Usually, integration experience is great to have on your resume, but a major integration failure between accounting systems recently lead to the resignation of a CFO at a UK company.
I've written about how integration is a growing asset to IT and workers-just ask Mark Hurd. And despite the risks with integration, I seldom-or ever, really-run across stories about people who lose their jobs over integration gaffes. Certainly, this is the first time I've read of a chief financial officer who resigned over one.
Yet TUI Travel CFO Paul Bowtell resigned last week after the company announced it had overstated revenues last year by 117 million, approximately US$185 million.
Apparently, the problem stems from TUI Travel's 2007 acquisition of a rival travel firm called First Choice. The integration error occurred between First Choice's retail system and TUI Travel's tour operator systems, according to The Wall Street Journal.. The tour operating system did not take into account the discounts and free items offered by agents and logged into the retail system. So, essentially, the TUI accounts were not registering sales discounts offered by First Choice's sales team.
Some of these "irrecoverable balances" were written off and disclosed earlier in August, but since then an additional 88million (US$139 million) have been discovered, according to the UK Telegraph.
The TUI Travel press release states that "The adjustments to the results are non-cash in nature and have no impact on the company's cash and net debt position," but it did affect its financial statements, reducing the company's reported profits by approximately $66.4 million (42 million) for the year ending Sept. 2009, according to the Telegraph, and reducing the cash reserve reported by around $110.7 million (70 million), according to Information Age. The company's stock also took a hit, falling 12 percent.
That's a big hit for what the article calls "a data integration glitch."
Interestingly, the press release and the UK articles all note this problem was "the accounting error in the integration of IT systems in its UK mainstream business" in one way or another. Even company's Chief Executive Peter Long said, "It is now clear that at the time of merger, there were weaknesses in the legacy systems we chose to use in the TUI UK business."
So why in this age of IT scapegoating, when this is obviously a case where tech systems were the problem, did Bowtell resign?
Long's comment suggests it's a little thing they used to call "honor":
Despite the fact that this situation had built up over a number of years, Paul is behaving honourably and I am disappointed that he will be leaving the Group. He is one of the most capable Chief Financial Officers I know and we have had an extremely good working relationship over the six years that we have been a team. I have specifically asked Paul to remain with the business to see through the full-year audit and production of our preliminary results. I will miss working with him and wish him every success for the future.
If you'd like to know more about what was going on behind the scenes with this integration, Information Age points out IT services company Avanade helped integrate TUI's accounting software last year-after the gaffe-and published a short case study on it. After its acquisition, TUI inherited four different sets of accounting software and a bit of an IT mess involving different user interfaces that created additional data silos.