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Shared Service Centres: Driving Positive Change

by Helen Sanders, Editor

Establishing shared service centres (which to avoid repetitive strain injury, I will refer to as SSCs) for centralising financial activities such as payments and collections is often a desirable activity from a shareholder’s perspective; however, their introduction can inevitably result in concerns and dissent amongst other parts of the business, where local responsibility may appear to be eroded and business functions moved to remote locations. From a treasurer’s point of view, centralising financial processes should bring a variety of benefits in terms of financial supply chain management, working capital optimisation and forecasting. In fact, treasurers should be closely involved in all aspects of a SSC migration, from developing the business case through to planning its activities, establishing technology and bank connectivity through to full migration. Without close integration between treasury and a financial SSC, many of these potential benefits are lost. In some companies, the SSC is part of treasury; in others they work in tandem; in others again, there is little or no interaction between the two so treasurers are losing out on leveraging these benefits, and failing to take advantage of shared objectives. 

SSC background

Early SSCs
Shared service centres are nothing new for many large organisations. During the 1990s, US multinationals were pioneers of the SSC concept. The centralisation of business processes such as accounting, HR and, to some extent, accounts payable went hand-in-hand with system consolidation and rise of the ERPs; in many respects, one trend has driven the other. Many SSCs have achieved dramatic cost savings by reducing headcount and IT costs, creating economies of scale with their banks and other third party providers. However, while a large proportion of readers will have SSCs already established in their organisations, there is still a great deal of potential for expansion both in the number of companies which set up SSCs and in the range of processes which they cover. The crisis has fuelled the business need for efficient, consistent and transparent business processes as well as making it more difficult for finance managers to invest in shared services projects; however, the benefits and return on investment can be considerable.

SSCs location
Despite budget difficulties, however, many banks are reporting that the profile of companies setting up SSCs is expanding, with companies of all types looking at SSCs for processes such as accounts payable and receivable. The location of new SSCs is also changing. Early SSCs were often located in high-cost countries such as Singapore, Hong Kong, UK, Ireland, Netherlands, Belgium and the United States. The next generation then witnessed the ‘offshoring’ effect, with many companies choosing to locate their SSCs on the Indian sub-continent and in China. Today, while all these locations remain popular, many SSCs are looking at regions such as Eastern Europe where the cost structure is quite favourable, language skills and education levels are high and tax incentives exist. Often these can be linked to production sites which companies have already set up in the region.

Banks are reporting that the profile of companies setting up SSCs is expanding.