Many organisations are justifiably proud of their shared services centres. Compared to traditional approaches to organising and carrying out important back-office functions, the modern shared services centre is rightly regarded as a significant step forward.
Even so, as APEX Analytix’ 2017 Financial Leaders' Benchmarking Report highlights, most shared services centre organisations still have room for improvement. Compare a best-in-class or high-performing shared services centre with a merely average one, and opportunities abound.
Creating change in your organisation can be a mammoth task, with lengthy implementation time scales and payback periods. Here we look at initiatives you should consider with shorter time scales: the five 'quick win' opportunities that are likely to benefit significant numbers of shared services centres.
* Opportunity #1: Review the number of payment terms
How many payment terms does your shared services centre administer? According to our analysis, 38% of businesses have over 10 payment terms, with 30% of businesses report having over 40 payment terms. Too many payment terms simply cannot be optimal for a business’ cash flow, and can cause difficulties in managing compliance, extension and more.
With almost three-quarters of businesses reporting formal efforts are underway to simplify supplier payment terms, it is a clear there is a focus on reducing terms terms. But what is the right number? This can vary for each organisation, but with 19% of businesses have five or fewer payment terms, should your organization join them?
* Opportunity #2: Establish a global contract repository
A central global contract repository serves a vital role: a single source of the truth. It offers businesses the ability to perform on demand contract optimisation, monitor contract compliance, and execute effective risk management across multiple languages, countries, and regulatory and business environments.
And yet, fewer than half of businesses possess such a repository—meaning that they lack a means of quickly and effectively establishing that prices and payment terms are correct, and that they are in accordance with negotiated contracts.
* Opportunity #3: Put a supplier portal in place
Supplier portals are known as a means of lowering the costs of supplier interaction and onboarding. But thanks to the fact that they enforce data completeness, and can provide a means of validating supplier-provided data, they’re also a superb tool for obtaining higher quality supplier data and advanced functionality in terms of fraud prevention and working capital management. That’s why so many best in class and upper quartile shared services centres are investing in them.
But adoption is still far from universal. Only 56% of businesses, in fact, have a supplier portal—which is, we believe, a significant omission. Inexpensive and quickly-implemented, a supplier portal is undeniably a high-ROI opportunity.
* Opportunity #4: Capturing (and reporting on) available supplier discounts
Discounts—dynamic or otherwise—represent a significant opportunity for businesses to both retain cash and reduce input costs by offering accelerated payments in exchange for price discounts.
Yet under half of businesses manage to capture over 80% of the discounts that are available to them. 10% capture less than 60% of available discounts, and 41% of businesses do not formally track levels of discount capture at all.
But thanks to their insights into comparative invoice submission and approval times across the organisation, shared services centres are in a superb position. They know which departments and managers are submitting and approving invoices too slowly to make discount capture possible—and can publish the data, ‘naming and shaming’ the relevant departments and managers to prompt faster processing. Shared service centres can report on discounts and fuel discount programmes that help the organization drive working capital.
* Opportunity #5: Monitor ‘after the invoice’ purchase orders
After-the-invoice purchase orders are indicative of poor procurement practice—maverick purchasing, for instance, or off-contract spend. Requesting a purchase order so that a supplier can be paid is a sure signal that normal procurement practices have not been followed. Even more insidious than poor procurement, after-the-invoice purchase orders create the illusion that good purchase practice has been followed, but without solving the problem.
And yet 60% of businesses don’t monitor the level of after-the-invoice purchase orders. They simply raise them, and pay them. Tracking after-the-invoice purchase orders is a vital first step towards minimising and then eliminating this bad practice—and in the process enforcing good purchasing practice. So shouldn’t your shared services centre being doing this?
So, whether it’s a reduction in payment terms or implementation of a supplier portal, the opportunity to quickly streamline your shared service centre is there. Or, why not implement best practices or areas for improvements highlighted in the 2017 Financial Leaders’ Benchmarking Report over 30 areas of operation?