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Tax and accounting

Corporations’ shared service centers are moving up the value chain

Andrew Hay  Head of Proposition, Statutory Reporting and Shared Service Centers at Thomson Reuters

Andrew Hay  Head of Proposition, Statutory Reporting and Shared Service Centers at Thomson Reuters

As companies' shared service centers become a more valued part of business, they're paving the way for automated, centralized financial reporting and tax compliance.

Multinational companies are accelerating efforts to establish and optimize shared service centers — with finance & accounting leading the way, according to the State of the Global Shared Services Market Report 2019, recently released by the Shared Services & Outsourcing Network (SSON).

This development bodes well for corporations’ ability to centralize and streamline financial reporting and tax compliance across their global enterprise. Companies that are late to the game, on the other hand, may face a long-term competitive disadvantage.

The shared services model came on the scene in the 1980s to improve efficiency and standardization in back-office functions. In recent years, it has taken on new importance — moving beyond transactional, manual work and focusing on automation, innovation, analysis, and process. “(S)hared services organizations have been ‘moving up the value chain’ — something that was promised for many years but is now accelerating,” says the report. “What defines the modern center are the insights it offers the business based on a thorough understanding of services processing, automation, and data analytics.”

That’s not to say increased efficiency is no longer an objective. In SSON’s survey of organizations that have adopted this model, nearly half said they plan to improve productivity targets 5% to 10% in the next 12 months; and one-in-four are shooting for more than 10%. “The consistent, aggressive commitment to productivity improvements are keeping… leaders focused on innovative solutions that improve effectiveness, efficiency and performance,” the report notes. “Today, that is predominantly achieved by leveraging automation and data analytics.”

Survey respondents said the functional area most commonly managed in their shared service environment is finance & accounting (52%), followed by human resources (48%) and information technology (39%). For tax & finance teams, a shared service center automates repeated, scalable processes, creates consistency, and establishes a trusted source of information, which is a critical prerequisite for data analytics.

Many companies have made the leap to a shared service center recently — 17% are currently planning to launch and 27% are in the early launch stage. Those companies with more experience say they are augmenting what they have learned with automation and data analytics to reposition the center as “the brains of the enterprise.”

This mirrors the experience of Thomson Reuters’ multinational clients, at least half of whom are using or planning for a shared service center to manage tax compliance or financial reporting across multiple disciplines. Some key areas include:

      • Statutory reporting — To automate, centralize, streamline, and standardize processes so they are scalable, repeatable, and consistent in all regions.
      • Indirect tax management — To ensure compliance with the varied, fast-changing rules and rates that affect a company’s tax liabilities across all the countries in which it operates.
      • Direct taxation — To close the books faster with less risk of errors.
      • Transfer pricing — To promote the sharing of information about related-party transactions between internal and external stakeholders, which traditionally has required significant manual effort.

The Holy Grail for tax & finance teams is to go beyond data management and master data analytics that create real-time insights and inform mission-critical decisions that impact the bottom line. In this way, a shared service center moves tax & finance from being perceived as a cost center to one that delivers strategic value. The corporate tax and financial reporting environment is an ideal place to leverage data analysis because it is a massive consumer of a company’s data, down to the transaction level.

The SSON survey provides additional insights, such as:

Respondents were asked to identify the most important benefits derived from their shared services centers. Their top choices were:

1. Control, standardization, and optimization (selected by 73% of respondents).

2. Productivity improvements (64%).

3. Scaling and agility (38%).

4. Improved customer service (36%).

More than two-thirds said they are transitioning to “knowledge work,” but it has proven difficult, specifically:

      • 28% said it’s going well for them; and they have developed roadmaps and milestones.
      • 19% said they are struggling to define knowledge services, and
      • 17% said their teams lack the necessary skills implement them.

“Whether it be in rolling out robotic automation or better understanding what the data is telling us,” the report says, “a lack of relevant skills is… a leading cause of under-performance.”

The SSON report points to a potential solution to this quandary. There is a “significant and growing interest in pursuing Global Business Services (GBS) as an achievable model,” it says. “This interest in the global model is driven predominantly by the urgent need to leverage automation across an increasingly broader scale. The global process ownership conferred by GBS, and the extent of standardization the model implies, are both key factors that determine the ability to roll out automation. In addition, the ownership of global processes reduces the resistance that automation teams frequently encounter in attempting to scale.”

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