Posted by Steve Wilcox on Thu, Mar 12, 2009 @ 11:27 AM
"A hasty man drinks his tea with a fork."
- Ancient Chinese Proverb
This amusing Chinese proverb on the futility of hurrying is similar to the more familiar "haste makes waste" truism.
... and how true it is!
You see, this past weekend, I got lost driving my son to his basketball game - a big playoff game against a worthy rival. We were hopelessly late. The coaches were calling me all in a frenzy as my son is one of the better players on the team.
So I'm lost and I'm late and my cell phone won't stop ringing with the "Where are you?!?" calls when I notice that I am very low on gas. Just great. Starting to panic a little bit, I pull into the local mom-and-pop gas station, fill up the tank as fast as I can, get directions to the gym and we are off.
Not so fast.
My car starts to sputter ... the engine stalls and there are awful fumes coming from under the car! Is the fuel pump malfunctioning? Has some BMW engine part that I can't pronounce busted? Did I pump in some watered-down shoddy gas?
Somehow, after about a dozen more stalls and restarts, we lurch and stammer into the parking lot just as the engine finally dies. The car is towed to the dealer and and I am scratching my head as to what the heck happened.
A long tow trip later, I found out why my car died. Are you ready for this? In my hasty rush, I had put diesel in my car! What a knucklehead thing to do! Haste truly made waste which resulted in a very expensive repair bill. To top it off, we also lost the game.
So what does this have to do with finance and AP? Here's my prediction: with the downsizing of finance departments, there is going to be a rise in knucklehead accounting and transaction processing mistakes.
As corporations continue to cut SG&A costs, nowhere are the risks greater than in over-worked, under-staffed finance departments - especially AP. Below is a graph of the rise in restatements. The graph only goes to 2006 -- the number of restatements in 2007 and 2008 are lower but still high around 1200.
Now here is the "haste makes waste" point: studies of corporate restatements suggest that well over half of the errors ... more than 50% ... were human errors -- ordinary books and records deficiencies.
Cutting staff in AP is invariably going to lead to more mistakes and errors -- especially so in manual, paper-intensive operations.
And AP errors are expensive to fix!
I'll elaborate more in my next blog entry.
-Rakesh Shukla
@rakesh170
P.S. I thought diesel pumps were supposed to be tucked away in the back away from the regular gas pumps ... (sigh) live and learn.
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