As automotive parts suppliers close their books on 2005 — a tough year that saw a number of leading companies having to restate earnings and come under the review of the SEC for accounting and pricing irregularities — it’s becoming increasing apparent that many of them need stronger oversight and processes related to parts and pricing management, says Terence J. O’Reilly, president and CEO of Pricedex Software, Inc.
“It’s no wonder they’re having difficulties,” says Mr. O’Reilly. “Sarbanes-Oxley (SOX) has forced greater accountability and transparency into financial management, and many corporations are ill-equipped to comply, so questionable practices and IT process deficiencies continue, and are simply coming to the surface.”
The same is true with a number of other key business processes such as pricing and special pricing.
“Most corporations’ pricing practices today, whether relating to negotiated contracts, rebates, input costs, or channel-related pricing are still performed on spreadsheets which form the basis for input to business systems. There’s simply no reliable audit trail available,” says Mr. O’Reilly.
The issue of SOX compliance, is compounded in the automotive aftermarket simply by the number of parts that aftermarket suppliers in particular have to price, track and manage, says O’Reilly.
“Certainly SOX is a primary driver and has everyone’s attention, but so do the areas of parts proliferation and related cost, and escalating materials and fuel prices and their effect on margins. A related problem is that when companies are working on very thin margins, there’s a temptation to get creative in pricing and billing practices. As we’ve seen this past year, companies simply can’t afford to continue doing ‘business as usual.’ It’s not worth the risk.”
According to O’Reilly, a comprehensive PIM solution can help aftermarket companies profitably manage these challenges and more easily comply with SOX standards by providing the process discipline, built-in documentation provisions, audit trail, visibility and accountability that SOX requires.
“SOX may be one of those initiatives CFOs ‘love to hate’. By and large the surveys I’ve seen suggest that financial executives agree that SOX is forcing some much needed change in financial management,” says O’Reilly. “This will also force change in certain other areas of business process management such as product information and pricing. And these changes will, in turn, produce other new efficiencies, cost reductions and improved margins.”