Payment Trends
Most Read
Most E-mailed
E-mail Article
Print Article
Tapping Automated, Integrated Accounting Systems to Rein in Financial Supply Chain Risk
New technology options can help LSPs streamline overall operations and optimize financial risk, says CargoWise edi's Simon Clark
Interview with Professor Richard Wilding, full professor and chair in supply chain risk management at Cranfield School of Management, U.K. Professor Wilding is a leading expert in Supply Chain management. The interview, posted on June 16, 2008, discusses supply chain risk reduction through effective collaboration.
Milton Keynes, UK — January 11, 2010 — International headlines appear seemingly on a weekly basis declaring the consequences caused by inappropriately managing supplier risk throughout the supply chain management process, says Simon Clark, business development manager for Europe, Middle East and Africa at CargoWise edi, a provider of integrated international supply chain logistics management systems. And, Clark says, during this still unpredictable business climate, the list of financial risks continues to grow.
"Logistics service providers (LSPs) in the air freight sector are often lax in administering the financial risk involved with managing their suppliers at a time when diligence is critical for business success," says Clark. "In business today, it is vital to keep a tight rein on all finances, to keep expenditures under control and identify true ROI."
From a credit management point of view, Clark suggests, it is essential to maintain control over the financial status of debtors to minimize the risk of building bad debt; and from a service cost perspective, it is also important that LSPs ensure that their credit lines with vendors are adequate without causing unnecessary financial risk.
Clark points out that a clear and total view of all company finances is needed to ensure the overall well-being of a business. An accurate assessment of the business' complete monetary risk situation is necessary to ensure that its credit control team is monitoring all activity and chasing the right debt, and that its procurement team can carefully weigh the offers being made by suppliers.
Similarly, he says, companies must not forget the significance of assessing revenue stream when reigning in financial risk. From the moment an operator prices a job at entry point, the ideal situation is to have complete visibility of the entire job process through an accrued revenue method, he says. Once the job is correctly entered into the accounting system it is important to manage it closely to ensure it is invoiced to the correct person in the correct company for the correct value with the correct terms.
"The most reliable solution to achieving this kind of comprehensive control over financial risk lies in implementing a totally integrated accounting system that accurately reflects the most current data for all transactions," he continues. "This begins at entry point — as soon as an accrual is entered onto the job-costing screen of a shipment. These cost accruals can then be electronically monitored, managed, matched and reported from the moment they are entered into the system. Any discrepancies in financial status can be reported with a full audit trail, ensuring that cost control risks are minimized throughout the supply chain process."
"Logistics service providers (LSPs) in the air freight sector are often lax in administering the financial risk involved with managing their suppliers at a time when diligence is critical for business success," says Clark. "In business today, it is vital to keep a tight rein on all finances, to keep expenditures under control and identify true ROI."
From a credit management point of view, Clark suggests, it is essential to maintain control over the financial status of debtors to minimize the risk of building bad debt; and from a service cost perspective, it is also important that LSPs ensure that their credit lines with vendors are adequate without causing unnecessary financial risk.
Clark points out that a clear and total view of all company finances is needed to ensure the overall well-being of a business. An accurate assessment of the business' complete monetary risk situation is necessary to ensure that its credit control team is monitoring all activity and chasing the right debt, and that its procurement team can carefully weigh the offers being made by suppliers.
Similarly, he says, companies must not forget the significance of assessing revenue stream when reigning in financial risk. From the moment an operator prices a job at entry point, the ideal situation is to have complete visibility of the entire job process through an accrued revenue method, he says. Once the job is correctly entered into the accounting system it is important to manage it closely to ensure it is invoiced to the correct person in the correct company for the correct value with the correct terms.
"The most reliable solution to achieving this kind of comprehensive control over financial risk lies in implementing a totally integrated accounting system that accurately reflects the most current data for all transactions," he continues. "This begins at entry point — as soon as an accrual is entered onto the job-costing screen of a shipment. These cost accruals can then be electronically monitored, managed, matched and reported from the moment they are entered into the system. Any discrepancies in financial status can be reported with a full audit trail, ensuring that cost control risks are minimized throughout the supply chain process."
RSS Feeds
