Expert opinions, FINANCE

Financial shared services centers: From accounting to management

In the past few years, there has been a notable increase in the number and scale of shared service centers (SSCs) in Russia. The trend is especially evident for financial SSCs that take over the management of accounting, taxes, and other financial functions of companies.

It all begins with accounting

The first SSCs in Russia were focused on accounting, encompassing a range of operations from routine transactions to reporting. The pioneer in this field was TNK BP: its SSC for accounting and tax purposes was created in Nizhnevartovsk in 2002 (TNK-BP Business Service). Over the subsequent 5–7 years, accounting SSCs were established for the companies SUEK (Greenfin, 2007), Rosatom (Greenatom, 2009), Lukoil (Lukoil-MCPB, 2009), X5 Retail Group (X5 Group Service Center, 2008), and Norilsk Nickel (Nornickel-OTsO, 2010).

These SSCs have evolved into multifunctional entities, that is, they serve several purposes. Accounting was the primary purpose, and not without reason:

  • It is strictly regulated by law, that is, there is minimal variability;
  • Maintaining uniform accounting is crucial for ensuring data transparency, and it is most feasible to do this within the SSC;
  • With the development of digital technologies, accounting functionality can be easily separated from other functions and implemented in any location.

Speaking of what functions are typically transferred to SSCs: roughly 90% of centers service are dedicated to accounting and tax accounting. Personnel administration and settlements with personnel are handled by up to 70%, while half of the centers took on the treasury function. Approximately 40% are involved in document flow management and handling accounts receivable debt.

An interesting fact is that one third of SSCs in Russia have existed for more than 10 years, and about 30% are less than 5 years old.

From accounting to payment factories

The effectiveness of accounting as a centralized function became evident when transferred to a shared service center, which prompted companies to consider centralizing other crucial financial areas. Thus, starting in 2012, payment centers have been created, which made it possible to bring together transactional treasury operations.

For instance, payment factories were established at Procter & Gamble and NLMK (2014), Cherkizovo and Rolf (2015), Gazpromneft (2017), and Rosatom (2019). These centers took on such responsibilities as interacting with banks on settlement and cash services, managing salary cards, handling payment processing, executing conversion transactions, and overseeing currency control.

SSCs development: Enhancement

Having successfully handled transactional and accounting tasks, shared service centers reached a new level of importance for business, evolving into tools for planning and decision-making. In terms of increased depth, there is a notable integration of accounting and management accounting within companies. Accounting SSCs are currently responsible for generating reports for regulatory authorities, and also provide extensive analytical data applicable for decision-making. The data is incorporated immediately where necessary for business management, production, and other operational aspects. Through “quick closure” projects, SSCs provide information in the shortest possible time so that managers can quickly make crucial decisions for the business. For instance, Rosatom’s Greenatom shared services center provides data and management reports as early as on the sixth working day. Today, SSCs’ functions are not solely limited to collecting data and properly transferring it to supervisory authorities; they also serve as a flexible analytical tool to provide any data required by a business.

I should add that this development is based on advanced IT solutions that comprise financial data from all organizations within the service perimeter: those include unified accounting systems, analytical modules, and software robots tailored to perform routine standard operations. SSCs also have vast potential for evolving into owners of BI systems, which allow for building data volumes and making reports in various analytical sections, as well as providing assistance in creation of BI ETL layers.

What is next? I believe that analytical tools will be advancing; at least there is a corresponding demand from both us and our clients. Latest information updates will become increasingly prompt. Ultimately, we will be able to see any information online, including every transaction and its necessary details – such as the procurement manager’s online dashboard that shows the amount of purchases, orders and applications, the share of urgent applications, a summary of deadlines and projects, a profit and loss statement, and a plan vs. actual dashboard for the financial director.

SSCs development: Expansion

Previously, SSCs were used solely for standard operations such as transactions, while now they operate as centers of expertise, with increased scope of transactions and expanded knowledge base.

SSC planning and budgeting functions are advancing, including a number of areas:

  1. Business planning.
  2. Calculating the EBITDA indicator.
  3. Budget formation.
  4. Making reports for government agencies.
  5. Plan-fact analysis and factor analysis.
  6. Master data management.

SSC treasury operations include new responsibilities:

  1. Handling trade finance (letters of credit, banking securities, sureties of guarantee) and related settlements.
  2. Procurement of funding (loans, raising funds in the financial market).
  3. Investments.
  4. Placement of intra-group loans.

This scope of tasks suggests that SSCs have ceased to be solely accounting-related, having obtained financial functions as well.

Unified standards to organize and manage operations and unified approaches to collect information as well as data transparency provide SSCs with vast potential for conducting independent data analysis within the area of responsibility. Additionally and importantly, it allows companies to educate their own experts to apply the data and analytical tools to form their opinions and conclusions. They can also specify their own data requirements and develop approaches for better information acquisition. The transactions & analytics & expertise scheme allows a financial SSC to evolve into a fully operational business partner for organizations, making it not solely a standard operations conveyor but a fully functional assistant to provide expertise for a business.

I should generally note that shared services centers have evolved along with clients, and often even faster. With time speeding up and technology advancing, we see greater opportunity to support business.

By Svetlana Bormatova, General Director, Greenatom Simple Solutions, Rosatom State Corporation

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