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02.05.2012 Business & Finance

Local Companies Must Strengthen Internal Controls - PwC Study

02.05.2012 LISTEN
By Daily Graphic

Oonly 64 out of every 100 companies in Ghana are likely to report all issues to their boards of directors, a new study on how efficient Ghanaian companies are compared to international best practice, has revealed.

The survey which was conducted by the accounting firm, PwC, also identified that such companies which only reported certain issues to the board did not usually have internal governance and compliance structures to check risks, but rather rely heavily on the annual external audit and other internal reviews.

A Manager at PwC and a member of the survey team, Ms Serwa Atiase Dzogbenuku, who presented the survey findings to an audience made up predominantly of private sector practitioners, stressed the importance of companies surveyed and by extension other companies that fail to report all issues to their boards to consider the robustness of their controls in ensuring that governance and compliance are adequately maintained.

After giving quantitative and qualitative responses to questions in eight areas including people, business insights, process and systems, internal audit governance and compliance as well as corporate social responsibility, it became clear that Ghanaian companies have some catching up to do.

Ms Dzogbenuku later told the GRAPHIC BUSINESS that now that the Ghanaian companies can gauge how their performance benchmarked global business best practice, they could focus on areas that they fell short and achieve what was within their reach.

The survey also found that 50 per cent of surveyed organisations collected their debts within 57 days and paid within 93 days.

But PwC experts advised that companies needed to optimise their processes to collect debts in time to free up your working capital.

Ms Dzogbenuku said delaying payment to suppliers to balance short-term cash flows was common among the companies surveyed but the practice was risky in the sense that it could strain business relationships and the supplier’s ability to trade.

In all 24 blue chip companies in the country whose annual revenues average GH¢62 million, took part in the survey. There were 11 banks and capital market companies, three insurance companies, four mining and energy companies, three manufacturing companies and three others.

The 2012 Business Effectiveness Benchmarking Survey also indicated that it took the companies an average of 11 days after the end of a reporting period for companies to finish processing their financials.

According to PwC survey benchmarks, it took top multinational companies, some of which had to do complex consolidation of books, six working days to close their books after the end of the month, and reporting is done within three working days after the books have closed.

However, in the case of Ghana, the companies surveyed spent an average of 11 days for both closing and reporting, even though 60 per cent of companies surveyed did not prepare consolidated accounts.

This particular finding, although not the industry best, does not come with much surprise as 21 out of the 24 companies surveyed used an average of 64 manual processing journals.

The survey, therefore, advised companies to leverage technology to enhance their processing accuracy and timeliness.

Companies in Ghana that want to meet international standards must therefore ensure rigorous management of processes; perform most work before the end of month and they must observe materiality limits, which suggests which transactions could be treated in separate journals.

The Deputy Minister of Trade and Industry, Dr Joseph Samuel Annan, said the survey report was as relevant to the public sector as it was to the private sector.

He said the public sector also needed to be as efficient as the private sector ought to be so that their inter-dependence would speed up the development process and not stall it.

Dr Annan consequently, advised Ghanaian companies to aim at benchmarking their operations with international companies, change their attitude towards efficiency at the work place and not allow some of the cultural norms that rather drew businesses back to interfere with their quest to be the best.

The Country Senior Partner, Mr Felix Addo, said the benchmarking survey should be seen as the starting point for further discussions rather than a conclusive assessment a particular area.

He said the survey was already being conducted in other countries and would be repeated here in Ghana bi-ennially so as to help encourage local companies to aspire to greater heights.

graphic.com.gh

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