Penny Shares 2009
More and more frequently these days, companies with multiple business units are consolidating accounts payable, accounts receivable, and other financial transactions into one operation in a single location, instead of each business unit handling its own. The arrangement is known as shared services, and although some companies have been using this kind of approach for decades, experts have noticed a renewed sense of interest in the concept. “We’re seeing a significant focus on shared services now more than ever,” says Susan Hogan, principal and leader of the shared services practice with Deloitte, the global consulting and financial advisory firm.
In fact, research by the Miami-based strategic advisory firm, The Hackett Group, shows a 50 percent increase in the use of shared service centers over the past three years.
Many of those are in the form of an “all-in general and administrative,” or “all-in G&A” shared service approach, says Penny Weller, Ph.D., shared services advisory program leader with The Hackett Group. That is, companies are bringing together accounts payable and receivable, as well as other functions, such as payroll and procurement. While consolidating operations for just a single function, such as accounts payable, can reduce costs and enhance service, bringing together a number of functions offers the greatest opportunity for efficient, effective delivery of services, she notes.
More than four in five (82 percent) of respondents to the 2009 Global Shared Services Survey by Deloitte indicated that they were increasing the number of transactional processes handled in their shared service centers. For instance, a shared service center that handled vendor payments may now also be responsible for negotiating contracts with suppliers.
What’s behind the increase in shared service arrangements? The answer may lie in what sets shared services apart from simple centralization, Differences include service level agreements with customers – those business units that would otherwise all be handling their own AP, AR and other functions – and a continual focus on streamlining processes and reducing costs, says Jim Arnold, president of APEX Analytix, a provider of audit technology and services based in Greensboro, N. C., “The centers should be competitive with the outside world,” he says.
The sputtering economy also is coming into play, says Henry Ijams, managing director with the Charlotte-based consulting firm, PayStream Advisors. By consolidating functions, a shared service approach offers the opportunity to improve processes and cut expenses, both of which have become more critical as many companies are finding sales harder to come by.
Even though a shared service approach makes sense for many companies, that doesn’t mean implementing the concept is easy. Gaining employee acceptance often requires work. Here’s why: “There are perceived winners and losers with shared services, and the losers will make lots of noise,” Hogan says. The losers aren’t just those who may lose their jobs, although they obviously are a key part. Individuals who worry that their influence or power base is eroding – such as a controller whose AP staff is moving to a shared service center – also may fight the move.
That’s not to suggest that the team charged with managing the transition to a shared service approach should begin tentatively, or convey the impression that the initiative lacks support from the top. Quite the opposite, Ijams says. You want to “go bold,” he says. “The C-suite needs to say ‘This is what we’re doing and here’s why.’”
Although it may sound trite, communication is key. “Build your vision and repeat it often,” says Weller. Employees need to be kept in the loop as much as possible, and know how the changes can benefit both them and the company.
You also want to maintain an ongoing dialogue with the areas that will be served by the shared service center, says Weller. “Most bumps come early in the process,” and some will be waiting for the initiative to fail. You don’t want to give them a reason to say “I told you so,” she adds. To avoid that, you need individuals who will can adeptly manage any early missteps and maintain relationships with the customers.
Wal-Mart Stores, Inc. has made communication a priority as it has rolled out a shared service approach. The $400 billion retailer implemented shared services for finance about three years ago, says Kathy Schroeder, director of receipts with the Bentonville, Ark.-based company. The 900-some associates of the financial shared services center, also in Bentonville, process about 130 million invoices and 360 million receipts each year. Other functions housed within the shared services center include payroll and reimbursements of travel and entertainment expenses, record retention, and document imaging.
Wal-Mart’s shared service center comprises six “Centers of Excellence.” A center of excellence is a group that adopts best practices and continually strives to improve its operations. Wal-Mart’s centers of excellence include receipts, internal disbursements, support, general accounting, controls and external disbursements.
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Article Source: ArticlesBase.com – Shared Services Gets it Together
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