For public SMBs: Counterbalance Sarbanes-Oxley costs with streamlining gains

I knew that Sarbanes-Oxley (commonly referred to as "SOX" - don't confuse them with the American famous baseball team, they are less fun to watch !) new regulations to reduce significantly company's malpractices arising from Enron or MCI would increase your internal costs (Europe is certainly not being far behind with a huge fraud case - Parmalat - an $18Bn fraud - Yes you read it correctly I wrote Bn and not M !).

But one very big issue that arose from these huge straight frauds, is that we have to live now with new heavy-burden regulations that tax companies very heavily. According to Karen Kerrigan, the additional costs created by SOX amounts to no less than 2.7% for public companies weighing $100M or less ! The same point is also echoed by Jeff Cornwall in his "Entrepreneurial Mind" blog

Now as the boss of such $100M company, to offset a cost increase of $2.7M is a tough job. Do you add it to your selling prices or slash some costs abruptly to preserve your bottom-line ? Of course not.

There should be a better course of action and I would propose to take a positive standpoint. It is for sure given the major sanctions that top executives could go through (jail sentences and Millions of $ of personal fines) that you will follow very closely the SOX review process.

Why not go the extra mile and appoint a team of 2/3 Senior Executives who will be tasked to analyze and report on procedures/processes that are too complex/too heavy for the task at hand? Only by getting your hands dirty (I am sure you will be surprised by some findings) and having an open mind to streamline either an outdated or top-heavy process, you will then be in position not only to recoup these unavoidable regulatory costs, but more important to get an excellent insight into non-optimal processes.

As SOX focuses on how you collect, store, report key company data, and as a starting point to initiate streamlining actions: why don't you have a look at these lean management accounting principles?