Transforming Finance? Consider Shared Services

by Tan Joon Suan and Esther Te, Accenture, 14 August 2011

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topics:
Outsourcing and Shared Services

tags:
Accenture business partnering economies of scale economies of skills finance transformation shared services

In today’s fast changing and complex global environment, CEOs are demanding an elevated level of value-added insight from their finance organisations. Yet concurrent with these increased expectations, competitive pressures and economic conditions are also driving finance organisations toward lower cost operating models.

These sometimes conflicting demands can result in tension. This can be eased by finance transformation that, at the same time, presents large value creation opportunities.

Shared Services

The new finance vision is shifting focus from traditional accounting and control to value-added decision support and analysis. Finance organisations are having to improve efficiency by redirecting scarce resources from low value activities. This also improves service, speed, financial control and allows access to leading edge technology and processes.

To improve effectiveness, finance must partner with the business to drive shareholder value creation, improve scalability and responsiveness, move towards a more service-oriented culture and derive higher productivity from a smaller workforce.

These lead many to consider shared services to capture economies of scale and consolidate traditional transaction processing at lower overall costs. Those that are most successful in this endeavour do not focus solely on the cost savings potential. Rather, they think in broader terms and in the process, establish shared services that help them on their journey to high performance.

Click image to enlarge

Economies of Scale and Skill

Two primary sources of cost savings are reductions in administration headcount and management levels. Consolidated functions and processes eliminate redundancies and reduce the cost of transaction processing.

Companies can also gain additional savings by leveraging specialty skills such as legal, tax and environment/health/safety across the organisation. Doing this can increase the payoff over time by fostering a culture of continuous improvement.

A shared services structure can reduce the resources required for low-value activities while allowing finance to focus on strategic areas.

Infrastructure Costs

Shared services initiatives contribute to reductions in infrastructure costs such as technology, facilities and services. Typically, a shared service centre will be based in a lower cost location than the geographies serviced, thereby benefitting from wage arbitrage and other lower expenses.

The bulk of IT budgets on maintenance can be reduced substantially by eliminating less effective technologies through standardisation and consolidation. In addition, the shared services model can accelerate adoption of new technologies such as document imaging and recognition, as well as workflow solutions.

There is higher return on investment for the large volume of transactions processed in a shared service. Newer ERP systems increasingly integrate these technologies, allowing more efficient processes.

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