In enterprises with multiple departments, each department maintains its own finance and accounting processes. However, while this decentralised approach might have worked in the past, modern businesses are now turning to a centralised finance and accounting model. If you’re wondering, “What are shared services?” in the context of accounting, this model might be exactly what you need.
What Are Shared Services?
In accounting, shared services take on a very practical form. Instead of each business unit or department managing its own finances, a centralised accounting team handles processes such as accounts payable, accounts receivable, payroll and financial reporting. This centralisation means that the same set of procedures is applied across the organisation.
What Do Shared Services Include?
In a shared services model, instead of having multiple finance teams, a single team manages finances for the entire organisation. This includes:
- Processing payments: Ensuring all payments are made accurately and on time.
- Managing accounts receivable and payable: Keeping a clear track of money coming in and going out.
- Conducting audits: Carrying out regular checks to be accurate and compliant with laws and regulations.
- Providing financial reports: Sharing updates with management and stakeholders through real-time reporting for better planning.
The Benefits of Shared Services
Switching to a shared services model has a great deal of advantages:
Reduction of Duplication
When each business unit runs its own accounting operations, there can be a lot of repeated work. A centralised approach with finance automation removes these overlaps, saving time and reducing the chance of errors.
Streamlined Processes
Centralising accounting functions leads to standardised processes across the company, which makes it easier to implement best practices, maintain control and meet regulatory requirements.
Cost Savings and Better Deals
A shared services model can be cost-effective for enterprises. Instead of spending money on running many different departments, a single department helps them negotiate better prices and terms with vendors. This means that these savings can go towards better technology and less manual work.
Finally, a single larger team can be more efficient and more coordinated than several smaller ones.
Steps for Transitioning to Shared Services
If you’re interested in switching to a centralised model, here’s what you should consider:
- Review current processes: Map out the existing accounting methods across all units to identify overlaps and inefficiencies.
- Plan for change: Recognise that moving to a centralised system will involve changes in the way things are done. Good change management is essential.
- Invest in technology: Implement financial systems that can support the needs of a large centralised team.
- Monitor and adjust: Do regular reviews to help keep the new system efficient and responsive to the enterprise’s needs.
Common Challenges in Shared Services
While the benefits of a shared services model are clear, several challenges can arise during the transition:
- Resistance to change: Employees who have been managing their own departments may not want to switch to a centralised system.
- Departmental culture differences: Different departments might have their own ways of working, which can lead to conflicts or misunderstandings during integration.
- Initial investment: The cost of new technology, training programmes and restructuring can be significant at the outset.
- Communication barriers: Ensuring consistent and clear communication across all departments is crucial, yet sometimes difficult to achieve.
- Integration issues: Merging various systems and processes into a single platform can be technically challenging and time-consuming.
Best Practices for Shared Services
To solve these common issues and have a smooth transition, follow some of these best practices:
- Clear communication: Gather all staff and clearly explain the benefits of centralisation. Make sure there are no doubts regarding the new system.
- Invest in training: Provide training that will help familiarise employees with the new system.
- Adopt a phased approach: Implement the changes slowly rather than all at once. Start with the most important functions and expand as the team becomes more trained in the system.
- Encourage collaboration: Make sure that all departments work together to achieve a shared understanding of the new processes.
- Monitor progress and adjust: Regularly review the new system’s performance. Use the feedback from your employees to improve the existing systems and optimise efficiency.
Conclusion
Shared services in accounting help enterprises with multiple units operate more efficiently by centralising key finance functions. This approach reduces duplicated efforts, streamlines processes and saves money for enterprises.
Embracing this model can be a smart move for enterprises looking to improve their financial operations and support sustainable growth. With Aico’s financial close, compliance, monitoring and live integration solutions, businesses can easily transition to this centralised model and become more efficient.