Managing Supply Chains
In recent years, government regulations have been put in place that can put a serious burden on a company if it doesn’t pay close heed to the supply side of its balance sheets. In tangible terms, a manufacturing business using an on-demand system could suffer serious financial setbacks and delays in production if even minor parts aren’t delivered on time. In less tangible terms, yet with perhaps greater financial impact, Sarbanes-Oxley and other legislation demands that a business account for all planned transactions or agreements that will impact its future financial performance.
To take one example of risks on the on-demand side, imagine a building with several machines running virtually 24/7. Yet if the company that supplies car parts on demand (like brake pad parts) has delays of its own, then production in that building could go quiet. This is a risk that must be taken into account if the company is dependent on this sort of supply chain. The same risk attends all industries including the health care industry.
But there are certain off-balance sheet liabilities, another aspect of the supply chain that is more “potential” than tangible. Sarbanes-Oxley dictates that even the costs of your agreements, commitments, guarantees and other planned future transactions need to be taken into account, so that you have all aspects covered. What is required then, to keep track of this net liability and ensure that the company’s actual financial health can be accurately assessed, is a liability professional who specializes in this type of accounting. A whole industry of such specialists has sprung up in recent years, in response to Sarbanes-Oxley and other such legislation.
Many accounting firms also now provide software products that calculate and report these intangible liabilities, keeping track of your agreements and timed commitments. These risk management applications can also help create action plans to account for changes in supply and demand, and to help reduce inventory without depleting it so badly that your production sits idle while you wait for parts and supplies. It’s important to the health of your business to keep on top of all your production costs, including the more ethereal future costs, while complying with all government regulations.
Rene Lacape is a seasoned insurance agent. He has been dealing with both corporate and individual accounts for several years up to the present. If you need him, you can check his website and give him a call. Act now.
