Page 268 - Accounting Best Practices

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13–3 Continually Review Key Process Cycles
extremely difficult. Conversely, the consolidation task becomes much easier for
those companies that do business in a single industry and have many locations that
conduct the same kind of business using approximately the same procedures.
Here are the most common areas in which companies have had success in
centralizing into shared services centers:
• Accounts receivable collections
• Cash application
• Cost accounting
• Employee expense report processing
• Intercompany accounts payable and receivable processing
• Inventory accounting
• Invoice processing
• Payroll processing

The difficulty with this best practice is that it requires a great deal of manage-
ment skill and money to consolidate accounting operations. For example, combining
the accounts payable functions of many locations requires the construction of a
central processing facility, along with the transfer of staff to that location, retraining,
the design of new systems, new audit procedures, and the orderly transfer of sup-
plier invoices from many locations to a single one—and in the midst of this massive
change, suppliers must still be paid on time so there is no disruption of deliveries to
the company from suppliers. Given the size of this task, the major factors needed to
ensure success are the appointment of an excellent manager to the consolidation
process, the complete support of this project by top management, and sufficient
funding to see it through to completion. In addition, given the amount of disruption
involved, it would be wise to consolidate only one function at a time so that most
activities are not interrupted at the same time. By taking these steps, the odds of
successfully finishing a consolidation project are greatly enhanced.
Cost: Installation time:

13–3 CONTINUALLY REVIEW KEY PROCESS CYCLES

As a general rule, any system will begin to degrade as soon as it is created. For
example, a new purchasing process cycle will begin almost immediately to
encounter exceptions to the rules, as well as special situations that spawn a subset
of extra procedures that do not appear anywhere in the procedures manual. Fur-
ther, the process will not be maintained very well, resulting in lots of excess data
in the system, such as the records of suppliers that have not been used in years,
perpetually open purchase orders, even though the orders were filled long ago,