Riordan_Finance_and_Accounting

Finance and Accounting Unfortunately, there are many problems with Riordan Manufacturing’s accounting system as well as their financial handling methods. The company has started on the right foot by having company wide systems put in place at each location. These systems include a general ledger, accounts payable, accounts receivable, order entry, procurement, sales and purchasing history, invoicing and shipping, payroll, financial reporting, EDI, bar code reading, and EDSS. However, the last three systems are only in place at the San Jose office. Michigan or George never received these systems because of the “diligence process in which Riordan acquired the operating entities.” Just because the company received the two entities from other companies does not mean that they should ignore the accounting and financial system problems. According to company records, the main location in San Jose receives some information from data files, some on paper that has to be reentered, and some comes with the wrong account codes so the data has to be redirected. The company is wasting time and money not updating these systems. The first thing that Riordan needs to do is address the different financial programs in each location and get everyone on the same page. They need to install a bar code reading system in every location as well as set up an EDI system. The company also needs to implement there new financial software programs in all locations as soon as possible. Doing so will decrease the amount of money the company is spending on the financial systems and according to the last Income Statement put out by the company they need to reduce the company’s costs. A fortune 1000 company subsidy like Riordan Manufacturing should not have a decrease in income from the year before. If costly financial audits had been reduced to maybe two to three per year instead of once per month, a decrease in income may have been prevented. Audits take time as well as money away from the company if a monthly audit was not required the companies financial employees could get their work down faster and they could be better organized. Using the new company wide financial system that is proposed will greatly reduce the need for audits and prevent monthly internal audits. Another way to decrease internal audits is to relieve employees that have a tendency to cause these audits and replace them with reliable employees that have better financial background. Replacing employees and well as the system needs to happen first at customer level. The financial problems have been so bad lately that the customers and outside vendors have noticed with bad invoicing and payment handling. While it will take time for all the locations to get the upgrade to the new system, the areas that deal with customers directly such as invoices and accounts payable should be the first to receive the upgrade. A drop in income could be very well because customers and vendors have problems with invoicing and payments, therefore they will take their business elsewhere. While replacing customer-based areas first the company should also incorporate a temporary fix for the areas that will not receive the upgrade right away. These areas would be the Michigan financial and accounting department and the Georgia financial and accounting department. To fix these locations temporarily they should send an employee from the main office in San Jose to each of these locations with a windows based laptop that has the newer system that San Jose uses. This will hopefully speed up financial processing and decrease the amount of data errors. While these two locations will still have to use their older systems for most things, the final data can be imputed into the newer San Jose system at each location before it is transferred to San Jose. Doing so will allows San Jose to spend more time on their finances and less time deciphering the other locations data. Because San Jose spends so much time converting data from the other locations, they waste a good portion of the budget allowed for payroll for their department. Looking at Riordan Manufacturing’s budget for the last year, they have had more than two million dollars a month spent on labor. At the beginning of the year, they were in a deficit that took Riordan six months to get out of only to go back into a deficit four months later. They finally have gotten out of the deficit only to show a negative net profit for the last month of the fiscal year. This negative profit could have been prevented by changing the budget and allowing for the drop in income. Past records show that the industry drops during this time of year so the budget needs to drop with it. However, the company is so concerned with its financial problems they have not changed the budget in anyway. Riordan Manufacturing needs to restructure its budget to accommodate losses during the slow time of the year. After the new financial systems are installed, they will have an easier time budgeting for the slow period but they still need to recalculate the budget. Not only is the new financial system going to allow few hours spent in financial chaos it will also allow the company to forecast better its budget and spending habits and hopefully decrease the chances of seeing a negative profit.