|Anita Dennis is a Journal contributing editor.|
Companies payroll departments face numerous issues that must be addressed to ensure that employees are paid, contractual obligations are met and tax and other withholding duties are upheld. For example, as most CPAs already know, the numerical change in dates associated with the new
millennium poses a massive challenge to computer systems all over the world. Companies currently are struggling to diagnose and address the systems problems that are being created by computers inability to handle computations involving years after 1999. At one multinational, CPA Patty K. Lake is spearheading an effort to ensure that the computer system remains programmed to pay 15,000 workers. This project is just one of many she oversees as the payroll manager for Pillsbury, the international food processing and marketing company.
|Problem: Ensuring that a
multinationals payroll division continues to issue 1 million
payments a year to various recipients. |
Solutions: Greater automation; Year 2000 upgrade.
The Year 2000 (Y2K in computer jargon) challenge has the potential to affect organizations from governments to Mom-and-Pop stores. The issue stems from an economizing move computer managers made in the 1960s. Since data storage space on hard disks was so expensive in those days, programmers were instructed to use only two spaces, instead of four, when a year was designated. Thus, both programs and databases used 97 instead of 1997. But as the year 2000 approaches, the computer that has only 97 in its database is unable to distinguish between 1997 and 2097. As a result, date-dependent data—especially those that span the two millenniums—will not be calculated correctly.
For example, the Y2K issue could affect whether or not people get paid if computer systems are confused by dates that dont make sense, and thats where Lake comes in. The CPA, who reports to the company director of financial services, oversees a division that includes payroll, accounts payable and risk management. She and a staff of 13 are responsible for payroll processing operations, payroll taxes and deposits and accounting.
To ensure that those operations continue to run smoothly, all of her divisions Legacy payroll systems are in the middle of an upgrade that will expand their capacities—by expanding their date fields—to enable them to recognize years beyond 1999. "Its a massive project," Lake says. "We have had to extend every single date element in every company file, not only for payroll but also for other company systems." The budget for the upgrade in the payroll department alone is $350,000.
"We started looking at Year 2000 issues about three years ago," Lake says. "The corporate Y2K strategy involves large cross-functional teams from all areas of the company. The payroll system solution was selected in 1995 by a small cross-functional team from human resources, HR information systems, benefits, compensation, corporate tax, pension, payroll and management information systems." The payroll system solution involves some equipment upgrades but focuses mainly on software changes.
Bringing the payroll department up to speed is only one of the many issues to be addressed in the companys Y2K project. Because her system interacts with about 100 other company systems, such as pension, benefits and the general ledger, "the various interfaces and how they will work are an even bigger concern than the upgrade to our own system," according to Lake. The Y2K payroll system upgrade is scheduled to be completed in June 1998, "but all of the companys many systems will be performing their updates at different times and using different translation tables. All of the interfacing units must make a conversion when each side makes its change." The upgrade also will alter how the company deals with outsiders, including the federal government, which receives tax payments from Lakes division."My advice to other payroll operations is to get moving," she advises. "At Pillsbury, this is proving to be an immense project. If you havent started looking at Y2K issues, youre late."
Pillsburys payroll division disperses a total of 1 million payments a year to various recipients. How can this be accomplished most efficiently? Greater automation is the clear answer. In fact, the systems interdependence is the result of a thrust to automate as much as possible. Here are how some of the areas for which payroll is responsible are affected by the divisions efforts to achieve that goal:
Using Epic, a new software program, the company has upgraded its method for routing withheld payroll taxes to their proper recipients. With the new system, "we no longer have to key in confirmations that taxes have been paid on time." The company had been transmitting tax deposits electronically for several years, but when it received electronic confirmations of deposits it was unable to download them electronically, so the confirmations had to be entered into the system manually. "The new system will enable us to download confirmations automatically without human intervention," Lake says, and that will save the department time and money.
Although there are a dizzying array of innovations taking place in Pillsburys payroll department, Lake and her staff believe they are crucial to the companys functions. "Our philosophy is that people enjoy what they do here and they want to make a contribution, but payroll is the ultimate reason they come to work." Lakes department is working to ensure that every recipient receives the proper payment in the most timely and efficient manner.
Name: The Pillsbury Co.
Location: 28 plants and sales offices in 46 states and 15 foreign countries.
Date founded 1869.
Sales: $6 billion in fiscal 1996.
Number of employees: 15,000.
Form of ownership: Wholly owned subsidiary of the British conglomerate Grand Metropolitan PLC.
What we do: An international food processing and marketing company.
Our main customers: Supermarkets and food stores.