Finance subsidiary/head office gap revealed

A communication gap between head office and subsidiary finance departments has resulted in companies having to issue profit warnings, according to KPMG partner Ginny Stevens.

Addressing a conference on Best Practice in Group Reporting last week, she said subsidiaries at two audit clients had tried to handle a problem without consulting their head offices, which only became aware of the difficulties as they got out of control.

David Jones, a principal at Coopers & Lybrand, told the same conference that head office finance departments should be seen to add value to subsidiaries’ finance functions by acting as their adviser or sounding board.

He added that subsidiaries usually spend much more time compiling financial reports for head office than the head office does in preparing information for top management. But when the central department wants to shorten financial reporting times, ‘the reaction is to spend money on a new system at head office when an obvious place to start is to look at who’s on the critical path in the subsidiaries.’