Large companies face their share of accounting trials on a regular basis, but there are few circumstances more intimidating than discovering hundreds of millions of dollars in received cash — and not knowing which customers paid it.
The organization that faced this challenge, a multinational energy conglomerate, had undertaken a complex acquisition two years earlier, in which a large number of new assets, entities and joint venture partners were folded into the organization. Careful not to act hastily, the organization allowed the merged entities to work in parallel for an extended period of time. It was a lesson learned from a previous acquisition, in which departments were replaced too quickly, creating friction and confusion within the organization.
The good intention had an unintended consequence, however. With no new direction or guidance, accounting department employees of the acquired entities gradually became discouraged and unmotivated, and their work began to suffer. Over time, a massive backlog of transactions had accumulated on the books.
The problem became apparent when the acquired companies were finally integrated into the parent’s books. The company’s external auditor flagged the problem and recommended that the accounts receivable issue be resolved by year-end. In effect, that was a three-month deadline.
On paper, the challenges were staggering:
The company needed to address the issue head-on, and do it fast. It turned to Protiviti, which had not only accounting and finance expertise but also could marshal additional resources on short notice if necessary.
Faced with the looming deadline, Protiviti lined up a team of consultants to undertake the account clean-up process. The initial idea was to work with the company’s IT department and ERP business owners to automate the account reconciliation process through data validation. However, difficulties surrounding the data proved this plan unfeasible.
This left the team with option B: reconciling accounts manually. Leveraging the qualified resources of its parent company, Robert Half, Protiviti brought in experienced finance professionals on short notice. They matched complete and incomplete payment amounts to invoices, and were eventually able to reconcile the bulk of the cash, with only a fraction of outstanding cash receipts remaining.
The company then turned to its other problem — open receivables. Acting as a cash collecting department, Protiviti quickly uncovered the underlying source of the collections problem. Many of the parties billed were improperly invoiced, and as a result they were refusing to submit full payment, or any payment at all.
Realizing its mistakes, the company immediately set out to rectify them by correcting invoices, negotiating payments and clearing misunderstandings with customers. At the same time, management saw an opportunity to build stronger relationships with its joint venture partners and affiliates, leverage further capabilities in its ERP system, and clean up the data in order to help automate accounts receivable. Again, it asked Protiviti to help achieve these objectives and make other improvements in its accounting and finance function.
This second phase of the engagement included reconciling the accounts receivable ledger, resolving accounting disagreements with affiliates and joint venture partners, and implementing numerous processes to increase efficiency and save the company valuable time and money.
For example, the company was able to improve its monthly close significantly, by “re-engineering” the tools used for revenue accrual. Protiviti’s experts streamlined both process and tools, effectively eliminating 90 percent of the work and making the rest much easier to perform. The result was renewed confidence in the accuracy of the financial data contained in the monthly close process, which reduced the monthly close timeline by several days.
The streamlining process was soon duplicated in other departments, with efficiencies cascading throughout the company.
As similar projects followed, the company’s accounting and finance infrastructure improved quickly. What’s more, that newly adopted finance structure and practices enabled employees to keep the workload current, boosting employee morale and eliminating further need for outside help.
All of this is contributing measurably to the company’s bottom line. Executive management took notice and personally praised the accounting leadership and team members for taking on the initiative to clear the backlog of accounts before the auditor’s deadline and for the resulting improved structure.
Unintended consequences often can subvert an otherwise positive move, like the growth this company was undertaking. Willingness to acknowledge, diligently work through and solve these challenges is what makes the difference between an organization that succeeds and one that continues to struggle along at great cost.