The installation of SAP financial software at a major
London-based container transport firm exposed flaws in its legacy
accounting systems and processes, unveiling a gap in its
accounts of £23m for the past two years.
Earlier this month, CP Ships announced that the SAP software
implementation had delivered new visibility into its financial
operations and that its earning would have to be revised.
The firm issued an alert on 9 August that it was postponing the
release of its second-quarter results for a week and restating its
2002 and 2003 finances, as well as those for the first quarter of
2004.
"The implementation [of SAP] has revealed some deficiencies in
former systems and related business and accounting processes, for
which corrective action has been taken and continues," the company
said. The flaws included underestimates of cost accruals and the
need to write off some of its balances.
When the earnings were released two weeks ago, the biggest
changes were to the company's 2003 numbers. For instance, the
company reported that costs in 2003 had been underestimated by
$20m.
The company noted that the SAP rollout itself led to delays in
transferring financial information and processing cost data.
"This certainly was CP Ships' most challenging quarter since we
were publicly listed, and with respect to the restatements, you
should all know we feel ourselves we've let down our investors and
let down ourselves," said CP Ships chairman Ray Miles.
The SAP system was initially rolled out to five of the company's
seven lines of business in January, said chief financial officer
Ian Webber, who noted that SAP had allowed CP Ships to improve
financial reconciliation procedures and accounting visibility.
The realisation that a restatement needed to be done "didn't
happen overnight", said Miles. The numbers appeared valid until
July, in part because of the delays in processing company cost
data. To ensure that the new numbers were valid, there was a "huge
amount of activity" by the the company's audit committee to
investigate and nail down the new, more accurate figures, he
said.
Using the software, the company is working to strengthen its
accounting organisation, including speeding up the processing of
financial data and invoices, said Webber.
The entire company will be on a single operational and
accounting system by early 2005.
CP Ships said that it does not expect the last phase of the
rollout to result in "any significant transition issues" and that
one of the remaining units is already running an earlier version of
SAP.
"We're still in the process of completing the implementation,"
said a spokeswoman, adding that further comment would be a "bit
premature".
Marc L Songini writes for IDG News Service