ZIFFPAGE TITLEIntense ScrutinyBy Larry Barrett | Posted 2004-10-01 Email Print
In its race to comply with a Sarbanes-Oxley rule, Ingersoll-Rand found where it had been performing tasks twiceor not at all.
Identifying the different processes used within a company that reported sales of $9.9 billion last year is no small undertaking, and one that couldn't be accomplished by simply installing another piece of software.
Fletcher says "almost everyone" at Ingersoll-Rand played some role in the compliance process. The biggest difficulties were the simple things such as identifying who was responsible for the sales reports from specific units and regions. Also, the challenge of organizing the compliance project required the attention of everyone in the organization, from the ceo to the field sales representatives.
While 175 employees were appointed as Sarbanes-Oxley coordinators, those workers required assistance from the people working below them to gather and disseminate information.
As if that weren't enough, Ingersoll-Rand had to simultaneously collect this detailed financial snapshot to the satisfaction of its independent auditor while managing its day-to-day business operations and ongoing information-technology projects.
And it's expensive.
According to Financial Executives International, a professional association of controllers, cfos and treasurers based in Florham Park, N.J., public companies with annual sales of more than $2.5 billion will spend more than $3 million to comply with the regulation.
AMR Research analyst John Hagerty estimates companies will spend roughly $1 million for every $1 billion in sales to be Sarbanes-Oxley-compliant. If Hagerty is right, this would cost Ingersoll-Rand nearly $10 million.
Gartner analyst Lane Leskela says companies affected by the new requirement, roughly the top 270 of the Fortune 500, are taking different approaches to comply. "There's no blueprint for this, so everyone's just feeling it out as they go along," he says.
A Gartner study found that two-thirds of the Fortune 500 companies have or will invest in software to help them meet the requirement. Most of the companies surveyed said they'd spend the money on document management, financial reporting and transaction software. "Much of this data and these processes come out of critical systems such as erp (enterprise resource planning) or financials," Leskela says. "So we're seeing a lot of companies go through a phase of rush or panic to find point solutions."
Fletcher declined to say exactly how much the Sarbanes-Oxley compliance project has cost Ingersoll-Rand so far, saying only that "it's a lot of money, especially if you add up all the time that everyone in this company has spent" on it.
Ingersoll-Rand began its feeling-out process with two objectives: identify the best route to meet the sec requirement, and do it in a way that would also create some sort of ancillary value.
"It's something you have to do and it takes a lot of time, so you want to try to get something else out of it," Fletcher says. "We don't have any metrics to prove it. But we are learning our processes better."