Trend No. 2 The Recession Has Been Good For Shared Services
The recession for most of us feels like a part of our history. We are experiencing economic anomalies right now, having undergone a recession caused by the banks, and trying to skirt around a possible second dip recession caused, in Europe, but ‘the countries’. As Greece slips deeper into debt, even the stronger European nations are regarded with hesitation when it comes to their own economic stability. But what does this mean for shared services? Most authorities on shared services will agree: the recession has been good for this F&A operational model, and where before there may have been resistance to change, now there is acceptance and diminishing protestation. I talk of the 3 Cs driving change in shared services, and it’s these 3 Cs which now have the attention of senior management and have inturn nurtured the broader development and growth of shared services across the corporate world. Cost: Cost reduction has won the attention of C Level executives with real success. The cost of finance for multi-nationals doing shared services successfully is 0.6% to 1% of their revenues. Compare this to the organisations which haven’t done shared services or have just centralised their AP operations, and the cost of finance is well over 4%. This 3% difference helps companies survive during a recession. And seeing that revenue is seen as a factor which many companies can’t control during a recession, energy is channeledinto the area that can be controlled – cost. And what is one of the best cost reduction enablers in multi-nationals? Well, shared services of course! Cash: It’s a well referred to statistic: in 2008 71% of companies that went into administration were profitable… unfortunately for them they had run out of cash. During the recession senior management has almost gone into Panic Mode, expressing the importance of needing to know the company’s cash position, and now! If senior management want to know the true state of commitments, then Procurement need to be much more vigilant raising requisitions and POs. This has allowed shared services operations to drive through continuous improvement projects where increasing First Time Match rates and driving out Non PO invoices have been the focus. If senior management want to know how much spend is ‘out there’, the devil is in the process, and it’s the purchase to pay process where the root of this information exists
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Trend No. 2 The Recession Has Been Good For Shared Services