Finance Shared Services: Exploring Pros and Cons

The concept of finance shared services has been around for decades, but recent technological advancements are revolutionizing their efficiency and effectiveness. Since the 1990s, businesses have embraced finance shared services as a strategy to achieve economies of scale through centralization of financial functions. These shared service centers (SSCs) excel at managing accounting processes, either in offshore locations or centralized hubs, separate from disparate business units, resulting in significant cost reductions.

Today, approximately 80% of Fortune 500 companies utilize a shared services model for one or more of their operations, underscoring the widespread adoption of this approach. While finance shared services haven't achieved perfection, the integration of process automation tools is continuously enhancing their value proposition. By leveraging these technologies, financial shared services are not only saving businesses time and money but also driving strategic value through improved data analytics and decision-making capabilities.

As the shared services model evolves, it continues to transform how organizations manage their finance functions, offering a powerful combination of centralized services, cost reduction, and process optimization. This evolution marks a new era in financial management, where shared services and cutting-edge technology converge to create more efficient, agile, and insightful finance operations.

Coming Up

1. Introduction to Finance Shared Services

2. Key Statistics and Trends in Finance Shared Services

3. Benefits of Implementing Finance Shared Services

4. Challenges of Finance Shared Services

5. Leveraging Technology for Finance Shared Services

6. Future Outlook of Finance Shared Services‍

Introduction to Finance Shared Services

Finance shared services is a centralized model where common financial functions are consolidated and standardized across an organization. This approach allows companies to streamline operations, reduce costs, and improve efficiency by centralizing tasks such as accounts payable, payroll processing, and financial reporting in a single unit that serves multiple departments or business entities.

The shared service center (SSC) serves the business unit with its specialized service to cut overall costs and create a higher degree of strategic flexibility. Although it sounds similar to dividing an organization by department, a shared service center is different because it has measurable outputs and is in control of services for entire organizations.

Many benefits of setting up a shared service center, particularly in Finance, overlap with the benefits of financial automation tools. That’s why automation tools should be part of every financial shared service center because both are meant to offer: reduced costs, centralized services, standardized processes, measurable outcomes and easy deployment. 

Key Statistics and Trends in Finance Shared Services

While every organization has unique goals and operational strategies, the statistics supporting the use of Shared Service Centers (SSCs) in finance are compelling. Let's examine key findings from a benchmarking study conducted by ScottMadden across five business cycles up to 2020:

Organizational Structure of Financial Shared Services:

‍65% of SSCs report to the business’ finance executive.

Process Outsourcing in Finance Functions:

While automation is often the first choice for process improvement, many organizations still outsource certain financial processes. Here's a breakdown of outsourcing rates for top processes:

• 80% for expense reimbursements
• 60% for general accounting
• 58% for accounts payable
• 51% for accounts receivable
• 25% for collections
  

Process Centralization in Finance Shared Services:

‍The most centralized processes tend to be those that are iterative and repetitive (transactional), rather than those that demand high-level analytical thinking. For example, the global centralization rates for key financial processes are:

• Processing accounts payable: 33%
• Performing general accounting: 32%
• Processing accounts receivable: 29%
• Performing financial reporting: 29%
• Processing expense reimbursement: 16%
• Performing budgeting, forecasting and planning: 15%
• Processing taxes: 12%

Trends in the Shared Services Model

Finance shared services continue to evolve, offering significant benefits to organizations while presenting unique challenges. The trend towards Global Business Services models, increased process centralization, and the adoption of end-to-end processes demonstrate the maturation of shared services in finance.

1. Transactional processes remain the most centralized, but there's growing inclusion of more complex functions.
2. Organizations are balancing centralization, outsourcing, and automation to optimize their shared services.
3. Customer care is becoming a crucial component of finance shared services.

These insights can guide organizations in structuring their finance shared services, helping them decide which processes to centralize, automate, or outsource for optimal efficiency and effectiveness.

Benefits of Implementing Finance Shared Services

Many businesses have realized the benefit of using financial shared services because the workflow is similar between business units. Since financial processes adhere to compliance and regulations, it is something that can and should be standardized in its approach. 

Furthermore, with the utilization of automation tools, finance shared services can still deliver the impactful insights from deep data analytics that supports decision-making. These big business decisions often come from financial executives within the central business unit. 

So, SSCs and automation tools support financial business leaders by offering a multitude of benefits, including:

1. Increased Efficiency and Cost Reduction

Your business will be able to maximize its investment in technology, maintain a sense of control, and reduce labor costs. Cost reduction remains the primary driver for shared services, with 88% of organizations focusing on this aspect. Instead of maintaining large accounting departments across multiple organizations, financial processes are centralized in one location with a dedicated team overseeing all aspects. This centralization leads to significant cost savings and improved resource allocation.

2. Focus on Service Excellence

While cost reduction is crucial, delivering service excellence has become equally important. 71% of organizations now emphasize quality service delivery in their shared services operations, highlighting the dual focus on efficiency and effectiveness.

3. Enhanced Effectiveness

‍By leveraging specialist skills, you can improve decision support, warehouse data efficiently, and create a more controlled environment. This increased effectiveness contributes to better overall financial management. In fact, 66% of shared services leaders cite effectiveness as a key organizational target.

4. Standardization of Finance Functions

‍Finance processes should be standardized across the board and with SSC and automation, you can strengthen your application management and set best practices. From managing data to reporting insights, each process will follow the same pre-defined path from beginning to end. 

5. Improved Control and Compliance

With finance shared services, you can be assured of oversight and management of financial processes. The outcomes are measurable through data and analytics, allowing for easy calculation of ROI by comparing previous data and industry benchmarks to your own KPIs. Notably, 56% of shared services leaders identify compliance as a crucial organizational goal.

Challenges of Finance Shared Services

With shared services comes the ever-important task of finding the right technology to leverage for communication and processing. Shared service centers in finance are not always going to operate at maximum efficiency from the get-go. It takes time and effort to set up processes that work for business leaders and the SSC. 

As such, a rushed approach can create errors and flaws (but, we will show you how automation tools can solve all of them). Some significant challenges of SSCs include: 

1. Control Risk

When consolidating multiple accounting groups into one central unit, there's a risk of losing control. If an issue arises, it can now affect the business across all departments, not just within one. This challenge underscores the importance of robust governance in the shared services model.

2. Risk of Error

Similar to control risk, the potential for errors increases with the volume of work a shared services center must handle. The consolidated unit now manages more data, making accuracy and quality control paramount in financial shared services.

3. Visibility

Regardless of the shared services center's location (onshore or offshore), the executive team requires real-time access to operations. Financial data is crucial for timely business decisions, making transparency a key factor in the success of finance shared services.

4. Performance Improvement

If processes aren't measured, they can't be effectively managed. There may be situations where process improvement is needed, but without access to data points and analytical trends, these opportunities might be missed. This challenge highlights the importance of continuous monitoring and optimization in shared services.

Leveraging Technology for Finance Shared Services

All of the challenges listed above could be cause for worry or even could lead to a business opting out of using SSC. However, data automation tools inherently resolve every risk mentioned. With a data automation tool like SolveXia, your SSC can manage all accounting and financial services without every sacrificing your oversight and access to information.

As a financial leader, you want to know where your business stands, and by using a cloud automation solution, you can access reports and dashboards in real-time, no matter where the services are being performed. Additionally, tasks are automated, and mass amounts of data can be securely stored so that processes take place in a timely and error-free manner. You have clear visibility into your business’ financial health and can offer the same to any stakeholder within your company with defined access controls. 

Achieving Best in Class Status Finance Shared Services

To make the absolute most of finance shared service, your automation tool is a key player. The technology you choose to leverage should take care of two primary needs, namely:  

• Process automation: Rather than just automating tasks, you’ll want to automate entire processes. Automating processes reduces bottlenecks, increases an organization’s speed and agility and decreases manual errors. 
  

• Precise measurement: To know where your shared services stand, automation tools can compare past performance to themselves in the past or to the competition in the market. This analysis and comparison can serve as a benchmark to understand where continuous process improvement may be necessary. 
  

Future Outlook of Finance Shared Services

The future is here, and it lies in technological advancement like automation solutions. Across businesses, tools that perform robotic process automation and data automation have given rise to more analytical decision-making. 

Not only does robotic process automation perform repetitive and monotonous tasks so that humans don’t have to, but it also leads to machine learning. This allows for the resolution and remediation of problems before they happen, and the tool does so itself through its understanding of patterns from big data. Every small problem that gets resolved before it happens can lead to significant cost savings. 

When you can leverage all your data in a centralized software solution, then you can gain more in-depth and more timely insights. These tools process data and transform it into information you can visualize in the form of customizable reports. 

In this way, it doesn’t matter if your financial processes are happening across the globe because you’ll have all the information you need at the click of a button to make informed decisions that better your business. The power of Finance Share Services and automation tools are inherently linked in an increasingly data-rich business world.