Year 2000 Definition

What is all of this hoopla over the year 2000 problem? For most computers and applications,  the year date field is stored as two-digit fields (e.g. "98" represents "1998"). This convention was adopted decades ago when computers had very limited memory and storage space.   Programmers saved space by representing the year date by its last two digits.   When computers and other devices encounter the digits "00" for the year 2000, this information could be misinterpreted to represent year 1900 instead.  This erroneous calculation may produce computing errors that seriously affect how businesses operate.

Problems for Businesses

All types of businesses rely heavily on dates and date processing.  If the computer does not recognize that one date is greater than another, it may no be able to process properly. Imagine the consequences if your accounting software uses the wrong date for invoices, payment notices, and depreciation schedules.

For example, if a loan is entered into a program with a start date of 1998 and a payoff date of 2005 (98 and 05), the program may subtract 98 from 05 resulting in a term of -93 years, rather than 7 years.  This program may put businesses at risk because it could affect cash flow, inventory, taxes, interest calculations, customer relations and many other areas. 

The year 2000 affects all aspects of your business.  It is both a hardware and software problem.  Even if you are year 2000 compliant, your vendors may create problems in your supply chain if they are not ready.

Steps to Readiness

If you are like most companies, you are only just getting started on your year 2000 fix.  You still have some time to complete the task, but this is one project where the deadline can not be moved.  The most important first step is to develop a strategy to make your business ready for the year 2000. 

Here is a simple five step plan to achieve year 2000 readiness:

1. Awareness: Educating and involving all levels of your organization in solving the problem.  Emphasize open communications among members who are decision makers.

2. Assessment:  Identify and list all different computer systems, software (in-house systems, purchased software, etc.) and hardware.  Next, rank your list by how critical each item is to your business.   Date sensitive systems should be at the top of the list.

3. Planning:  After an initial assessment, you must now develop a plan to fix the computer systems and migrate from their current status to year 2000. 

4. Correction & Testing:   Implementing the readiness strategy you have adopted and testing the fix.   Testing year 2000 compliance is the most important aspect of the project.   Testing should include the following:  a) developing the test data, b) test 1999 going forward, c) test 2000 going backward and d) year 2000 operation.

5. Implementation:  Once testing has been achieved, you may now move your repaired or replaced system into your production environment.

Be Proactive

The year 2000 problem is here, and your business is at stake.  Published estimates of the worldwide cost of dealing with the year 2000 vary from $300-600 billion range.  While this cost is enormous, the consequences of not preparing for this issue could be even more costly.  As business or financial managers at your company, you need to take a proactive role in solving the year 2000 dilemma.

Westlake Consulting can help you develop a sound strategy to face the year 2000 challenge.  Call us at 713.850.9378 or email us at info@westlakeconsulting.com to find out more information.