The Business Value in Sarbanes-Oxley Compliance
By Rob Daly, President & CEO of Bluespring Software
No doubt, most public communications service providers are scrambling towards the looming June 15 deadline for Sarbanes-Oxley compliance, as required by the United States Securities and Exchange Commission (SEC). Teams have been formed, processes have been documented and internal controls are being put into place to establish and maintain compliance with the Act.
It should be recognized, however, that there is a great deal of business value to this exercise, too. Your internal audit committee should be more than the "Sarbanes-Oxley police" and a charge to administrative overhead. Your internal audit committee should be a profit center, looking at internal controls as both a way to maintain corporate integrity and a way to heighten operational margins.
Take, for example, the process in which enterprise customers are acquired. Enterprise business makes up roughly 50 - 80 percent of a communications service provider's overall revenue. The overwhelming majority of deals that make up enterprise revenue are based on non-standard arrangements (non-standard pricing, non-standard terms, non-standard solutions). Because these complex deals are treated as "one-offs," there are rarely internal controls over the methodology in which they are formed and approved, creating a possible risk environment of revenue restatement due to errors, leakage and/or regulatory non-compliance.
The traditional view from an internal audit committee is that this represents a "material weakness" in an internal process that impacts financial reporting and should be addressed, and they would be correct. But, step back for a minute and set aside the legal reasons for fixing this problem. What would be the business benefit of standardizing the way in which you acquire enterprise business?
From a sales perspective, non-standard deals represent a "headache" because they are slow in being formed, require input from an unspecified group of people and cannot be managed using existing systems and processes. From a financial perspective, these deals leak up to 25 percent of their revenue. From an order entry perspective, these deals contain error rates in excess of 90 percent, leading to large amounts of rework and customer rebates. Improving the process in which deals are formed with enterprise customers would produce faster sales cycles and prevent many of the errors that lead to revenue leakage.
Broadening the scope of this project beyond Sarbanes-Oxley means that any investment made towards achieving compliance will also speed your time to cash and prevent many of the errors that lead to revenue leakage.
While this represents only one example of the many processes being reviewed for internal control, it does demonstrate the perspective that your internal audit committee should have when justifying courses of action. "What is the business benefit to establishing this internal control," should be the question asked of every initiative pursued in the name of Sarbanes-Oxley. You should expect to be able to have your cake and eat it, too.
About the Author
Rob Daly is the president and CEO of Bluespring Software.
In 1999, Bluespring Software was founded on a vision to assist communications service providers evolve their customer acquisition strategy to embrace complex, non-standard opportunities as a source of profitable growth. Bluespring's Deal Assurance solution is the result of years of customer-focused product development, leveraging telecommunications operations maps.
For more information, please visit Bluespring Software at www.bluespringsoftware.com.
