. One of these is the drawback regime, which reduces taxes on products used in the production of exports. This means that the system must be able to prove the link between the imported goods and the materials subsequently sold.
  • Nota fiscal – this is a statutory document that formalizes any transaction between two legal entities. It is not just an invoice. Each and every goods transaction is informed to and authorized by the fiscal authority, electronically.
  • Sales and purchasing pricing procedures – are highly integrated with the tax engine. It is mandatory in sales to have a specific pricing procedure for Brazil.

Implementation phase

Once you have designed the template, the real implementation phase begins. The critical success factor at this stage is to have experienced consultants, with IT experience and a solid business background, and specific experience of the Brazilian marketplace.

Major challenges include:

  • Project timeline – due to the heavy regulations and specific legislation in Brazil, the planned project timeline often seems wildly inaccurate, and the implementation phase can easily be prolonged by 6 to 12 months. This is because the process of addressing issues, changes and the additional complexity of the system in Brazil is substantially underestimated – for example, if a process in the UK usually takes 10 days to be set up, in Brazil it may take up to 100 days.
  • Project complexity – one of the greatest issues with SAP rollouts in Brazil is that once business requirements have been defined and fixed, they’ve already become out-dated. Government changes to rules and legislation are extremely dynamic.
  • Project team – the ability to contextualize, document and communicate properly with the global organization, in order to have all requirements quickly addressed, with ‘tending to zero’ disruptions in the global solution and business operations.

Ongoing maintenance

Due to the dynamic nature of the environment and legal/fiscal regime in Brazil, you need proactive support from a partner who is fully engaged, and dedicated to helping you achieve your goals.

The best support offerings usually include:

  • System audits – to validate the system design and ensure it’s compliant, no matter what regulatory changes have been applied.
  • Experienced consultants and enterprise architects – in-house or partner, you need a qualified team that understands the business requirements and can quickly adapt the system.
  • Advice from partners – it’s best to have a local partner that specializes in monitoring and applying the statutory requirements. In Brazil the implications for non-compliance can be significant, and can translate into multi-million dollar fines.

Good partners should have specialized resources focused on SAP, with many years of experience in implementing SAP in Brazil. Try and find a partner who has a highly-skilled team in both the technical and language areas, with specific experience in your industry sector, and who can prove they understand your business properly.

 

Eneas Bernardo is Managing Director Brazil at RED 

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