An ongoing installation of SAP's financial software at a London-based container shipping firm has exposed flaws in its legacy accounting systems, forcing the company to lower its earnings over the past three years by a total of US$41 million.
Officials at CP Ships said the SAP rollout itself contributed to the need for the restatement, which was announced last month. Demands placed on business units while the software was being installed early this year led to delays in transferring information between shipping operations and the finance department, making it hard to update cost estimates in a timely manner. The processing of actual cost data was also delayed, CP Ships said.
On the plus side, the company said the SAP applications have delivered new visibility into its financial operations. The installation "revealed some deficiencies in former systems and related business and accounting processes, for which corrective action has been taken and continues," CP Ships said in a statement.
The use of the software has also improved financial controls on transactions and account balances, particularly ones involving different internal operating units, said CP Ships. That helped executives identify US$8 million in erroneous account balances that had been reported as part of the company's financial results for 2003 and this year's first quarter.
CP Ships rolled out the SAP-based system to five of its seven lines of business in January, Chief Financial Officer Ian Webber said during a webcast briefing about the restatement and the company's second-quarter results. Webber noted that the software has also allowed CP Ships to improve its financial reconciliation procedures.
The company is working to strengthen its accounting operations through steps such as using the SAP applications to speed up the processing of financial data and customer invoices, Webber said.
The applications are scheduled to be installed at the other two business units by early next year, which would put the entire company on common operational and accounting systems. CP Ships said it doesn't expect the last phase of the rollout to result in "any significant transition issues" at the remaining units, one of which is already running an earlier version of SAP's financial software.
Officials at the company declined requests for more information about the SAP project, including the cost of the rollout. "We're still in the process of completing the implementation," said a spokeswoman, adding that further comment would be "a bit premature."
CP Ships Chairman Ray Miles said during the webcast that the company's numbers appeared to be valid until July, in part because of the delays in processing cost data.
To ensure that the new figures were accurate, there was a "huge amount of activity" by the company's audit committee to investigate and nail down the actual results, Miles added.