What is an Accountant’s Role in Product Recall and Mock Recall Planning and Management?
In our 12-step series, Roles That Are Typically Involved in Product Recall and Mock Recall Planning and Management, we are diving into each department’s role in product recall management. This is Part 1- Accounting’s Role During a Product Recall and Mock Recall Planning.
When navigating the murky waters of product recall management, the product manager might be the captain of the ship, but she doesn’t sail alone. There are all kinds of departments involved in product recalls, from quality assurance to records management. The accounting department is, arguably, one of the most important. Responsible for handling all the financials associated with product recalls, accountants play a significant role and can speed up recall responses considerably.
In this guide, the first of our new 12-part series, learn the roles and responsibilities of the accounting department during a recall.
What Does an Accountant Do?
Product recall management might be important, but it’s expensive. Organizations need to continually monitor recall notices from the Food and Drug Administration (FDA) and other federal/state agencies and remove dangerous/faulty materials and products from supply chains and the marketplace.
Some of the costs associated with product recall management include:
- The expenses involved in recalling products
- Lost profits because of unusable products
- Potential lawsuits when organizations don’t take action quickly enough
An accountant manages all of these costs and identifies money-saving strategies in the product recall process.
Learn more about each department’s role during a product recall
What are the Roles and Responsibilities of the Accounting Department During Product Recalls?
Accountants have various roles and responsibilities when managing product recalls.
- Audits
Accountants establish audit protocols for product recalls, making it easier to identify financials before, during, and after the recall process. Good accountants review these protocols regularly. - Mitigating Financial Risk
Product recalls have a negative financial impact. Organizations might need to destroy unsellable products or unusable materials as a result of a government recall notice, for example. While accountants can’t mitigate financial risk completely, they successfully monitor the recall process and quantify potential damages. - Financial Reports
Accountants prepare financial reports that assess the potential impact of product recalls on an organization, including profit and market share loss. Good accountants continually monitor the financial impact of product recalls. - Penalties/Lawsuits
Although attorneys deal with penalties and lawsuits that arise from poor product recall management protocols, accountants evaluate the financial risks associated with government enforcement action and litigation. - Cost Assessments
Accountants assess the cost of product recalls, which include:
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- Repairing faulty equipment
- Replacing products
- Shipping expenses
- Hiring additional labor to manage recalls
- Administrative expenses
Accountants update an organization’s balance sheets and cash flow statements accordingly.
6. Compliance
The accounting team ensures their organization adheres to all financial compliance frameworks and guidelines. Failing to do this can result in penalties.
The accounting department works closely with the product management team and other departments when managing product recalls.
Why is the Accounting Department So Important for Product Recalls?
Few organizations realize the financial consequences of bad product recall management until it’s too late. Research shows that food recalls, for example, cost organizations an average of $10 million. This is money most organizations just can’t afford, especially in the current economic climate.
Poor product recall response times also result in lost customers. Another study suggests that 21 percent of consumers wouldn’t buy products from a manufacturer impacted by a recall.
It’s the job of a good accountant to keep an eye on financials so organizations save money on product recall management.
Why Accounting Departments Need Mock Recall Planning and Training Using Digital Tools
MockRecalls is a mock recall planning, training and consulting company focused on testing your recall readiness.
We are purely focused on protecting your product investment by working with you to create a new recall plan or analyze your current recall plan and then put it through a mock recall or recall simulation test to insure you are prepared for a possible product recall.
Our program can analyze your company’s readiness in many of the typical elements of the recall process including:
- Initiation, investigation, and communication process
- Recall working team and decision team composition and dynamics
- Team roles and responsibilities
- Process flow and lot traceability
- And retrieval capability and effectiveness checks
Our recall simulation program is conducted as an escalating model using real product facts and potential issues, with multiple inputs such as consumer complaints, social media, FDA/USDA/local health department and law enforcement. Conducting a recall simulation will also allow the recall team and all involved personnel to become familiar with their responsibilities throughout the recall procedure. This gives them time to effectively communicate any concerns about the plan while the company isn’t dealing with the pressure of an actual recall.
Mock Recalls, was created by our sister company Trievr Recall Management. Trievr has been helping organizations in pharma, medical device and several other industries successfully conduct product recalls and withdrawals seamlessly through its SaaS based on-demand system for over 10 years.
While working with many of its clients, TRIEVR discovered that most had a recall plan in place, but many had not tested the recall plan with a mock recall inventory-based traceability exercise or a recall simulation to test the organizations entire process.
To meet this vital need, Mock Recalls has partnered with RQA, Inc., a global leader in providing quality assurance, crisis management, and risk mitigation consultancy and training, to offer a recall simulation and mock recall training program, utilizing TRIEVR’s Recall platform, that challenges your organization’s capabilities and training and readiness, from initial incident identification to recovery of the affected product.
Final Word
People think product managers are the only ones responsible for product recalls, but this couldn’t be further from the truth. There are different department roles during a recall, and accountants have various responsibilities, making them a vital part of the recall process.
Looking to test your product recall readiness across your organization? MockRecalls will help create and/or test your recall program. Click here to learn more or call us!
Learn more about each department’s role during a product recall