Are you maximising the benefits of your Shared Service Centre?

22 September 2014

Mark Chalfen

Mark Chalfen

Former SAP S/4HANA Global Lead

The concept of a Shared Service Centre is well known. Historically the growth of ERP implementations complimented the growth of Shared Service Centres. Having a common central platform removed the need for local teams to manage core financial processing.

This could be the amalgamation of regional finance teams within a single legal entity that were using local systems, or a wider approach that saw regional finance teams supporting all financial processing within a geographical continent.

Common benefits of a Shared Service Centre

Common benefits can be split into four areas:

  1. A single platform / system with common processes to enable common reporting
  2. Automation of low value tasks
  3. A reduction in the size of the team to manage operational financial processing
  4. Ability to close local buildings reducing cost or freeing up space for other teams

In this blog post I will focus on the first two.

A single platform/system

Having a single platform for financial processing will enable common processing. Or to put it another way, if an organisation used multiple SAP ERP systems for financial processing, common processing could not be achieved because data and transactions will be performed in slightly different ways. Having worked on multiple large SAP ERP engagements I noticed a common view that building the functionality and processes within the legacy systems in SAP would be the best approach This however generally leads to two problems:

  1. Removing the benefits of SAP Business Suite by extending the build to customise the solution to meet old requirements and designs. Additionally the business process is not reviewed; therefore process efficiencies cannot be achieved as you are stuck with the old design
  2. You may find that by migrating more than one ERP system to SAP Business Suite, there are differences between them. And if you map directly to the “as-is” designs, the SAP solution becomes more complex and the multiple versions of a process stay.

Both of these remove the ability to gain one of the main benefits. So to turn this around once more, to fully achieve these benefits when designing a single SAP solution for multiple legal entities managed via a Shared Service Centre, the focus needs to be on utilising SAP standard where possible and designing a single common process per business process.

The follow on benefits

By having a single SAP instance supported by common processes, the various financial operational teams can now start to work in a common way. This will produce process efficiencies, as everyone within the team will be working in a common way. By working in a common way, reporting can be run at a global level, removing the need to manual adjust data before comparing the performance of one region against another. In turn this can highlight high achieving sub-teams and individuals as well as poorer performing ones.

Automation of low value tasks

Once you have a common system with common processes in place, you can start to look at how to make the individuals within the team more productive. An operational finance team will have to perform plenty of high effort/low value tasks that make the cost of ownership higher than it needs to be.

Here is an example of three such tasks and how the effort can be reduced to perform these tasks.

  1. Automating vendor invoice entry
  2. Journal entry
  3. Analysis of customers to contact

1. Automating vendor invoice entry

Historically a local business unit could receive 10,000 vendor invoices per year which need to be manually entered into a system for approval and then payment. The cost to automate the data entry and validation for such a small number of invoices would outweigh the gain. However moving to a Shared Service that manages 40 or 50 local businesses now means the Shared Service Centre is managing 400,000 to 500,000 vendor invoices per year. 

The business case to now automate the data entry and validation becomes more compelling. If a local business unit had 6 people to manually enter and validate Vendor invoices and 40 to 50 business units were managed by the Shared Service Centre in theory the size of the team would need to be over 200 employees. 

The use of OCR technology can automate 70-80% of Vendor invoices meaning the size of the team would be a fraction of the historic size. Further to this by using OCR as a tool, data accuracy is improved, removing manual re-keying of data or wrong payment of invoices.

Lastly automating vendor invoice entry will speed up the process meaning that all invoices can be paid according to their payment terms so early payment discounts can be achieved improving the working capital further.

2. Journal entry

Standard SAP does not provide an easy mechanism to entry large volumes of data for a single journal within the GL processing process. Data is normally prepared in offline spreadsheets and then manually keyed back into the system. The process is highly time consuming and the re-keying of the data is a duplicate step due to the lack of standard interface from spreadsheets into SAP Business Suite. To counter this there are many 3rd party tools that provide an integrated process to upload spreadsheets directly into SAP thus removing the additional re-keying step. Some more complex tools will validate the data within the spreadsheet to ensure the values in the cells are valid entries such as ensuring the correct GL account is used or the journal will balance. This is a widely used tool within Shared Service Centres, with high performing ones focusing on data validation and approval within the process as well.

3. Analysis of customers to contact

Within the Accounts Receivables process the ability to contact the right customer at the right time is critical to success. Contacting a customer who has just paid or about to pay is a waste of time.  This could lead customers that you need to contact, as they can’t or won’t pay, not being contacted leading to the amount of overdue debt increasing putting a negative impact on working capital. Further to this moving from regional debt chasing to Shared Service debt chasing will mean a customer receives a single call, rather than the many calls they would have received historically.  There are normally team size reductions by moving regional debt chasing teams into the Shared Service Centre, and therefore the new streamline team need to be efficient in the day to day activities to recognise the benefit of the headcount reductions.

By using the standard tools with SAP Business Suite around Collections Management efficiently will enable the debt chasing team to target the correct customer to contact at the correct time. Historically notes would need to be managed offline and the production of contact worklists could take 20-30% of the daily effort of debt chaser. By automating the worklists and producing them in a common way the team becomes more efficient (able to make more customer contacts) and can be performance tracked.

Summary

When analysing the productiveness of your Shared Service Centre it is important to refer back to the reasons for the creation of the Shared Service Centre. You should look to measure the effectiveness of the Shared Service Centre against the four common benefits detailed above. Once you have made the headcount reductions and building efficiencies, you need to look at ensuring you have provided the various team the correct tools to excel at their day to day activities and that they are not caught up manually entering or validating data. Without the correct tools the headcount reduction efficiencies will start too ebb away and the Shared Service Centre will become more costly than envisaged.

 

 

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About the author

Mark Chalfen

Former SAP S/4HANA Global Lead

Mark tells it straight - as an ex-boxer, what else would you expect?  Both his knowledge and experience of SAP products allow him to cut to the chase dispelling myths and hearsay.

As a result of working closely with various SAP Finance Product Management teams on product development, Mark understands these products inside out. This depth of understanding has led to him become a ‘thought leader’ in his field; after all, it is not often SAP consultants have helped shape and develop the very product they are selling.

Having such a strong relationship with SAP alongside being an SAP Mentor and Moderator means that Mark has an extensive network within SAP. For clients, this relationship proves to be a huge advantage and leads to configuration issues being resolved rapidly.

Mark has worked on short proof of concepts through to year-long multi-million pound global roll-outs. However, no matter how large or small the project, the true value Mark brings to his work is in the guidance he provides to senior stakeholders. In essence, he assists them to implement more effective processes and drive better behaviours within their finance teams.

Helping organisations transform their business with SAP S/4HANA is Mark’s current focus. The benefits of S/4HANA are numerous, including the simplification of tasks, embedded analytics and improved user engagement. Whilst the eventual move from SAP Business Suite into S/4HANA is inevitable, the journey to it is not always clear. Mark’s ability to understand an organisation’s needs coupled with his deep understanding of S/4HANA provides clarity and eases their transition.

Bluefin and SAP S/4HANA - welcome to the one horse race