Centralizing Financial Operations
Kuyk, Bou Van, Strategic Finance
THE NEW ECONOMY IS PROMPTING SOME COMPANIES TO MODIFY GLOBAL OPERATIONS
The past year has been fraught with economic uncertainties and now a worldwide tragedy. Surviving downturns and crises means many North American businesses are continuing to face new challenges. Layoffs, spiraling stock prices, and an underlying need to look for alternative ways to cut costs are key issues ruling many boardrooms these days. Management personnel in businesses of all sizes are scrambling to find new money-saving ventures, and, for some, the answer lies in centralizing their financial operations and systems processing.
The American business community is composed of large, medium, and small businesses, but to date, mainly the large ones have taken advantage of centralizing their financial operations. The primary reason is the exorbitant expense that has been traditionally required. But thanks to the Internet and to modern technology; switching to a centralized processing system has become much more attractive, and businesses of all sizes can reap the financial rewards.
Some small and medium-sized businesses have overseas operations, which makes them particularly well suited to centralized processing. When implemented properly, this financial management option can help these companies further establish competitive advantage all over the world.
Much of the business community has already discovered the huge benefits inherent in centralization, as witnessed through recent trends in centralizing call centers and back-office functions. Significant savings have been realized as a result of these moves, and businesses have been able to offer investors a better bottom line.
Today, leaders of small and medium-sized businesses are taking that concept one step further by centralizing their companies' financial operations and systems processing.
Centralizing financial operations and systems processing allows businesses to create virtual shared service centers where they can process all financial data in one database through one server or multiple servers that use the Internet.
One example is Accelio Corporation. Accelio, based in Ottawa, Canada, has about 600 employees and eight million users around the world. It provides sophisticated online e-process software applications and frameworks to automate business processes. Centralizing financial systems and processes gave the company the flexibility to work with multiple currencies and streamline financial management. The vendor it chose had a global presence and provided scalability so the system could grow as the company grew.
Accelio CFO Jeff McMullen says the experience made him a firm believer in shared services -- especially those that operate in several different languages. "It used to be very painful when it wasn't automated," he says. "Now it has transformed the whole process of multinational consolidation."
Centralization, or shared services, enables businesses to implement a standard or uniform off-the-shelf software package that can be used by all of their site locations. It creates a standard global chart of accounts, implements standard global processes, and offers centrally controlled procurement, as well as shared services.
So how does this affect your business? First, it translates into significant cost reductions.
There's the immediate elimination of up-front costs, such as duplication in hardware, software, and valuable IT resources. There's also less of a need for individual specialists trained in the complex rules and regulations of various country tax laws. One individual can now run five or six different site operations from one location.
Another key advantage is the added degree of control available to the user. Because the entire database is in one central location, the user has access to any site's data. …
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Centralizing Financial Operations. Contributors: Kuyk, Bou Van - Author. Magazine title: Strategic Finance. Volume: 83. Issue: 5 Publication date: November 2001. Page number: 28. © 1999 Institute of Management Accountants. COPYRIGHT 2001 Gale Group.