Ever since the high-profile collapses of corporations like Enron and WorldCom, the corporate sector has been under immense pressure with regards to governance regulations. Investors lost billions of dollars in scandals such as these, leading to a severe lack of confidence for future investments on their part. For the government, this was a huge setback and something had to be done. The solution was presented in the form of various stringent corporate governance laws, prime among which stands the Sarbanes-Oxley Act.
Enacted as a way to restore public confidence in corporate governance, the Sarbanes-Oxley Act requires organizations to make several significant changes which include the introduction of stricter accounting standards, certifying the accuracy of financial information in a more comprehensive manner, tracking corporate spending, and conducting external audits at a regular basis. Compliance of the law has been made mandatory for all public corporations in the United States.
Herein lies the problem. Ensuring compliance with the Sarbanes-Oxley act is no small matter. The necessary protocols to track corporate spending as required etc, can be quite costly for the organizations to implement. For this reason alone, many companies refrain from going public in the first place. For larger organizations, the Act serves them well in the long-term as it does help reduce oversight. With the increasing prevalence of web-based systems though, companies are able to incorporate cost-effective solutions to certify accuracy of financial information. One such system is e-procurement.
Companies which use e-procurement systems for their purchasing needs have the added advantage of being able to track corporate spending and maintain electronic financial records for as long as need be. The Sarbanes-Oxley Act demands that all financial data that may be relevant for audits must be preserved for a period of 5 years minimum. Using a web-based purchasing solution, this issue becomes non-existent too. All the infrastructure you need to setup such a system is a browser.
Most of a company’s spending is on purchases, and thus, financial records of such transactions are often the largest part of data that needs to be in compliance with corporate governance laws and accounting standards. E-procurement software becomes a powerful too in this regard, tracking corporate spending with ease and therefore ensuring compliance with modern governance regulations.
Achieving good corporate governance is fast becoming a crucial aspect in major organizations, and companies are always on the lookout for increasingly efficient ways to do without having to spend too much. This has become one of the main reasons for the popularity of web-based purchasing systems, along with the various benefits a well-built e-procurement system brings to the organization. Regulators, courts, and investors frequently extol the virtues of good corporate governance since it promotes the long-term interests of the investors. That was, after all, the entire point of governance regulations like the Sarbanes-Oxley Act. So why not get started on the road to achieving good corporate governance through tools like purchasing software.