The great euro challenge

SLOVAK businesses have been working out to get in shape for the day when the EU currency finally arrives. Companies agree that the greatest burden during the home stretch to the euro will fall on the firms' accounting systems.

SLOVAK businesses have been working out to get in shape for the day when the EU currency finally arrives. Companies agree that the greatest burden during the home stretch to the euro will fall on the firms' accounting systems.

Both the private and public sectors expect the switch to the euro to have an impact on at least some aspects of their functioning, according to a survey by Ernst & Young released in February 2008.

"The companies are expecting the greatest changes in accounting and wage and invoice systems, followed by systems of property registering, obligations and liabilities," said Ernst & Young in its official release.

Almost 90 percent of the surveyed companies consider accounting among the areas that will be most affected by the euro conversion, while 84 percent mentioned human resources and 73 percent said IT systems were also exposed to the impact of the euro switch, according to Ernst & Young.

The survey showed that 46 percent of the surveyed institutions have already analysed the potential impact of euro adoption on their systems, representing significant progress compared to a similar survey from the spring of 2007, when 53 percent of businesses and 23 public sector institutions planned to undertake a strategic analysis.

Marián Hudák, a partner in Deloitte Audit, said that in accounting systems, the two areas that will require the greatest changes are the display and then the conversion itself.

"These are the changes in the systems that should allow for the dual display of financial information in relation to individuals and consumers; for example, wages and prices for the end consumers," Hudák told The Slovak Spectator.

Once the exchange rate between the Slovak crown and the euro is fixed, which is expected in June 2008, the firms will be obliged to report all financial information in both currencies, although the Slovak crown will be the primary currency. However, after January 1, 2009, the euro will become the primary display currency and the Slovak crown the secondary until December 31, 2009, Hudák said.

A second area of changes will pertain to the systems that will make the conversion of financial data from Slovak crowns to euros possible by the January 1, 2009, deadline, according to Hudák.

Tomáš Barcaj, senior consultant with Centire said that the suppliers of the information systems are ready to offer businesses system upgrades compatible with all the legislative requirements.

It seems that most software providers either already have a euro version, or will distribute it soon, said Bart Waterloos manager at VGD said.

"Here it will be mainly a matter of installing the update and training the users," Waterloos told The Slovak Spectator. "However, most companies forget that for their reporting systems they very often rely on Excel or other programs, whereas they will need to implement the changes manually."

Standard issues will be adjusted automatically, according to Waterloos, but there could be a problem with custom-made templates, adjustments etc. Every company will need to conduct a review to identify and document these, he added.

Another important change will be ensuring that software is capable of processing four decimals, and rounding correctly to two decimals, Waterloos added.

The preparation process does have many risks and pitfalls which the firms might knowingly or unknowingly underestimate, according to the experts.

"Underestimating the situation and intentionally delaying the process of preparing for the euro are the greatest problems," Hudák told The Slovak Spectator. "The deadlines for the euro switch are fixed and it will be impossible to change them."

As soon as possible, businesses should identify the systems that will be affected by the euro switch and plan the necessary changes in great detail.

"As time progresses, system providers will be more and more in demand, and some of them might not have enough human resources to address system changes for a large number of clients," Hudák said.

If a firm fails to get ready for the switch, it might find itself at odds with legislation that defines the obligations of companies in association with the process of euro conversion, Barcaj told The Slovak Spectator.

Moreover, any delay might bring additional costs. Failing to prepare for the switch might be reflected in relationships with business partners and customers, with potential harm to the reputation of the firm, Hudák said.

According to Waterloos, any failure to prepare for the conversion will be a bonus to competitors who planned ahead.

An early start is the key to avoiding major risks, experts agree.

According to Róbert Srnka, senior manager of Ernst & Young, there are still a number of organisations that have either planned to start preparations in the first quarter of 2008 or have not planned these activities at all.

Srnka also pointed out the misperception that euro-adoption requirements pertain only to accounting and reporting systems.

"The results of the survey show that the issues are much broader and may have an impact on many functions within the organisation," Srnka told The Slovak Spectator.

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