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backLATINtalk April, 2012

Understanding Performance and Drivers of the Finance Function in Latin America

Unprecedented insights reveal the seven key themes of the Latin American finance function.

With the continued economic growth and rise of multinational companies across Latin America (LATAM), it is time to take a closer look and get a deeper understanding of the performance and drivers of the finance function of LATAM companies. As their growth continues, finance functions must become increasingly more effective while maintaining efficiency to remain agile in today’s challenging international business and economic environment.

LATAM finance executives should have a clear, empirical understanding of their finance function’s performance in order to implement lasting operational improvements and become a trusted business partner.

Understanding performance and drivers of the finance function in Latin America

This piece takes an in-depth look at seven key themes that resonate across the finance functions of companies throughout Latin America, particularly as related to their cost structure and performance:

Total cost of finance – Across Latin America, there is wide variation in the total cost of finance; Latin America finance functions generally have higher staffing levels yet much lower labor costs, leading to lower overall total cost of finance compared to US companies

- Staffing allocation – Latin America allocates more staff to lower value transaction processing activities, and proportionately fewer staff to higher value performance management activities

- Technology usage – Higher technology usage drives lower costs in Latin America due to decreased staffing levels

- “Self-induced complexity” – Higher degrees of “self-induced complexity” in Latin America leads to higher costs than US companies

- Country variation – Among countries in Latin America, there is notable variation in cost structure, staffing levels and labor rates

- Economies of scale – As Latin American companies increase in size, economies of scale are recognized, as larger companies have lower finance costs as a percentage of revenue

- Multinationals vs. locals – Multinational organizations operating in Latin America have higher finance costs than local companies headquartered within Latin America

About this study
This briefing is the culmination of over twelve months of in-depth research and draws from our experience of working with LATAM companies, client interviews, quantitative data collection, and deep understanding of the finance issues. It brings to light seven key themes that resonate across the finance functions of companies throughout Latin America including the total cost of finance, staffing allocation, technology usage, “self-induced complexity,” country variation, economies of scale, and multinationals vs. locals. We uncovered opportunities for finance functions to increase efficiency and add value.

To download 24-page report, please click here.

Source: Deloitte - GAI

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