As companies are moving out of budget season and fast approaching their year-end, costs and efficiencies are at the forefront of leadership agendas, and the common proposal for the finance community is shared services. Can technology be an enabler for shared services or are there other factors to consider? Ann Furlong writes.
Shared services is the pooling together of transactional services within a company, such as Accounts Payable, Payroll and IT, and this can be performed in-house or outsourced to a third-party specialist vendor. The path taken is dependent upon the company’s risk appetite, timing and cost. If a company is new to the idea of shared services, the less risky approach is to perform this function in-house and then as the team matures and benefits are realised, the next stage is to outsource to a third-party vendor and take advantage of their expertise.
Factors to consider:
Offshore vs. inshore
Determining whether to offshore or onshore is a decision that needs to be undertaken along with whether to own and run the team internally or outsource to a third-party vendor. There are a number of options to consider, for example, does the company have the resources to create the shared services team? If the decision is to offshore and outsource, then due diligence needs to be undertaken to explore the specialist vendors and their operations and obtain references from existing clients.
What are the true costs (direct and indirect) of shared services as compared to traditional accounting departments? We need to compare the cost of maintaining the service department, taking into account expenses like hiring costs, salaries, benefits, training, staff retention, office space, equipment and software, compared to retaining disparate accounting departments.
Service Level Agreement
Whether shared services are in-house or outsourced, these agreements are a must and ensure that both parties understand the deliverables and deadlines. Adherence to the agreement will drive accountability and ultimately keep costs down and return efficiencies. In the event that there are issues, protocols should be in place for resolution that prevent issues from spiraling out of control and delaying the close process. These agreements should also capture the recharge rate, as shared services is an overhead and therefore these costs will be recharged to the business and typically recharged at a transactional level, such as number of invoices processed, payments made, journals processed, and so on.
Technology is critical to shared services as this will determine how successful the centre can be from a process perspective – do they have the right access to core systems to be able to complete their function. Can we accurately track the cost per transaction to recharge to the departments utilising their services? Will the information be available in real-time?
Once the decision has been taken to move forward with Shared Services, how can technology be an enabler?
Month-end in the shared services environment
The transactional services typically performed for month-end are:
- Accounts Payable: processing invoices and payments and vendor reconciliations,
- Accounts Receivable: issuing invoices, processing receipts and customer collections,
- Month-end journals, and
- Balance sheet reconciliations.
These services are key to the success of the business and the shared services team will need to ensure that there is end-to-end visibility, transparency and reporting across all processing functions, robust back-up and disaster recovery; and if a SaaS solution is in place, the team also needs to ensure that it has world class security e.g. SSAE 16 SOC 1 Type II, ISO 27001.
When it comes to the month-end process, a tool such as the BlackLine Financial Close Suite for SAP Solutions can drive standardisation, automation and workflow to ensure compliance in a controlled environment with real-time reporting through dashboards and templates. Some of the benefits are below.
- Templates for journals
- Templates for reconciliations
Utilising templates will ensure that both the shared services team and the business approvers can benefit from the consistent approach to the reconciliation or journal and template and therefore efficiency. Having the ability to include policy and procedures within the template will ensure IP is retained within the tool and will streamline the learning curve.
- Auto certification of reconciliations
- Allow simple low-risk reconciliations to be completed by the system, for example, reconciliations that don’t change each month, equity accounts, nil balance accounts, can be auto prepared by the tool and included for completeness.
- Apply an exception-based reconciliation approach – focus on the high-risk, large value and complex accounts.
- Ability to import transactional data and create journals.
- Import transactional data, such as bank statements, into the BlackLine tool and based upon defined logic, for example, bank fees, automatically create the journal to pass back to the ERP.
- Removing the need to create manual journals.
- Defined roles for each process
- Each reconciliation, journal and task has a primary preparer, approver and reviewer to segregate the roles between shared services and the business and drive accountability.
Automated workflow notification
- Email notification for both reminders, delinquency alerts and escalation alerts.
Dashboards and Reporting
- Real-time dashboards
- Completion status
- Status by person/department and so on.
- Real-time reporting
- Ability to write custom reports to meet stakeholder requirements
- Report scheduler.
Once operational there is always an adjustment period between the business and shared services, but what is critical, during this time and ongoing, is communication to address any issues with the process. Communication is effective when technology is used to substantiate the issue. Technology can therefore be an enabler for shared services, as it drives consistency, visibility and real-time reporting for all stakeholders.
Ann Furlong is director of operations, APAC, for finance controls and automation software company BlackLine.