Government Mandates Monitoring of Supplies Among Business Sectors
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.
Think about it. You may have a building containing several heavy machines that run virtually all day, every day. A simple delay in receiving a shipment of filters could bring all of your production/automation to a standstill. You don't want to keep a huge inventory of parts, preferring to adhere to the "just in time" delivery concept, and yet if the company that supplies you has delays on their own end, then your machines suddenly sit idle and you lose money. This is one of the risks of being dependent on this type of supply chain. And think of the catastrophe that could potentially ensue if this sort of last minute delay were to occur with crucial health products.
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.
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