Contrary to popular belief, large, corporate accounting functions have unwittingly retained a lot of waste and inefficiencies in their processes. Despite a decade of cost reduction and process optimization, CFOs and controllers are still not leveraging the cost-reduction power of shared services centers.
According to the most recent APQC Open Standards research data, the total cost to perform general accounting per $1,000 in revenue using a shared services center is lower than performing the same process in a self-supporting function (Figure 1). However, 224 organizations out of 262 participants perform the general accounting process themselves.
Among the top-performing organizations—making up the top quartile*—shared services perform general accounting at half the cost of self-supporting organizations. Even among bottom-performing organizations, shared services still provide a leg up.
With obvious trends that (1) organizations using a shared services model for general accounting perform better than those that do not and (2) the use of shared services reduces the total cost in terms of overall annual revenue, it is safe to surmise that these 224 organizations are interested in learning about the economic benefits of making the switch—if they haven’t begun already.
We also know from APQC’s benchmarking data that top performers have increased their automation capabilities in general accounting processing, thus increasing productivity while reducing costs (Figure 2).
The top 10 organizations from the top performers group only perform manual journal entries at rates between 0.75 percent and 6 percent. However, the median of the remaining participants perform the same process at a rate of 25 percent. The very worst of the bunch spend a shocking amount of time performing the same process: 57 percent of all journal entries are done manually. This increase in manual journal entries results in additional time required for personnel to spend on manual entry processing, ultimately reflected in overall process cost.
*The top quartile is the performance level above which 25% of all responses occur. The bottom quartile is the performance level above which 75% of all responses occur. The median is the middle value in a set of values that are arranged in ascending or descending order.