23 January 2015

Another sad point about Target Canada

Normally, reviewing bankruptcy and CCAA filings is rather depressing, but there are occasions where some details pop out that really are surprising.

Take the recent news about Target pulling the plug on its Canadian operations:

There's a throw-away observation on p. 16 of the Pre-Filing Report, which disclosed that "[Target Canada] does not have stand-alone accounting and treasury departments." These functions were handled out of Target's head office in Minneapolis, under an intercompany agreement.

Think about it: in establishing its Canadian operation, the US parent decided that it was not appropriate to set up a separate Finance function, whether for reasons of cost or operational efficiency. I have already been familiar with some larger companies setting up shared service centres for consolidating some aspects of their operations world-wide, but deciding to farm out the entire function to another country does not bode well for us CPAs here. This is suggesting a hollowing-out may be coming for many Canadian operations of foreign companies, on a scale we have not yet contemplated:
  • spreadsheet and ERP applications have taken over many tasks that used to be consigned to clerical staff
  • receivables and payables processing can be fully automated, to the point that remittance information can be transmitted to vendors for posting directly against outstanding invoices without human intervention
  • banking transactions can be handled in similar fashion
  • in short, paper-based transactions are essentially obsolete, and any that remain suggest that operations are not being competently managed
  • posting and reconciliation can be handled anywhere, and I am already familiar with such operations being handled out of India, Malaysia and the Philippines by equally competent staff working for significantly less salary that would be the case here
Given these realities, what is left for professional accountants to do on our home turf? Is there still opportunity for developing Finance groups with a critical mass of CPAs that will benefit new Canadian organizations that are not in the public sector? This is definitely worth debating.

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