Swimming With Sharks 1

As a small manufacturer, getting your first order from a giant company like Walmart or Sears can be a dream come true.  But that dream can turn into a nightmare if you don’t have the right systems in place.

I worked with a company that landed a contract with an international department store chain.  One month’s order from them involved more of my client’s product than they had sold in the whole previous year.  It was a cause for celebration and the sales team threw a party.

Then the realities of all the logistical requirements hit home.  All of the skids had to include an RFID tag (radio frequency identification) to identify the contents of the skid to the department store’s computer system.  The truck had to show up at the receiving dock at exactly the right time.  All of the shipping documentation had to be sent electronically (by EDI – Electronic Data Interchange).  If anything went wrong, the department store would reduce its payment to my client by a pre-set penalty.

That may not sound like much.  Just a few extra steps with each shipment, right?  Wrong.  Another part of the agreement had the six different ways the company forecasts demand and replenishes stock.  They want to keep the minimum quantity on hand and avoid out of stock situations, meaning that suppliers have to be on their toes and respond immediately to new orders.

If my client had had a full featured ERP (Enterprise Resource Planning) system like Oracle or SAP, all of this would have been routine, but they were just a small operation.  So we modified Microsoft Dynamics GP to create special reports that could be downloaded from the accounting system and made a big list in Excel for the staff to follow.  But it would have been so much better, if the client could have had a workflow system that would have sent email reminders to all of the staff about what steps they had to follow for each shipment.

So, let’s stand back a little and look at the best strategy for your systems if you are a medium sized company swimming with sharks.  You have your toe in the door, but have no way of knowing whether this is a one-shot deal or the start of something big.  In the long run, you would like to be able to ramp up your sales, production and systems so that you move up, but in the short run, that strategy is time consuming and expensive.  A good starting point is to upgrade one piece at a time, making sure that anything new you add will work to meet the current demand AND grow with you as you upgrade.  In this case, a work flow system would keep the staff on top of the vendor requirements, as well as supporting the company’s operations regardless of what the future holds.

Reposted with the kind permission of iDatix:  http://www.idatix.com/insider-perspective-swimming-with-sharks-what-to-do-when-dealing-with-large-retailers/

Workflow Software

Downsizing, right-sizing, layoff, restructuring, whatever word you use, accounting departments have been consistently trimming staff for decades.  Computers are taking on more and more of the daily routine.  While this is good news for cost control and efficiency, it’s not so good for accounting controls and segregation of duties.  Where you used to be able to separate incompatible functions between different staff, now there may now be only one person available.

The Controls Environment – The Sarbanes-Oxely Act (affectionately known as “SOX”) enacted in 2002, was legislation designed to reassure the investing public in the integrity of financial statements after the accounting scandals of Enron, Tyco and WorldCom.  It imposes some strict requirements on not just the accuracy of financial statements but also the control systems behind them.  Those requirements aren’t going away any time soon.  In fact, the US Bureau of Labour Statistics has this to say about accounting clerical positions:

“As the number of organizations increases and financial regulations become stricter, there will be greater demand for these workers to maintain books and provide accounting services.”  (Source:  http://www.bls.gov/ooh/office-and-administrative-support/bookkeeping-accounting-and-auditing-clerks.htm)

So, not only are accounting departments being downsized, but they are also expected to meet increasingly strict requirements.  What are companies to do?

The answer may surprise you.  Most people don’t think you can automate accounting controls, but a computer approach called “workflow” can stop employees from shortcutting the internal control system and provide an evidence based audit trail that will stand up to outside scrutiny.  And the good thing is that it can be added to an existing system even if that system does not have the feature built in!

The Paper Trail – The basic building block of accounting control is the approved document.  Whether it is a supplier invoice, a customer purchase order or a government document, it follows a pre-set trail through the company’s approval process, depending on how much it is and what it is for.  For example, the purchasing manager may only approve invoices from preauthorized vendors under a certain dollar amount.  Anything from a new vendor or above his limit requires further authorization from a more senior corporate officer.  Workflow systems work on scanned images of the document and email.  The company’s rules are loaded into the software, so it can check if the document is from an approved supplier, as well as knowing the authorization of all of the staff.  This automation saves a lot of accounting staff time because they don’t even see the document until it has been properly approved.  No more squinting at illegible scrawls wondering if that’s the new division manager’s signature or turning the documents back because they aren’t approved.  The computer takes care of all that.

“He’s in Europe” – One of my first jobs in accounting was for a company with a head office in the United Kingdom.  The Vice President of Finance would let us know when he was going overseas and there would be a scramble to be sure that he had seen everything that needed to be approved.  And when he came back, there would be a stack of papers on his desk for approval.  No large transactions could be processed while he was away.  Because workflow is based on scanned images, they can be approved via a computer or even a smart phone at any time, anywhere in the world.  Now, isn’t that nicer than coming home to a stack of papers in your in-box?