Mines of information, by Paul Sandford

6 Apr 11
Sharing services should not be seen as a quick fix for shrinking budgets - but done properly it can give finance departments better skills and data

Sharing services should not be seen as a quick fix for shrinking budgets – but done properly it can give finance departments better skills and data

Shared service centres have become an established feature of modern financial practice. Some of the main reasons for adopting this model are to reduce costs and make spending more transparent, issues that have become even more important as the public sector faces up to severe cuts. But as departments weigh up the possibilities for more collaboration, there is a significant debate about how much shared services and back-office efficiency improvements can really achieve the cuts needed.

Understandably, saving money is a priority but people recognise that there is also a need for sustainable change. For most organisations, simple cost-cutting and price-slashing reach a point where they fail to provide true economies of scale. A better way of achieving holistic and sustainable efficiency is to examine long-standing processes and ensure all aspects of daily operations are both visible and controllable.

Successful shared finance services can achieve these aims. In the short term, they can improve efficiency and cut costs. But in the long term, by providing information back to the organisation, they can lead to even greater, long-term savings in areas such as compliance and supplier consolidation.

Savings on transactions can be substantial, according to research. Automation within the finance department can lower processing costs to less than £2 an invoice, compared with more than £20 for manual transactions. Based on processing 100,000 invoices, that’s a saving of £1.8m per annum.

Automation can also reduce the time from receipt to approval from 33 days to 5 days, on average, enabling early payment discounts and improved prices from suppliers. A review of case studies found that early payment discounts alone could amount to approximately £1m per £415m spent.

So finance shared service centres can transform the way organisations conduct processes and functions as a whole. In their infancy, the centres were primarily designed to suit a tactical function within the business, focusing on streamlining transactional processing and cutting costs.

However, there has been a significant shift in this role. Through the sheer volume of data the centres gather, they have become mines of valuable information that can be given to organisations to help decision-making. Whether through input into budgets and resource planning or implementing operational changes, the centres and the finance team as a whole are increasingly able and expected to contribute to the top line strategy of the organisation.

The information and insight the centres provide are essential when determining the most significant opportunities for cost reduction.

The data that a shared service centre possesses can join up disparate pockets of information from across the business.

What has driven this transformation of the role of the shared service centre? In many cases, technology and automation have played a huge role, significantly cutting the cost of transactional processing and making more information readily available than ever before.

But technology alone is not enough. The skillset in shared service centres has developed in line with the demands of the industry as a whole. As more specialised services are now available, there’s a great opportunity for public sector organisations to take advantage of the value these can add to their teams.  Consolidating business centres used to be only about costs but today there is much more focus on specialised skillsets that can improve competitiveness and efficiency.

So when organisations are assessing the possibility of shared services and looking for back-office efficiencies, they do need to look beyond short-term reductions and understand the long-term value of information. That information, used correctly, can make the task of finding sustainable savings a lot less daunting.

Paul Sandford is a public sector specialist at Basware UK, which specialises in financial process automation software  www.basware.com

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