Shared Service Center is a business unit or a physical entity dedicated to providing transactional-processing services for multiple business units within a large enterprise. Typically used by MNCs- spread across the globe, SSC acts as an in-house sourcing centre which focuses on consolidating and standardizing a particular business process in low cost locations. However, SSCs can bring more to the table than pure cost-savings. If implemented properly, a Shared Service Center can establish better process controls, provide better service delivery and improve process and employee efficiency.
SSC for Accounts Receivables:
Receivables and Payables are the major building blocks of a solid working capital for an organization. While organizations across the globe have taken a step forward towards optimizing AP processes, service delivery optimizations of AR departments are often kept in the back burner. For a holistic growth, organizations need to continue to improve and optimize their process effectiveness and service delivery models. Standardizing and consolidating end-to-end receivables is the next logical step towards achieving this.
The key strategic objectives for an AR SSC are:
- To achieve operational efficiency via standardization, consolidation and automation.
- To offer better customer experience through key touch points such as order processing, invoicing and payment
- Workforce optimization via removal of duplication of resources and associated hidden cost
- Optimize key AR processes such as remittance matching and cash application, collections, reconciliations, dispute management etc. through automation technologies
- To achieve organizational scalability & agility for geographic expansions and acquisitions.
Technology as an SSC enabler:
There is often a gap between SSC as an organizational strategy and SSC as an actual deployed solution for business optimization. Technology can be leveraged to bridge this gap. State of the art technological solutions are available to centralize, consolidate and automate the entire Order to Cash process including Accounts Receivables. For e.g. Companies, globally are increasing focus on collections and optimizing accounts receivable performance indicators such as DSO (Days Sales Outstanding). One way to achieve reduce DSO is to centralize Accounts Receivable into Shared Service Centres or ‘collection factories’. By centralising remittance matching and collections, these organizations can collect cash more efficiently, standardise performance monitoring and optimize processes for collections and establish better credit & delinquency analysis.
SSC technology automation need not be limited to Accounts Receivable but can be deployed across the Order to Cash process as a whole. Process automations in Order to Cash are as follows:
- Customer Order Processing & Validation
- Order Acknowledgement
- Sales Order Creation
- Invoicing & Collections
- Remittance matching & Cash Applications
- Reporting
For instance, technological tools such as Optical Character recognition, validation checks and workflows are helping organizations to automate hitherto manual data entry and validation tasks such as processing paper/email purchase orders to create Sales Orders/Order Acknowledgements and matching incoming payments to open invoices for clearance.
SSC is not the same as outsourcing:
The key reason why organizations shy away from establishing a Receivables SSC is because of the level of sensitivity involved in dealing with customer based processes. Receivables as a business unit often times involves a lot of customer-centric data and correspondence. Outsourcing of AR can thus involve an external organization handling such sensitive & regulation bound tasks. Although blurred, there is still a distinction between Shared Service Centres and Outsourcing. SSC operate as an internal customer service business whereby, it charges the business units for the services provided and provides services in adherence to SLAs. Hence organizations can still maintain the desired control and customer centric regulatory compliance while leveraging the benefits of outsourcing.
Key Metrics:
The following metrics/KPI’s can be set in place to monitor the performance of Receivable SSCs. These include:
- Days sales outstanding (DSO)
- Cost of remittance
- Remittance per FTE
- Incorrect invoices
- Credit checks per FTE
- Customers per FTE
For any organization, efficient cash flow management is a key business objective. Regardless of the current profitability of a firm, it can still experience cash flow problems because of inefficient receivable processing. Shared Service Center for Receivables can dramatically optimize the credit-to- cash process and optimize cash flows within an organization. The successful implementation and application of SSCs is helpful for companies to improve service quality, reduce operation costs and enhance core competency. Thus, for organizations considering to optimize their Receivable, a Shared Service Center with appropriate automation technologies is the right wave to ride