Magazine article CMA - the Management Accounting Magazine

Bringing Quality to Accounting

Magazine article CMA - the Management Accounting Magazine

Bringing Quality to Accounting

Article excerpt

Most corporations are paying increased attention to quality. For some, it's lip service. For others, it's the core of a program to improve customer service, profitability, and product and service offerings that ultimately leads to increased competitiveness. But what does quality have to do with accounting? Many companies' accounting systems manage the basic accounting functions, but do not provide information that can be used for real-time, strategic decision-making. As a result, these companies are missing an opportunity not only to improve efficiencies of business, but also to empower them to change, or re-engineer the way their companies do business.

Financial information should be considered another product of the organization. And as with any product, companies should work to avoid "scrapping" or reworking information, such as through manual reconciliations or balancing accounts. In short, they must bring quality to accounting. In accounting, quality should be based on efficiency and a higher value of information. Accountants are the agents of information, and information is the accountant's product. The accountant's role is to integrate all sources of information from the entire company. In reality, accountants are the original system integrators, as the first business systems were accounting systems.

So for accounting managers, the more efficient you can make the information process, the more effective the information will be by being of a higher value. The successful companies will translate data into information and have that information available to decision-makers instantly. Why will this make companies successful? Because in today's highly competitive marketplace, the underlying product technology from one company to another is often the same, so a key differentiator for companies is how they gather, analyze, and use information. As companies recognize that they can use information as a competitive tool, they will empower the users to take action in the areas they manage.

In order to achieve this quality level, accounting managers must first eliminate or streamline accounting practices that waste time and provide inaccurate information. For instance, let's look at a typical raw material acquisition. The control procedure must make sure the purchase order, goods receipt, and invoice match. If they don't, the problem must be identified. It could be that the purchase order doesn't reflect the company's agreed-upon discount. Or the wrong quantity is reflected on the goods receipt. Now, what if the accounting clerk, who is handling this procedure, is having a bad day and doesn't notice that they don't match up? Not only does the manual reconciliation of this process waste resources, but manual errors can also cost the company money.

This leads to the obvious question. How can a company get rid of outmoded accounting practices without disrupting the entire business cycle? It may not be as difficult as one might imagine. There are numerous companies which have successfully undergone a transformation from providing data to maximizing information. They have done this with software that provides integrated, real-time information across business functions.

Du Pont: recognizing the

need for change

Du Pont Canada is an excellent example of a company that assessed the quality of its information, and developed new information technology structures to increase the company's competitiveness. Information, in Du Pont's view, was another product, and it made sense to apply total quality to its information.

In 1990, Du Pont Canada decided to replace the financial reporting system at its Fibres Division in Kingston, Ontario. The existing accounting package consisted of several disparate databases at Du Pont's six sales offices and at Du Pont Canada' s headquarters in Mississauga, Ontario.

John Valberg, systems project leader for Du Pont Canada's Kingston Works' Divisions, cited the fragmented and geographically specific nature of the existing package as too inflexible for Du Pont Canada's growth. …

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