Shared service centers are used for the purposes of driving efficiency by managing common activities centrally to eliminate redundancy across the organization and leverage economies of scale. In the Finance world, the most common activities that are handled via shared services are accounts payable, collections, invoicing, account reconciliations, etc. – in a way even centralized corporate functions like tax, treasury, legal, etc. are shared services!
Even though most organizations have shared services within Finance these days, very few shared services appear to be truly optimizing their full potential! This lack of optimization can either be a result of sub optimal scope or sub optimal processes!
Sub optimal scope and sub optimal processes
Sub optimal scope refers to cases where some but not all activities that can be centralized are being managed by shared services or else even though activities are centralized, all business units are not covered – some units continue to perform the activities locally. Sub optimal processes refer to scenarios where the shared services processes are not being run in the most efficient manner, either in terms of execution or in terms of the fact that they do not eliminate various redundancies – process redundancies, systemic redundancies or data redundancy …. They are NOT Lean!
Most of the issues related to optimizing shared services stem from the fact that various business units and operational components do not operate on a standard platform – managing processes for entities operating on different ERP systems poses the biggest challenge – this issue is further magnified in case of companies that grow through acquisitions as integrating platforms is by far the biggest challenge for them!
In many cases data is exchanged through manual and/or semi-automated means – like exchange of data dumps, periodic file imports. In some cases, the shared service teams end up working in multiple systems to run their processes. In many cases, even where system integrations do exist, these are often discrete and “band aid” type connections that need to be managed individually and need extensive maintenance!
Let us look at a few best practices we have implemented to alleviate some of these challenges and improve the effectiveness of financial shared services towards our LeanCash™ approach
Shared services are not always deeply integrated with inbound and outbound processes
The key is real time (or near real time) integration across disjoined systems and platforms to deliver seamless connectivity and exchange of information. Shared services have a bunch of stakeholders and it is essential that they have seamless integration with all of them, both on the inbound and outbound sides to operate effectively. To list a few of the relevant stakeholders:
- BU’s and organizational components they service – to collect POs/invoices/vendor and customer details/contracts – to convey communicate payment schedules, I/Co accounting entries
- Treasury – related to payment processes and cash forecasts
- Banks – related to transactional processes
- Vendors and customers – to resolve disputes, update payment instructions
- Accounting teams and organizational GL systems - accounting entries related to shared processes
Central Data Management is key to a successful shared services implementation
Considering the volume of data that flows in and out of a centralized shared service function, it is essential to maintain a central data repository that acts as the “single source of truth”. This facilitates efficient reconciliation of transactions across platforms and eliminates differences across various organizational ledgers.
Efficient File Mapping
As multiple platforms are integrated, it is essential to back that up with efficient file mapping/conversion routines on the inbound side as well as reverse mapping on the outbound side to enable seamless exchange of information across systems by standardizing data sets from multiple systems and platforms. This almost acts like an interpreter translating data and information across systems that speak different languages, so that they all have the same understanding!
Centralized Process Hub
In a complex setup described above with multiple interfaces, it is essential that the functional shared service folks are able to run and manage the processes in a simple manner oblivious to the intricate system architecture. This can be accomplished by providing a user friendly front end/interface that works like a turnkey setup to ensure transparency across complex system connections – think of it almost like a cockpit that allows pilots to operate a plane effectively without needing to know everything in detail about the build!
Organizing a financial shared services operation using these key factors can almost enable them to leverage to a large extent the benefits of serving an organization that is on a common integrated ERP like SAP or Oracle!
APIs – the secret sauce for integrations
- Given the number of APIs we’ve exposed and consumed from various systems over the past decade or so has enabled us to maintain best practices and define standards in the API world. We use open source and secure platforms like https://swagger.io/ to test APIs with various IT teams.
- We rub some DevOps monitoring tool <Road to DevOps series> to ensure the APIs are ‘healthy’
- Logging all API requests (in and out) with timestamps enable us to stay on top of compliance and security
We maintain systems that are ‘old’ but stable (when was the last time you heard a security breach on an AS400 system?!) – File mappings, EDI, SWIFT, XML and other formats are essential and we know a thing or two coz we’ve seen a thing or two or as the insurance commercial will put it here -- https://vimeo.com/150181996
Medullus LeanCash™ is a tried-and-tested solution that draws upon lean concepts to streamline Corporate Treasury by eliminating waste in processes and functions which helps to manage liquidity and risks in the most optimal way.
Our products and services are geared towards making improvements in Treasury & Finance processes to bring big gains with minimal impact. The low hanging fruit is sometimes difficult to find in a large organization with myriad of processes and systems. Take the 1st step in identifying these high value/low risk improvements – get your LeanCash score, benchmark against other organizations that have obtained their score and improved them. It does not cost anything to find out where you are as compared to industry-best-practices!
Blog post by: Tejnain Singh. Reach Tej @ firstname.lastname@example.org
Tej is a seasoned treasury and finance professional with over 17 years of extensive experience across organizations like GE, Deloitte, SABIC and Valeant Pharma. He has held senior positions in treasury operations and cash management and has led multiple strategic initiatives in the areas of payment automation, treasury system implementations, business process simplification and shared financial services among many others. Tej is a Chartered Accountant from India.