Cutting SOX's red tape

As the British subsidiary of a US public company, Danka UK is required to demonstrate compliance with the Sarbanes-Oxley Act. Mark Brooks, the company’s UK commercial operations manager, tells Enterprise Information how a document management and workflow system has helped achieve compliance.

By Jessica Twentyman

From fax machines to sophisticated multifunction devices and high-volume printing systems, Danka distributes, installs and maintains printing and imaging devices to suit the needs – and pockets – of companies of all sizes.

But Danka does far more than simply providing equipment and consumables, such as paper and toner cartridges. Its contracts with customers also include a full range of services. This could be anything from analysing clients’ document production needs, to integrating products that they buy or lease with existing corporate networks, training their employees in using new machines and providing ongoing maintenance and support.

For Danka, these activities have historically generated a mountain of paperwork. In the UK, the company has 24,000 machines installed and more than 15,000 lease, rental and service contracts to maintain every month, while the company’s sales team regularly generate 300+ new contracts every month.

Approving, tracking, managing and accessing the documents associated with these contracts in order to answer customer queries was historically a manual, paper-based process, says Mark Brooks, Danka UK’s commercial operations manager. Not only did this act as a substantial ‘brake’ on the business, he says, but it also presented problems in satisfying mandatory financial compliance regulations.

The SOX challenge

In particular, as the subsidiary of a UScompany listed on the Nasdaq stock exchange, Danka UK is required to comply with the Sarbanes-Oxley Act of 2002. Introduced in response to major corporate and accounting scandals, Sarbanes-Oxley (or SOX) is a US federal law that applies to all US-listed companies and their international subsidiaries. It mandates that companies maintain documentation of significant business processes and their related controls.

With the introduction of SOX, muddling through is no longer an option. For Danka UK, it has meant establishing clear processes for handling contracts, processes that have the approval of the company’s international auditors, Ernst & Young. It also requires Danka to regularly submit contract documentation to the auditors for inspection, so that they can ensure that appropriate controls are in place and applied in each and every case.

“Approving and managing contracts is a complex operation involving more than ten basic steps with additional branches along the way, depending on individual contracts,” says Brooks. Contracts are subject to a number of checks when they first arrive at the company’s UK head office in Theale in Berkshire, he points out, and each one must be approved by a board director before they can be processed.

“Since all contracts have to be authorised by a board director, what was happening was that each contract would physically be taken upstairs to our managing director or to another director’s office. They would sign it when they had time to sign it. Then it would be brought physically back down to contract department and so on. It was a real paper chase.”

Sometimes contracts went astray, sometimes they would get mixed up with other paperwork and sometimes someone would take them home with them, he says. “This was far from ideal because a contract is clearly a legal document and also represents monetary value to Danka UK – without a contract, we can’t invoice the customer,” he says.

“And because a lot of the business Danka does is lease business,” he adds, “it’s important that lease documentation is pushed through as quickly as possible.”

Danka UK decided that what it needed was a document workflow system that would route contract documentation around the company in strict accordance with the processes it had set up for SOX compliance and for general good governance. That system would also need to keep an audit trail, detailing what happened to a contract along the way.

The Danka response

After some discussion, Danka UK decided to extend its use of TokOpen, a document management and workflow system that it was already using to handle some basic archiving of its contract documentation, and which it had supplied to a large number of its own document imaging customers. TokOpen is supplied by Tokairo, which was acquired by knowledge management and data synchronization specialist Corpora in January 2006.

This, of course, entailed a number of key changes to business processes. When a new contract arrives today at the contract department, employees make a number of vital preliminary checks on the paper-based form: Has the correct product and part number been selected? Have the right prices and leasing rates been applied? Are the customer’s contact details all correct, including postal codes? Is this a specialist contract – that is to say, is it with one of Danka’s many public-sector customers and, if so, have special discounts been applied?

“Once these checks have been made, the contract documents are scanned into the TokOpen system,” says Brooks. “If, for any reason, there is something wrong or missing with the paperwork, we reject it but still goes onto TokOpen, so that at any one time we know how many are pending for re-submission of paperwork. If the contract is approved, the workflow routes it straight to a board director for authorisation.”

In certain circumstances, other authorisation and notification is required. In these cases, TokOpen automatically routes the contract to other areas of the business, says Brooks. “If the contract is of a certain value, it will go to the leasing house. If it is of a specialist type, it will be passed to a service manager. If it involves a network, it is sent off to technical operations to check out the specifications,” he says.

Once the necessary approvals for a contract have been obtained, all data needs to be entered into Danka’s main management information system, VALE, as part of the contract definition process. By integrating VALE with the TokOpen System, data input staff are able to see the VALE interface and the relevant documentation held on TokOpen simultaneously.

From there, final checks are performed on the contract for Sarbanes-Oxley compliance and the contract is sent to the customer for approval, as well as Danka’s sales order desk for processing. Equipment can then be ordered, a despatch date confirmed and a Danka engineer notified of the install date. When the product is installed, the engineer updates VALE and a bill is issued to the customer.

The benefits

“TokOpen has completely automated the contract approval process,” says Brooks. “The result is a dramatic reduction in time taken to complete the contract processes, documents are no longer misfiled or lost and information retrieval is faster and easier,” he says.

When Ernst & Young need to make quarterly checks on documents, these can be easily located. Typically, the auditors requests a random sample, but also need to see the contracts for the highest-value deals signed in that quarter. Either way, these can be located by customer number in the TokOpen system and e-mailed directly from there – so there is no more any need for Danka staff to search through paper files for documents, photocopying when they are located, and then mailing or faxing them to the auditors.

It has also improved accountability. Using unique pass codes, TokOpen can show that a company director has authorised each and every contract. “Not only that, but because of the log that TokOpen keeps on each file, we can demonstrate to auditors that we have kept track of every time a contract has been accessed, what changes were made, by whom and when,” says Brooks. Web access, he adds, means that directors can authorise contracts from any location where they have Internet access, “just as quickly as if they were in the office”.

“We now have complete confidence in being able to satisfy all requirements of the Sarbanes Oxley Act, for which the software is successfully supporting full audits. Everyone who needs to be is now always in the loop and can see the process progressing,” says Brooks.

But compliance with SOX is only one of the benefits Danka UK has enjoyed. “TokOpen has helped us raise awareness of service level agreement (SLA) response times and improved reporting in terms of both speed and accuracy and boosted productivity,” he claims. Using the new system has also helped Danka UK significantly increase its workload, without employing additional staff. “I’d estimate that it has effectively given us another person at no extra cost,” says Brooks.

It has also made the process of responding to customer queries much simpler. “[Employees] have two screens – one for TokOpen and the other for the VALE MIS. A ‘hot key’ on VALE enables the user to interrogate TokOpen and bring up all documentation on any contract straight away”.

Essentially, says Brooks, this has given Danka a firmer grip on its business, enabling managers and directors to take a much more comprehensive view of what is actually happening with both current and pending activity. The company is now hoping to extend the TokOpen system into the order fulfillment and billing departments – this will, according to Brooks, “help us complete the business-process loop”.

Mark Brooks can be contacted via www.danka.co.uk