Nowadays there is a trend where over 50% of companies globally create a shared service centre and consolidate their Finance and Accounting (F & A) function. There are obvious benefits of doing so – be it commercially or from an efficiency and productivity point of view. However, there are some major challenges too; let’s see what are those.
The advantages of having a shared service centre
There are many benefits of having a shared service centre (SSC) that attract various companies to consider creating one. It not only helps in standardizing the processes, but also leaves little room for errors. Having standard processes helps in creating and also updating the control environment, and it makes it simpler to design reliable input and output reports. What’s more? The end-to-end review work easily is streamlined and the various iterations are minimized.
Having a standardized global process in place also helps in comparing trends going on across various organisations. Also, when we consolidate all processes to single accountancy software, it gets easier to leverage the add-ons, for example more automations and even robotics. Then there are commercial advantages that are derived from centralizing, because one country’s operations do not need to resource their own services.
The roadblocks or challenges of creating a shared service centre
However, creating a shared service centre by centralizing has its own challenges. The biggest challenge is ensuring compliance with the local rules and regulations in each country where the business is operating. These variations of the local rules and guidelines take the cost to a higher level, because being compliant in-country certainly requires more processes to be added in order to develop and monitor, example data reconciliation and other tools for oversight and tracking. In addition, this increases complexities, which only a professional organization like IMC can help you deal with. You would also need expert assistance to take care of local taxes and the requirements of financial reporting.
Knowing the language of the land
Another major issue that crops up is knowing the local language. In various countries like France, Russia, Spain and Romania, where the reports, returns and all the accounting documents have to be mandatorily made and filed in the local language. It surely is tough to acquire language skills in a shared services centre of a certain location. To deal with this, you would need to depend on the local professionals.
However, it is not possible to hire representatives of each language globally in an SSC. In such a situation, IMC and its accounting services can help you take care of these requirements with its qualified and expert professionals in each field. All our offices are staffed with local language-speaking professionals who are equipped with the required skills, know-how and local contacts.
Knowledge of the local rules and regulations
The accounting and other tax rules vary from country to country. There could be some common points, but every country would have their unique rules and regulations and also different reporting requirements. Various countries have local GAAP, which is quite different from the commonly-applicable IFRS or US GAAP (France, Romania, Russia etc.). In such a case, IFRS or US GAAP accounts have to be converted into local GAAP and it is important to ensure that the local regulations for foreign currency revaluation, depreciation, or fixed asset capitalization are considered.
Though everyone seems to be aligning rules with regards to VAT and General Sales Tax, various corporate income taxes and other withholding taxes are actually based on each country’s precise rules and the requirements for expense deductibility. Even the sufficient supporting documentation varies in each country. Therefore, it’s not an easy task for an SSC to possess all the knowledge and be up-to-date about every jurisdiction globally.
It is also important to maintain contact with the local tax authorities to stay compliant. Hence before considering creating an SSC, it is wise to first begin the transition with a comparatively easy region in terms of rules and also seek professional advice to identify the particular output reports that need to be standardized, and which all country-specific variations are to be considered.
