For multinational corporations, today’s business environment demands accurate statutory reporting right across the globe. Keeping up with ever-changing legislation in every country means finance teams have their hands full – constantly.
As big businesses grow even larger, they must prioritise cost containment and seek to maximise organisational efficiencies, which is why many multinational organisations are looking towards shared service centres to address statutory financial reporting on a global scale, ensure consistent data and automate repetitive tasks. Ultimately, creating this efficiency can deliver an improved bottom line to the business.
Becoming lean and efficient
A shared service centre will concentrate critical business processes into centralised units or groups with expertise and static processes instead of duplicating them in multiple business units that are spread across the globe. This approach will also help to align skills with job responsibilities in a way that helps companies to scale.
Executed well, a shared service centre will improve cost efficiencies, service levels, and the overall responsiveness of?the company. It can pay increasingly large dividends as a company continues to grow. Some of the departments most commonly associated with shared service centres are human resources, payroll, information technology, legal, compliance, purchasing, security and, increasingly, tax compliance and statutory financial reporting.
On top of cost reduction, shared service centres reduce risk and facilitate better management by providing more detailed information about workflows and performance.
Shared service centres positively impact multiple areas of finance:
- Statutory financial reporting: Encourages standardisation of both process and deliverables. Historically, statutory financial reporting has been a decentralised process. More and more organisations are looking to centralise and rely on technology to assist in streamlining the process.
- Transfer pricing: Promotes the sharing of information about related-party transactions between in-house trade teams and customs and border protection, which has traditionally been a major source of manual effort.
- Value-added/Indirect tax: Ensures compliance with the many jurisdictional rate changes that routinely affect a company’s tax liabilities.
- Corporate tax: Helps tax close faster and with a lower risk of errors.
While it’s hard to argue against the efficiencies that a shared service centre will deliver, migration to this new way of managing processes can be impeded by perceived costs. However, there are three responsibilities where finance departments can overlap in an operational sense, and recognising these could help to justify moving reporting workflows into such an environment:
- The organisation needs to handle multiple jurisdictions simultaneously. Does the transition of statutory financial reporting into a shared service centre environment help it achieve compliance quicker and therefore reduce risk across multiple jurisdictions?
- Regulators are constantly exerting pressure on MNCs. Will the transition better meet the needs of the evolving global regulatory environment?
- The company needs processes that accommodate business growth. Can the transition help finance departments integrate and analyse new information on the business quickly and efficiently? Is it sufficiently scalable for statutory reporting if the company enters new markets?
Businesses need to objectively weigh both the upsides and downsides of migrating into a shared service centre. The requirements will vary from company to company, but centralisation and standardisation are two qualities that finance teams look to achieve as businesses grow globally, regional regulators increase demands and technology creates new ways to leverage data that exists in and across the organisation.
Aligning functions and processes
Many multinational corporations already manage financial processes out of shared service centres, so why not statutory reporting? If the management of the finance function resides principally inside a shared service centre environment, then placing other aligned functions there enables better communication and a closer cross-departmental working relationship.
It’s difficult to overstate the value that comes from being able to turn statutory reporting, and other financial data, into real-time insight. Data analysis has transformed how the consumer sector sells, and it can make similar waves for how businesses are managed financially.
The ability to analyse trends in revenue, expense, and currency fluctuations in the context of different business strategies that a company is considering could reveal useful information on effective tax rates and cash positions – an insight many senior leaders value.
Businesses now create more data than ever, and they have the technical capability to store, access, and process that data into conclusions that are more dynamic, specific, and meaningful than ever before. Regulators, in turn, are increasingly requesting this data and seeing to it that it is shared across other authorities.
Incorporating statutory reporting into the shared service centre environment is one more way for finance professionals to provide value to management. For those teams, the benefits of shared service centres are clear. They drive easier management of information from multiple jurisdictions, prepare teams for questions from regulators, and eventually leverage data analytics in ways that will identify efficiencies and improve the financial performance of a company.