Auditing: An electronic stitch in time: Automated reporting has saved a lot of money and trouble at Thorn EMI

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The Independent Online
MULTINATIONALS are under constant pressure to streamline their accounting procedures. Daily fluctuations in exchange rates, international variations in accounting practices and the internal requirements of a business all hinder the ability to collect and process data efficiently.

Now Thorn EMI, the UK multinational best known for its music and video rental operations, believes it has found a solution. It has developed an electronic mail system that allows its autonomous subsidiaries to report results monthly. The figures are consolidated automatically at the head office in London.

Previously Thorn, like other cross-border companies, collected these reports via costly private lines, discs sent by courier, andfax. The information then had to be laboriously consolidated in London. Roy Cater, Thorn's IT director for rental in Europe, said the new system had sharply reduced reporting times.

In addition, the reporting has become 'richer and more exception-orientated'. This means that Thorn is able to concentrate on forecasts rather than what has already happened, 'because the actuals are enough under control'.

There are other advantages. 'The type of thing you want to know about a record company and the type of thing you want to know about a rental company are utterly different,' he said. 'This system is fully capable of recognising that, bringing in these different types of data, reporting it sensibly and keeping it, above all, in one integrated data repository.'

David Renshaw, a sales executive for Infonet, which supplied the network equipment, said Thorn had been taking nearly a month to close its monthly accounts. 'They can now get this information in a few days.'

Thorn EMI is now marketing the system under the name Pro- Active through Data Sciences, a systems integration and facilities management company of which it owns 20 per cent.

Desmond Fox, Pro-Active's sales manager, said the company was targeting about 200 UK multinationals, each with at least 50 subsidiaries. The package costs an average pounds 200,000 and takes about two months to install.

Mr Renshaw believes financial consolidation is probably the most important business application of electronic mail. Some companies, he said, had squeezed the reports from about 20 overseas units into 4,000 characters a month.

To avoid extraneous data, the system also restricts the amount of reporting. Data is validated before dispatch and as it arrives in London. Then, Mr Cater said, it was passed 'up a natural hierarchy of things, which have to be done'. He added: 'That obviously starts with currency conversion.'

If the incoming data is not acceptable, the host system will flash an immediate message back. 'If Australia sends us something in the middle of the night, it is no good us waiting for tomorrow morning to realise it is wrong and call back in the night to tell them it's wrong,' Mr Cater said. 'So that process is fully automatic.'

At this stage, the emphasis is on identifying problems and reconciling differences. Dutch accounting rules, for example, mean that what is regarded as a loan in Britain is treated as a preference share in the Netherlands. So every month, Dutch preference shares are automatically converted to loans.

'The whole purpose of the project was to design a tool for the accountant,' said Mr Cater, a qualified accountant who has worked in information technology for the past decade. 'The technical decisions were about how we could achieve it.'

The development of network services has coincided with a trend away from the mainframe computer for all but the biggest jobs, such as organising payrolls or servicing large bases of customer accounts. Large businesses are trying to devolve responsibility to lower levels, and mainframes are inflexible and expensive to maintain.

The PC-based systems that are evolving instead are described as client-servers, and the PC is linked to a localised server or database.

Thorn EMI has itself reduced the size of its reporting system from an IBM mainframe base.

(Photograph omitted)