5 ways poor visibility holds shared services back
As I discussed in my previous post, more and more organizations are moving their financial operations toward a shared services model. And while there are many benefits to centralizing operations like accounts payable and accounts receivable in this way – process standardization, economies of scale, etc. – you don’t always realize those benefits immediately.
Especially if activities like invoice, sales order and payment processing are mostly manual.
What makes achieving the goals of shared services so difficult?
2 things: Complexity and visibility (or lack thereof)
Shared services operations can be incredibly complex. One in five businesses say operating accounts payable as part of a shared services organization is the biggest reason for increasing accounts payable complexity, according to the Institute of Financial Operations (IFO).
Consolidating processes means that staff have to field requests and handle tasks coming in from multiple submission channels. Shared services organizations may also be responsible for supporting multiple currencies, languages and tax regulations.
These challenges are only exacerbated in a manual process environment, where staff and leaders alike lack visibility into financial data, operational metrics and the status of incoming or outgoing payments. They have difficulty finding the information they’re looking for – be it a physical document or data stored in core systems like ERPs.
Without quick and easy access to information, financial shared services operations suffer. Visibility is key to effectively responding to inquiries, monitoring performance and making important business decisions. Luckily, there are technology solutions available that can help shared services leaders complete the view of their payables and receivables picture, but many may not be aware or convinced of the negative impact that poor visibility can have.
5 ways poor visibility is holding you back
1. Long cycle times
Manual processes make it difficult for finance managers to track productivity. Without a view into the status of invoice payments or order processing, or even employee workloads, managers cannot identify bottlenecks and opportunities to speed cycle times.
Also, if remote and field workers are required to approve transactions or documents, but cannot access the information for review unless they are in the office or connected to an internal network, it can create significant processing delays.
No wonder 50 percent of accounts payable departments cite remote approves as a contributor to processing complexity, per IFO.
2. Information silos
Accessing all the information related to an invoice or incoming payment is impossible in a paper-based shared services environment. In most cases, key information is not captured, information is not timely or integrated across systems, and decision makers do not have access to key variables.
For example, most ERP systems provide a limited content repository and cannot manage supplemental documentation, like packing slips, supplier correspondence and extra approvals.
The inability to quickly access information related to an invoice or incoming payment makes decision-making difficult, complicates approval processes and delays exceptions and dispute resolution.
3. Poor cash management
Managing cash in a paper-based shared services environment is a challenge for finance leaders, as they have little visibility into where invoices and incoming payments stand in workflows. This forces leaders to gather information on liabilities and receivables manually. Meanwhile, reporting is largely dependent on spreadsheets and is not connected to budgeting and cash forecasting solutions.
It also is costly to provide financial decision-makers outside of accounts payable or accounts receivable with access to documents and information stored in an ERP platform or other system.
It is for these reasons that 69 percent of controllers indicate that improving visibility into cash flow and cash management is among their top priorities, IOFM reports.
4. Weak control and tracking
In a paper-based environment or manual environment where files are scattered among shared drives, documents can be easily lost or misfiled. Without visibility across all financial content and documents, how can organizations determine which documents are missing, or have been misrouted, stolen or destroyed?
Poor control over documents and information puts your businesses at risk for hefty fines and penalties for audit and compliance violations.
5. Delayed financial close
In a paper-based shared services environment, accounts payable and accounts receivable staff cannot easily locate the information they need to resolve an exception, or tell whether documents have been modified, misfiled or lost. These issues delay the financial close, putting a business at risk of compliance fines and penalties.
Nearly 60 percent of U.S. and European finance professionals are dissatisfied with the visibility into their financial close process, Adra Match reports.
The solution
Businesses cannot afford to have their shared services initiatives undermined by fragmented systems. That’s where the power of enterprise information platforms can help.
More businesses are deploying this technology to provide them with a more complete view of their critical payables and receivables information. With these platforms, shared services staff can work electronically with all critical content, regardless of the format, while automating workflows, notifying approvers of pending documents, streamlining dispute resolution, and retrieving documents from a single interface.
I’m my next post, I’ll explain how this technology is best aligned to support the goals of financial shared services organizations.
To learn more, download the IOFM whitepaper 5 Ways Poor Visibility Impacts Financial Shared Services Initiatives.
- The intelligent data capture journey with Brainware - 01/24/2022
- Data capture: A decades-long evolution - 10/26/2020
- Intelligent data capture technology is a customer experience game-changer - 10/15/2020