Shared Service Centers (SSCs) are constantly under pressure to cut down costs, onboard new units faster, and deliver a positive customer experience. When properly designed and implemented, SSCs can leverage economies of scale, higher levels of expertise, and technology to digitally transform their order-to-cash (O2C) processes. In this blog, we will preview how finance teams can achieve digital order-to-cash (O2C) transformation with the latest tools and AI.
What are shared services?
According to Gartner, Shared services or a shared services center (SSC) is a dedicated unit (including people, processes and technologies) that is structured as a centralized point of service and is focused on defined business functions. These functions are supported by IT and IT services for multiple business units within the enterprise.
The term “Shared Services” defines an operational model that involves centralizing the specific administrative functions of a company that were once performed in separate divisions or locations. In a shared service center, typical `back office’ functions—such as Accounts Payable (AP) Accounts Receivable (AR) or IT—are centralized. For example, instead of having a separate AP, AR or IT department in every state/country a company operates in, an enterprises can choose to have a regional or global Accounts Payable shard services center.
What are the advantages of a global shared service center?
The objective of a shared services delivery model is to empower each business division to focus its limited resources on activities that support the division’s business goals. Key advantages of a shared service center include:
- Cost-efficiency: Global shared services centers are cost-efficient because they eliminate redundancy by centralizing back-office operations of multiple divisions across the company. Instead of having big finance teams across the organization, the financial processes can take place from one centralized location with a dedicated team overseeing all aspects.
- Automation: Shared Service Centers (SSCs) were created to perform operations better than they could be performed in a decentralized environment while controlling costs. Automation plays a big role here. For example, in the order-to-cash process, AP automation tools such as e-invoicing can be deployed for faster delivery of invoice and receipt of payment.
- Increased effectiveness: Enterprises will be able to leverage specialist skills, enhance decision support, and improve the controlled environment.
- Increased responsiveness: Unifying customer-oriented vision enables shared services staff to better gauge and respond to changes in customer requirements. Shared services models that employ regional centers are well-posed to address the regional needs, regulations and language.
What are the challenges faced by F&A shared services?
While shared services have come a long way, they still face several demanding challenges that decentralized operations often do not. They include:
- Service Level Agreements (SLAs): Formal service-level agreements (SLAs) help clarify the terms of service delivery, bringing in greater transparency and aligning with customer expectations. SLAs define the output required, and its quality/accuracy and timeliness in a quantitative manner. Measurements are implemented to gauge their success in meeting the SLAs. Often, SLAs are quite elaborate and complex.
- Productivity annuity: A productivity annuity performance (efficiency & effectiveness) is expected to improve every year.
- Accommodating multi-units: The need to accommodate multiple business units with widely varying business models, revenue streams, customer bases, ERPs etc.
- Legacy systems: While shared services and system integrations as part of a business transformation project can yield excellent results, limitations of legacy systems can cripple the transformation process with sub-optimal results.
An optimal mix of people, best practice process, technology, metrics, and analytics are required to bring in these improvements. However, in reality that’s easier said than done. Also, once these are operating at a high level of effectiveness, it becomes increasingly difficult to deliver the improvements expected in the Productivity Annuity.
At this point, exponential increases in efficiency are required in some sub-processes to offset the meager increases achieved in other sub-processes. In our opinion, exponential increases are only obtainable through the deployment of digital-AI driven automation in the order-to-cash process.
Why process automation and digital O2C transformation is the future of finance?
Digital finance automation, powered by Artificial Intelligence (AI), is the key to transforming the order-to process and achieving exponential gains. Employing AI in the order-to-cash process can reduce the manual processes by up to 85%, freeing up staff for more strategic tasks. This is very important in the current uncertainty-driven economy the workload across the order-to-cash process—including credit, collections, deductions and disputes, and cash application—is expected to double. Exponential increases in productivity in these sub-processes will enable SSCs to:
- Successfully cope with the threats during and beyond COVID-19
- Deliver significant productivity benefits in the coming years
- Improve cash flow and mitigate risk in the new digital age
- Achieve best-in-class performance
Delivering annual productivity and effectiveness increases year after year is just not possible with semi-manual process improvements and modest ERP enhancements, especially in light of the COVID-19, which has greatly increased workloads in key O2C sub-processes. Digital with Automation, Analytics and AI, is the path to an SSC delivering new levels of performance in the digital age.