I’m sure you’ve heard it countless times, but if you work in shared services, you’re on a journey. And it’s true, shared services has a life cycle: it has an obvious birth and, as many purists believe, it should result in some kind of death.
Leisure company TUI is an example of an operation that had a clear birth, middle bit and death when processes were finally automated, converted to electronic and outsourced. Once the shared services director had done his job, he was without a job.
So when we look at 2011, it’s wise to stop, find some time to take a breather and ask yourself, where is this journey taking us? What does the final destination look like? As the focus for shared services moves towards adding value, does the journey only end when you shut shared services down?
Whether you consider it a tool to help you standardize and eliminate processes, or you see it as an enabler that turns finance into an instrument that helps the company grow, here is a check list of factors that will help your shared services deliver results in 2011.
We’ll start with six items today.
1) Involve procurement
Shared services is an enabler to help improve the performance of purchase to pay. Gone are the days when we treated accounts payable (AP) as an isolated function. Shared services leaders realise that the performance of their AP activities is highly dependent on the level of support they receive from procurement. AP key performance indicators (KPIs), like cost per invoice, payment on time, electronic-invoice volumes, can all be improved or damaged by procurement. This is why shared services professionals now refer to end-to-end processes, like purchase to pay or order to cash.
If you are still operating as a silo today, make this single change in 2011 and see your KPIs improve. Procurement tends to get involved quickly when it realises the huge gains it can make from working with finance, but you may have a sales challenge ahead of you to secure its buy in.
2) Consider outsourcing if you haven’t already
There is usually an element of outsourcing in today’s shared services. If you’re not outsourcing, ask yourself why. If you have the scale, and recognise that certain activities in the process add no value to your aims and you add no value to the processes, then evaluate the outsourcing option.
The horror stories of old have fallen by the way-side, and BPOs are more focused on service delivery than simply cost reduction. Increasingly, shared services automate and outsource as much as they can, and then hone their talent on becoming a centre of excellence. Perhaps this could be an option for you in 2011?
3) Measure
If you are not already measuring then do. How can you improve if you don’t know where you are? Set targets and track progress towards them. One retailer I spoke to recently told me that these are the areas she measures:
- Cost per invoice
- First-time match rate
- Percentage of payment to terms
- Invoices per FTE per annum
- Percentage of invoices via EDI
- Percentage of goods for resale invoices matched to a purchase order number as well as a receipt
- The number of invoices in query at period end and as a percentage of total invoices
- Percentage of accounts-receivable debt that is overdue
- Percentage of expense claims that do not have receipts
- Percentage of expense claims outside policy.
I know of shared services that have over 130 KPIs and one SSC with just one. You don’t necessarily have to report all of your statistics to your customer. Show them the breadth your KPIs cover and ask them to tell you which five or ten are key, then report on those every month.
Measurement for shared services is essential; you will always need data to prove your point. If customers claim that service levels have deteriorated since shared services got involved, you can compare the baseline data against current statistics to prove their information is incorrect.
4) Automate
The investment you make in your ERP is huge and you’ll want to leverage it. One of the best ways is to look at your process and identify the areas that can be automated. It is a giant step towards touchless processing: the central aim of shared services.
Many of the transactional activities within the purchase-to-pay process lend themselves perfectly to automation. For example, matching line items on an invoice, reconciling bank statements and balance sheets, capturing invoice data that isn’t electronic, and distributing invoices for approval around your company.
Vendors like Readsoft, Basware, Trintech and Brainware win deals every week because shared services leaders know that this is a priority. They have reference customers who can share the dos and don’ts with you, so the risk of adoption is much lower than it once was.
5) Electrify
Take automation one step further and convert to electronic. Join Caterpillar, Astra Zeneca, HP, Metso, Kelloggs, HSBC, TNT Express, Sara Lee, GSK, and Johnson & Johnson: get on the e-invoicing train!
There is, however, little point converting a broken process to electronic, but if you have more than 30,000 invoices per annum and your match rate is high, then ask your suppliers to join your e-invoicing programme.
The key players in Europe continue to be Basware, Ariba and OB10. If you haven’t already introduced e-invoicing, start to think about the business case. Take a look at your invoice volumes, how many people work in AP and how many invoices match first time. If 80% of your invoices come from 20% of your suppliers, then your e-invoicing project should be straight forward. But remember the point made at the top of the check list– if procurement is not involved your project will fail.
Once you have e-invoicing at your shared services centre you are within striking distance of touchless processing. But don’t forget, it takes time to get the project going, so if you want to be live at the end of 2011, then you really need to have selected your service provider by July 2011.
6) Increase activity scope
If shared services is proving successful in AP, then increase the scope to other process and even other functions. Shared services works because it standardises and automates transaction activities. You can apply this to any activity that fits the profile.
Increasingly, finance shared services organisations are encapsulating processes in HR, IT, procurement, real estate. The push towards business services is achieving momentum as organisations scrutinise their functions and divide them between those that are shared-services friendly and those that aren’t. If shared services isn’t already having an impact on functions beyond finance, perhaps 2011 is the year to make this happen?
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