Complying With Sarbanes-Oxley While Maintaining Efficient Trade Spending
Trade management efficiency has remained a crucial marketing and sales issue for both retailers and consumer goods manufacturers. " Industry statistics show that $75 billion dollars are spent annually in the US on trade promotions, and more than one quarter of that is spent on promotions with unidentified purposes. Additionally, most companies cannot determine the return on investment from their trade promotion programs." 1 As long as duplication of tasks exists in the areas of planning, presentation, and execution by both manufacturers and brokers, efficiency can not be realized.
Recent industry studies have shown that:
- More than 90% of manufacturers and close to 80% of retailers report trade spending as a critical issue. 1
- Most mid-sized companies have no formal planning process in contrast to nearly 70% of top corporations that do.
- An independent survey of 300 mid-sized manufacturers found that of the 72% companies that do not have an automated and collaborative system implemented, a significant number of those companies acknowledge the necessity of a system, citing cost as the major prohibitive factor.
- Manufacturers that feel they are effectively managing their trade programs number less than 10%.
- Often, manufacturers set their small balance write-offs at too high a level.
- Processes for researching and classifying deductions, auditing supporting documentation, and collecting charge backs are non-existent for many manufacturers.
Financial Implications
The Sarbanes-Oxley Act of 2002 requires increased reporting and accountability of these expenditures on the part of all companies, including system auditing, reporting, and tracking. "Section 404 of the law requires companies to maintain and monitor their internal controls. Setting up or improving such systems, -- while a pain in the short-run, may well help some CFOs ratchet up their internal control mechanisms". 3
1. Financial statements must be certified:
Section 302 of Sarbanes-Oxley mandates that the principal executive officer's and principal financial officer(s) of the company must prepare a report and affix their signatures to it certifying that the information contained within is a true and accurate depiction of the company. Section 404 of Sarbanes-Oxley requires that a reliable process be in place to ensure data accuracy.
The consequences for not meeting these requirements are significant. Beyond the possibility of fines that could escalate into the millions of dollars, few public companies can afford to breach the hard won trust of their shareholders. Confidence in a company's controls and processes is critical in an environment rife with mistrust.
While process automation does not guarantee the total elimination of expense fraud, it does demonstrate to owners, shareholders, and the SEC that proper tools are in place to help protect against fraud.
2. Assets are safeguarded against unauthorized or improper use:
Financial improprieties can originate from the misuse of trade funds, invalid payments to customers, or improper authorization or release of funds. By incorporating customized business rules and flexible workflow configurations to define processes, Adesso's clients can detect and avoid inappropriate and / or erroneous expense anomalies.
3. Transactions are accurately recorded and reported:
The transparency and visibility of expense data is vital when confirming that transactions are properly recorded and reported. No other Trade Management solution can match Adesso's range of internal controls, limits, and overall accountability.
Adesso leverages the power of reporting and analytics by providing an interactive tool to query the database, unlocking hidden trends, and enabling companies unprecedented visibility into their trade expenses in 'real time'.
1 Dienekis Information Systems, http://www.dienekis.com/crm-news/EppVpFlVVuLW.php
2 H.R. 3763 - Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002 [http://financialservices.house.gov/media/pdf/hr3763ah.pdf]
3 "Sarbox or Sarboon?" by Marie Leone for CFO.com, May 9, 2003. [www.cfo.com/article?article=9460].
4 Dienekis Information Systems, http://www.dienekis.com/crm-news/EppVpFlVVuLW.php
