What are Financial Shared Services?
Under the shared services center (SSC) model, low-value, back-office operations are consolidated in a central location to support the rest of the organization. A shared service center handles support functions like AR, AP, Payroll & Sourcing.
Traditionally, SSCs have been employed to handle data entry-heavy tasks. Thanks to accounting automation, SSC’s are increasingly taking on entire end-to-end processes, as well as expanding beyond transactional tasks to provide higher level support services. The purpose of SSC’s now are to enable finance teams to focus more on strategic work such as FP&A, budgeting, and data analytics.
How SSC’s Operate?
SSC’s are either captive center’s within the organization or they are run by an outsourced partner. Many organizations use a hybrid approach, and use an SSC for some business processes, and an outsourcing provider for other processes.
Developing an effective governance model is essential for the success of SSC’s. An important part of the model are service level agreements. These specify the scope of the services to be provided, the price, and generally also specify expected metrics of time and quality.
Governance models may also include global process owners (GPO). A GPO takes responsibility for an entire end-to-end process for an organization. Assigning one person to oversee a process makes it possible to optimize that process, and ensure that all choices made with regard to that process are aligned with the overall goals and strategy of the organization. They serve as the point person for improving the integration of that particular process with all business units.
What are the pros of having SSC’s?
The biggest benefit of shared services, obviously, is the cost savings by reducing redundancies in back office operations. Organizations also get a boost from improved operational efficiencies because all business units need to follow the same financial processes to interface successfully with the SSC. Improvements in transaction processing mean better and more timely data for decision making.
Why SSC’s fail?
Poor planning The biggest reason why SSC initiatives fail is insufficient planning. Developing a new SSC or expanding the scope of an existing SSC is a huge and disruptive change that will be felt throughout the entire organization. At the very least, the design needs to specify in granular detail who will do what, where they will do it, and how they will do it.
Inadequate resources The people assigned to plan and lead a new SSC can’t be expected to take on this project in addition to their usual responsibilities. Temporary staffing replacements may be needed.
Lack of benchmarking An essential part of planning is understanding the current status quo. Failing to benchmark current operations in terms of performance, headcount, and cost will make it impossible to measure the efficiencies gained by consolidating processes.
Resistance to change Another big reason that shared services fail is not dealing with the resistance to change. Because jobs will be cut or may change, human resources needs to take an active role throughout planning and implementation. For a finance shared service initiative, getting the support of financial controllers and CFOs at all the business units is key. They may not be willing to relinquish control, and they will need support to navigate any changes to their roles.
Poor communication Overcommunication is impossible, but under communication is deadly. Adding a help desk to answer questions and to ensure synergies are in line and that all concerns are being met can help allay many of the fears people will have about change.
What is the future of SSC’s?
For many organizations, the future of shared services is here. With cloud ERPs, building a new SSC no longer requires investing in an expensive data center and infrastructure. It also makes it possible to develop virtual SSCs, which means talent can be from anywhere in the world.
Advances in AI and RPA mean that more tasks can be done by machines alone. For SSCs, this means that headcount — and therefore costs — will continue to decrease.
SSC’s will increase the ability of the accountants to be strategic and to drive innovation across their organizations rather than limiting themselves to transactional accounting. Implementing an SSC means all the pieces of an organization have to be on the same page with processes and systems. All of that means CFOs and, really, anyone affiliated with the financial function, will have better numbers faster and easier.