Shared service centers increasingly popular

In April 2016, there were more than 900 service centers in Poland, employing ca. 210,000 people (source: “The Business Services Sector in Poland 2015”report). The largest group among them consists of companies providing business and professional services (including BPO) – 40 percent, technology and telecommunications companies – 23 percent, and providers of financial services – 20 percent. As many as 28 percent of companies come from the US, followed by the Scandinavian countries, the UK, Germany and France. The Polish shared service centers perform accounting, banking, insurance and financial services, and provide customer service, but most of them support the IT area.

Many multinational corporations locate their service or business-related operations in Poland. Also Polish groups separate entities in which they centralize and implement selected business processes.

One of the decisive factors for setting up such units in Poland is the high level of education and a large number of students. In 2013, about 1.9 million Poles (Eurostat) studied at universities across the country. This is the fifth best result in Europe; more people studied only in Germany, the UK, France and Spain. According to “The Business Services Sector in Poland 2015”report prepared by the Association of Business Service Leaders (ABSL), in the academic year 2013/14 at the Polish universities there were 312,000 economics and administration students, 137,000 technical engineering students and 70,000 computer science students. In 2014, there were 153,000 graduates in these fields of study, including almost 14,000 IT specialists.

The level of knowledge of foreign languages is also high. In the survey of English-language skills conducted by Education First, Poles were ranked 9th among 70 countries worldwide. According to the research by TNS, more than half of Poles speak at least one foreign language, and nearly 20 percent speak two or three languages. This is another argument in favor of locating in Poland the entities centralizing business processes for companies from different countries.

Typical processes, typical challenges

So far, one of the most popular ways to use a shared service center (SSC) was the outsourcing to a specialized external entity. However, many companies decide to separate from their structures an entity whose task is to provide services to individual units or whole companies.

The most frequently used areas of activity of shared service centers include the handling of orders and purchasing, human capital management, including payroll, and accounting. In the latter area, particularly labor-intensive activities are the receiving and handling of purchase invoices. Depending on the business profile, there can be as many as several thousand such invoices per month in the shared service centers for several companies.

Each received “paper" invoice must be first manually entered to the accounting system. The posting operations can be only performed in subsequent steps. At this point, the following questions often arise: what is the performance of our SSC? What assumptions and tools should be used to measure it? A number of invoices processed, an average number of invoices entered by the employee and the similar figures may be insufficient indicators of the quality of service.

Measuring the effectiveness of SSC in SAP

For shared service centers which carry out financial and accounting processes in the SAP system, SNP has developed the SNP Invoice Controller, a solution for measuring and monitoring the quality of services related to the handling of purchase invoices. The tool is an extension of the standard SAP ERP system and has been designed to present the actual performance of the whole center and each employee individually.

The solution provides the flexibility in configuring business units that use a given shared service center. The monitoring of entering documents to be invoiced has been designed at several levels:

  • a shared service center,
  • a business unit,
  • an employee.

The effectiveness of work at individual levels is represented by more than 100 specific indicators. In order to calculate them, the application analyzes the documents entered in terms of the processing time and complexity. The information about the working time basis and the absence check ensures that the presented results take into account the actual time worked by each employee responsible for entering documents.

Additional parameters of the analysis are the costs of running the shared service center, including salaries of individual employees, and administrative costs of the unit — they are used to calculate cost indicators for the SSC. This in turn enables an objective evaluation of both an individual employee, a business unit and the whole shared service center in terms of work efficiency and total costs of document processing.

The determination of working time of each employee and generated costs has been enabled by the creation of master data of employees in the application. For each employee, his/her working time basis and monthly remuneration are entered. All such entries have a defined validity period, which enables the employee’s working time basis or remuneration to be changed with storing historical data. Data storage allows for analyzing previous periods with taking into account the employment terms in each period analyzed.

One of the basic parameters recorded by the SNP Invoice Controller is the actual time of entering each invoice. Each start of entering or editing a document activates the time measurement that is made until an invoice is saved or posted. The time registered in this way is saved in a database and used to calculate the necessary parameters, e.g. the percentage of the employee’s working time spent on posting documents.

In addition, a special mechanism for controlling the so-called dubious measurements has been prepared in the application. This enables a time limit for a single measurement to be introduced at the level of each supported business unit. When the time limit is exceeded, the measurement is classified as “dubious". This mechanism allows an authorized person to subsequently analyze the document that has generated the dubious measurement. Upon checking, this person may accept the dubious measurement if he concludes that, for example, the complexity of the entered document actually forced a longer entry time.

The document entry time is not the only parameter determining the evaluation of effectiveness. After being entered, each invoice is analyzed by the system in terms of complexity, i.e. a number of items, tax codes, account assignments or a document entry method. The results of the analysis determine how the measurement is saved to the database. To avoid an excess of information recorded, for example, making 1: 1 entries for each document, a measurement aggregation mechanism has been introduced.

Measurements are performed in the background without interfering with the daily work of the evaluated individuals. The start of work of the Invoice Monitor is the time at which a relevant transaction is run in the SAP system and the data entry is started. During this time, the SNP Invoice Controller retrieves from the database the information on the settings defined for the business unit and the employee’s working time. If all data are correct, the measurement is continued.

When the document is saved or posted by an employee, timestamps are captured, and the invoice is analyzed in terms of complexity. Then, the document considered to be “dubious” is saved together with the measurement data directly in the database with records for further analysis, otherwise the measurement aggregation mechanism is activated. In the accepted record, only an identifying structure (a set of key fields), a result of the invoice complexity analysis and measurement data are included. Subsequent measurements of the employee modify a single item in the database.

This approach allows both for the reduction of the amount of information recorded at a time, and a significant decrease in the number of measurement records stored in the database, without losing key information required to analyze the performance of a shared service center.

Performance reports

The above-described mechanisms are aimed at gathering, analyzing and preparing data that will be used to present the effectiveness of a shared services center. In the case of an organizational unit such as the SSC, it is difficult to determine the effectiveness using just one figure.

In this type of activity, the primary indicator of the effectiveness of work could be the ratio of the number of invoices entered by the employee to the total number of invoices received. However, due to the large differences in the complexity of individual documents in the SAP system, it can take from more than a dozen seconds to several dozen minutes to enter a single invoice. A large number of complex invoices submitted to the same employee could result in a significant decline in his performance, while the amount of work actually done by him would be much bigger than the one of the other employees. For this reason, the SNP Invoice Controller thoroughly analyzes each document entered in terms of its complexity. The document is defined using more than 100 specific indicators.

The SNP Invoice Controller provides two reports:

  • a performance report at the SSC level,
  • an employee performance report.

In both cases, the main parameters of the analysis are the number of shared service center and the analysis period — where we can select a range or a single month. The results are presented in two tables: the first one contains general indicators for a specific SSC, calculated per month, while the second table shows the indicators for the business unit (also per month). With this approach, it is possible to analyze the performance of the whole center and the individual components of the result per business unit concerned.

The second report — the employee performance — enables the analysis at lower organizational levels. It presents the results of each employee. The displayed indicators can be reduced, as in the previous report, to the range of months and the ranges of business units as well as employees. The report generates two tables of indicators, similarly to the general report. The first table lists the results of each employee in relation to the selected shared service center, while in the next table below, the results of employees have been separated for each business unit. An additional functionality of the report is an exception indicator for every user. Its purpose is to signal the existence of dubious entries made by a specific user.

The structure of both reports allows for quick and easy analysis of the results at any level of the organization — from the general results of the whole shared service center to the detailed data entered by any employee. The reports have been prepared in the ALV technology, which provides the user with access to standard tools such as sorting, filtering, export to a file or a graphical representation of the results.

An additional feature implemented in the SNP Invoice Controller is the visualization of the results of reports using an MS Excel file. In addition to the calculated indicators, the graphs of basic indicators (as a function of time), characteristic of a specific report, together with the calculated and drawn average value, and graphs of individual shares of employees in the number of posted invoices are recorded.

Not only for SSC

The SNP Invoice Controller has been designed for shared service centers which operate in the growing groups and companies. However, it is a tool that can be used in any enterprise where the entering of purchase invoices takes a significant amount of employees’ working time.

This application is a complete product that does not require any complicated adjustment to each customer, but it can be installed “out of the box". It requires a minimum effort to use the tool itself — the initial configuration and then administration of master data and measurements once a month are sufficient. The remaining part is done in the background, which in no way affects the daily work. The outcome of the SNP Invoice Controller operation can contribute significantly to increasing the performance of the whole shared service center.

Calculate efficiency, optimize costs
The emergence of new shared services centers working for various companies and corporations is increasingly reported by the media. This way of provision of services is no longer a niche sector — Poland is increasingly considered to be a hub of various SSCs. The range of services provided by these centers is constantly expanding. These are not only simple actions, but also advanced services requiring the employment of highly qualified specialists.
The free market and global competition make the companies implementing business processes in such a model face the increasing pressure on costs, the need to look for savings and optimize processes. To this end, they implement the solutions that enable them to measure a number of indicators for evaluating the effectiveness of the whole organization and individual employees according to various criteria.
SNP has prepared a solution for evaluating the effectiveness of shared service centers for companies operating in the SAP system. The SSC itself can be flexibly defined as a new organizational object in SAP. Along with the tool, we provide pre-defined parameters to evaluate the handling of incoming invoices.
Equally important is also the possibility of reporting indicators related to the costs of the SSC operation — showing the actual costs of running a business per person, organization or single item of an invoice in a foreign currency. In addition, we can evaluate the work of individual employees according to many different parameters, which may, among other things, allow you to create a better and more motivating remuneration system.
It is worth noting that the solution is suitable not only for large shared service centers, but also for smaller companies where a team of several employees records and posts several thousand invoices per month.
The SNP Invoice Controller is an out of the box product ready for operation, and therefore its implementation and deployment takes a little time, which allows you to quickly achieve business benefits.
Piotr Adanowicz, Business Development Manager in the Supply Chain area, SNP Poland