A CURE FOR MANDATE MADNESS
For many companies, meeting complex requirements, such as evaluating the effectiveness of newly required accuracy controls, in the same amount of time—or even in less time than before—forces executives to rethink their closing and reporting processes. That was the case at Rock-Tenn, a $2.1 billion manufacturer of paperboard products such as packaging and retail displays.

“The close had been a perfunctory process—no one really looked at it. Then Sarbox came along,” recalls CIO Larry Shutzberg. Sarbanes-Oxley exposed all the touchpoints in the process where errors could creep in.

“We have 90-plus locations, with people doing accounting functions in the field. Getting everybody to do what they need to do is like herding cats,” Shutzberg notes. Add to that challenge a string of acquisitions and management’s attention was diverted from the increasingly patchwork financial processes that were taking root.

So Shutzberg, working with his CFO, led an effort to identify and standardize Rock-Tenn’s financial controls.

“It was a painful process,” he says, overcoming people’s resistance to let go of systems they had used for years. Shutzberg uses software from Movaris to determine what Sarbanes-Oxley would require of the revamped processes, and then to test the new processes against the requirements.

“The first thing you need to do is understand your current state,” advises PricewaterhouseCoopers’ Harries.

Shutzberg’s first step was to create standard Excel checklists for all Rock-Tenn financial and accounting staff. But truly adhering to Sarbanes-Oxley’s requirements “was impossible to do with spreadsheets, e-mail and PowerPoints,” he notes, because it’s extremely difficult to validate the accuracy and consistency of such disparate, individually maintained data. So Rock-Tenn launched a project to replace its aging ERP system with one that supports Sarbanes-Oxley processes out of the box. When it’s deployed later this year, “we’ll see if it’s good enough,” Shutzberg says.

THE BOTTOM LINE PAYOFF
The process efforts at Rock-Tenn have reduced its closing time from 15 days to 10. But “the business didn’t feel disadvantaged when we were closing in 15,” Shutzberg says. The real benefit for Rock-Tenn (in addition to meeting Sarbanes-Oxley requirements), he says, was “in consolidating accounting by reducing headcount.”

An efficient financial process typically lowers costs by eliminating the need for reconciliation across systems and processes, thus reducing demands on staff, and by eliminating duplication of effort across organizations. Common processes and systems allow for more automation and shift responsibility to a smaller set of managers.

At Accenture, sales, general and administrative expenses have dropped 1 percent a year as a share of revenue, says Tony Coughlan, controller and chief accounting officer—that’s a $166 million drop for Accenture in 2006, given its $16.6 billion in revenue. In essence, Accenture’s sales, general and administrative expenses have stayed flat as the business has grown, he notes. Coughlan attributes this payoff, in part, to reworked financial processes and a consolidated technology platform: “We’ve cut finance headcount even as we grew, and a significant driver was our ability to leverage the infrastructure better.” IT costs relative to corporate revenue have also dropped by half, says Accenture CIO Frank Modruson. “And we have better technology than we did before,” he notes. (Editor's note: This paragraph reflects a correction. Go here for an explanation.)