Is setting up a SSC the right move for your company? Here are some key factors to consider.
Companies looking to consolidate and centralise their finance and accounting functions are typically wanting to do so for:
Process standardisation and efficiency: with standard processes, it's easier to design and update the control environment and build consistent input and output reports. Review work is streamlined and iterations reduced. Cost savings: this is the no-brainer. Automation and process improvement can reduce costs substantially. Business insight: companies with a de-centralised accounting function spend a significant amount of time collecting data - but don't analyse it. By the time management information is collected and reports are available, it might be outdated and irrelevant. Setting up shared service centres (SSCs) can help companies to save money and operate more effectively. However the pros should also be weighed against the cons.
Most companies do not use KPIs to monitor the activities of internal finance and accounting functions. Those that do tend to focus on traditional, external-looking KPIs including AR (accounts receivable) days and AP (accounts payable) days. The entire approach changes with SSCs. Finance and accounting functions are managed as a service, measured from an efficiency and productivity perspective.
The most popular KPIs used in SSCs measure the number of invoices per FTE (full-time equivalent), FTE cost as a percentage of revenue, percentage of errors, number of manual entries and so on. Continuous monitoring of these KPIs helps organisations identify areas for improvement and automation.
In many countries, finance people complain about the challenges of getting the right level of skills and expertise. Centralisation of the finance and accounting functions can help solve some of these problems by locating the activities in countries with the available talent pool.
The move to a SSC model prompts organisations to entirely reconsider the way in which they operate. It's an opportunity to look not only at how some tasks can be performed more efficiently, but ask whether the tasks are needed at all.
Risk of non-compliance
How do you make sure the SSC remains compliant with local rules in all the countries in which your business operates? While transactional accounting can easily be accommodated in a SSC, there will...