The pros and cons of shared service centres for finance and accounting
Article 3 minute read

The pros and cons of shared service centres for finance and accounting

02 August 2018

More than 50% of global companies have either already consolidated their Finance and Accounting functions to a shared service centre, or are considering doing so. There are cost and efficiency benefits in such a move – but also significant challenges.

With regulation and compliance among the biggest complexity issues for companies globally, according to our experts surveyed for the 2018 Financial Complexity Index, it is clear that managing a compliant shared service centre needs stringent attention to detail.

The advantages

The attractions of a shared service centre (SSC) loom large. Such a move provides an opportunity to standardise processes, giving lower potential for errors. With standard processes, it is easier to design and update the control environment, and it is also easier to build consistent input and output reports. The final outcome is that the entire review work is stream-lined and iterations are reduced.
A standard global process also creates a better opportunity to compare trends across the organisation. Plus, consolidating to one accountancy software makes it simpler to leverage add-ons, such as greater automation and robotics.

There are cost-efficiency benefits from centralising, as individual country operations no longer have to resource their own services.

The challenges

However, centralisation also comes with its challenges. The challenge beyond gaining these benefits is how to ensure a shared service centre stays compliant with local rules in all the countries in which the business operates. The differences between local rules would increase the cost of being compliant in-country because additional processes will need to be developed and monitored, such as data reconciliation and tools for oversight and tracking. At the same time, they will add to the complexities, which a specialist business services organisation such as TMF Group can help address. While transactional accounting can be easily accommodated in a SSC, there will still be a need to meet local tax and financial reporting requirements, which is where specialist assistance is invaluable.

Speaking the right language

Another fundamental issue is local language skills. There are many countries (Spain, France, Russia, Romania) where reports / returns and accounting documents still need to be prepared and filed in the local language. It is difficult to build the language skills and the knowledge in a shared services centre or central location. You will still need to bridge that gap and rely on local professionals.

It is virtually impossible to staff an SSC with a representative of every language globally. Yet TMF Group, with more than 125 offices in over 83 jurisdictions, employs more than 7,000 qualified accountants, lawyers, corporate secretaries, HR, and other professionals. Each office has local language-speaking employees – with local knowledge and local contacts.

Knowing the rules

Local accounting and tax rules differ from country to country. There might be commonalities, but each country has its own unique regulations and reporting requirements. There are many countries in which local GAAP is different from IFRS or US GAAP (France, Romania, Russia etc.). IFRS or US GAAP accounts still need to be converted to local GAAP and the local rules for depreciation, foreign currency revaluation or fixed asset capitalisation still need to be considered.

While there is a trend towards rules alignment in terms of VAT and General Sales Tax, corporate income tax and withholding taxes are based on country-specific rules and the provisions for expense deductibility or for what represents sufficient supporting documentation will most likely vary from country to country. It is very difficult for a shared service centre to be 100% knowledgeable and up-to-date on every jurisdiction around the world. Yet local experts in TMF Group offices not only maintain compliance to current standards, they also pro-actively monitor upcoming regulation changes and update clients accordingly.

Regular contact with local tax authorities is also important to maintaining compliance. The ability to converse with local authorities in the language they speak – and respond to questions quickly – is paramount, so time zones are important. Failure to respond in time could result in fines and penalties.

When considering a move to an SSC, it is a good idea to start the transition process with a less complex region and to get specialised advice that will assist you to identify what output reports can be standardised, and what country specific variations still need to be considered.

Talk to us

Find out how TMF Group’s accounting and tax services can support your transition to a shared services centre.

Get in touch with us today.

Discover more about how we help drive efficiency for our global clients.

Written by

Emine Constantin

EMEA Head of Accounting and Tax

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