3. Reliability of Information and Reporting System
By this we don’t necessarily mean Sarbanes-Oxley items (although that does not, unfortunately, go away), but how does management know that the new policies and related procedures (to address cash flows and reduce expenses) are being adhered to? In our experience, many of the people in a company take a “business as usual” approach – and that will not get the turnaround completed. So what are the controls to monitor compliance? If they are not in place then they need to get implemented and pronto. Also, how reliable are the reports, for example on daily cash position, or forecast cash - which requires an accurate sales forecast and estimates for converting an order through receivables into cash? We typically find that the information systems are not reliable (even though the accounting software churns out pretty looking reports, often with 3-D color bar charts!) – which is one of the ways for a company to get into difficulty to start with.In the medium term, it is a necessity to train the people (or replacing, as appropriate, with a fewer number of higher quality personnel) to utilize the systems correctly, to avoid the “garbage in, garbage out” problem. However, in the short term reliable information is needed immediately. Using Stanton Associates’s honed ability to cut through the fog and clutter of wrong data and misinformation, reasonably accurate reports can be generated and the right business decisions made expeditiously. We can’t emphasize enough how critical this is to do – nor how difficult too in many situations.