Considerations For F&A BPO – Shared Services – Process Scope

Following the decision to migrate to a shared service centre, there are a number of decisions that need to be finalised and agreed before the Transition can begin.

These consist of the following:

– Process Scope of the solution

– Location Scale of the solution

– Governance

– Detailed business case

– Detailed roadmap

This white paper will focus on the decision around the process scope of the solution. The assessment around scope is undertaken, to ensure that the Finance shared service centre links to the strategic requirements of the organisation and is fit for purpose.

Process Scope

When assessing the process scope the key considerations are: what are the objectives of the transformation; what processes would the organisation consider strategic; how would the interface with the rest of the business be handled; what is the risk appetite; how good are we really in that area; what dependencies and interfaces exist across process and sub processes;

What are the objectives of the Finance & Accounting Transformation

As a first step, it is crucial to understand the objectives of the transfer of activities to a shared service centre. In the current environment of prospective global recession, the primary objective is likely to be cost led, but control effectiveness, standardisation of services, improvement in service levels, access to more qualified staff, value add services, and / or improved management information could also be valid objectives for the Transformation programme.

Only after understanding the objective, one can ascertain the appropriate scope for the programme. For example, if there were only one objective and that was to reduce costs then the scope would likely need to be as broad as possible.

What processes would be considered strategic

Within Finance & Accounting Transformation, each organisation slightly differs in the sub processes2 considered strategic. Recent research dictates that strategic processes should be kept in house due to them being linked to the core activities of a firm, integral to the success of the Finance Function and connected to the differentiation of the organisation.

In certain organisations, Treasury and Cash Management is considered a strategic activity, with the managing of cash flows, liquidity and funding in the organisation identified as core. Conversely, others would argue that once the rules and governing principles are determined, the process is largely transactional and can be migrated to a shared service centre.

Similarly, management information is largely considered a strategic activity to certain Finance Directors or CFOs as the function is intrinsically linked to business decisions that a business needs to make. However, others will agree that once the leadership develops the reports required, and these reports are then designed, approved and built that the management information activity can be completely migrated to a shared service centre.

How would the interface with the rest of the business be handled

Finance is the lifeblood of an organisation and the information delivered by Finance represents the organisational position and performance for a given period.

To obtain this information, there are a number of inputs required from the rest of the business. This information includes sales order information, approvals for the processing of invoices, query resolution to resolve expense queries, information on debts, accessing / sense checking of budget, forecast, accrual, prepayment and journal voucher information. In assessing the scope, an organisation needs to decide the level of interface that it wants shared service centre to have with the rest of the business and how that input interfaces will be managed.

To supply this information, there are a number of outputs to the rest of the business. This information includes management information to departments and leadership, approval exception reports to the businesses for invoices and expenses, and crucially the financial statements. In assessing the scope, an organisation needs to consider the interface with the leadership and business and how the output interfaces will be managed.

What is the risk appetite

When assessing the scope, one must consider the risk appetite of the organisation. All Finance Directors will tell you that the organisation wants to minimise risk but the risk must be balanced with the achievable reward.

In considering the scope, one must assess the risk appetite of an organisation. The size of the retained Finance team, and the processes and sub processes that they will carry out, will be largely dependent on the risk that the organisation is willing to take. Some organisations choose large retained Finance teams, with a small process scope migrating to the shared service centre to reduce risk.

However, this approach has a savings implication. Other methods to minimise the risk and maximise the achievable reward, can include managing the change with a phased approach to migrating to a shared service centre and spacing out the phases as much as is appropriate.

How good are we really in that area

It is necessary to carry out an honest assessment of what an organisation does well and not so well. Benchmarking studies are readily available to provide a point of view of how the Finance Function is performing against other Finance Function in a similar industry.

Migrating activities to a shared service centre is not only an opportunity to improve the performance on the processes at which an organisation is doing badly, but also on the processes where the organisation is doing well but can do better. When considering which processes to move, it is key that the organisation does not miss an opportunity to improve performance through the shared service centre.

However, this must be balanced with the objectives of the transformation and the risk appetite of the Finance Function and the leadership of the organisation.

What dependencies exist across process and sub processes?

Finance represents a complicated web of interdependencies and interfaces between processes and sub processes. One process cannot be migrated without considering the implication on the other processes. The advantages of end to end processes in one location are numerous and widely discussed, in Finance & Accounting it is effective to have General Accounting team in the same location as the Accounts Payable, Accounts Receivable and Reporting teams.

Outside of the Finance Function, there are numerous dependencies with Accounts Receivable linking with the Processing of Sales Orders, Accounts Payable linking with the Procurement and T&E linking with employees.

When considering the scope of the shared service centre due consideration must be given to these linkages and to ensure that the Finance & Accounting Transformation is a strategic decision that considers the complete Finance Function and the rest of the business.

Overall, a balance approach should be encouraged in assessing the process scope of a solution taking into consideration all of the factors described above. Getting this wrong can affect the success of any Finance & Accounting Transformation programme.

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What’s the Financial Services Market Like?

This is a question that has been asked over and over again all around the world. Some people are asking this because of the sheer numbers of people that are in the financial services market and are involved in either a career or job that keeps a close eye on the current financial industry trend and try to predict where the market will go next as the entire world’s financial markets are in a free fall due to the economic mess that the entire world is currently in.

Some people are saying that there are too many people that are already working in this field and that far too many people all around the world that are either under-insured to be able to withstand a financial crisis such as losing their job or the death of a primary income provider or are totally uninsured because they either do not know how important financial planning really is or just do not have the money for the life insurance that will see to their family through if something happens to them. The other reason that people are complaining about the financial services market and how bad things are is because they have either lost money on investments, had financial problems because of poor financial planning, or simply gotten so disillusioned by the current status of the financial markets that they have given up hope altogether of understanding how the markets really work.

These people really do not know that there definitely is hope out there and that all is not lost. The key to keeping your sanity and keeping your clients in good financial standing in this topsy-turvy uncertain financial market is to know what the current financial industry trend really is at any given point in time and to be able to adequately provide the soundest financial planning that you are able to give to your clients so that they are prepared for any and all possible financial situations that are going to come about. As long as you; as a financial adviser, are able to guide your clients to make the correct financial decisions as far as insurance and investments are concerned then those clients are going to be in much better financial shape than a great deal of the people who are completely thrown out of sync by the current financial industry trend and economic situation.

This is what a very good financial adviser is capable of doing for his/her clients. Yes, there were a lot of people who made their living in the financial services industry and a good many of them have either left the business or have been laid off due to the current economic situation. Those financial advisers who are good at keeping up with the current financial industry trend and knowing what they are doing are the ones who are still going strong and able to guide their clients around any financial trouble that they see and out of those they are in currently.

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