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For MNC CFOs in China, SSCs are key to finance-business cooperation supporting growth.
NeuGroup’s Asia CFO group met October 19 in Shanghai and discussions about finance and business team cooperation dominated. Close finance-business partnerships are needed to meet the challenges in China of rapid economic growth, market and regulatory change, which require fast-paced business transformation. And to support close finance-business partnerships, MNCs need a new kind of Shared Services Center (SSC).
The SSC-Business partnership
One of the key lessons for business-finance team partnerships is the need for a strong SSC. This was underscored by two presentations over the course of the meeting. The first by a CFO and his shared services center head detailed a project to insource its SSC activities, including the business process outsourcing (BPO) of a recent acquisition. What they found was that bringing SSC activities in-house facilitates better end-to-end coordination of processes from the business end as well as finance. It also brings “sunshine” to several shadow costs that often remain hidden in BPO arrangements and creates opportunities to “harvest” value-added activities.
One example shared was allowing the SSC to take the lead on collections, which had been traditionally left to sales. Sales managers are often more inclined to close the next contract and do not want a collection conversation to get in the way of that. The shared services team is also going to be more conversant and receptive to training to make them more knowledgeable about procedures on all forms of payment collection, such as those involving bank acceptance notes and discounting, which is a common form of payment in China. The payments team in the SSC can also share knowledge on this form of payment creating a center of excellence. According to the CFO of the company presenting, the decision to shift collections to the SSC has already improved cash flow and DSO significantly. Banks and other providers offering solutions to improve the situation further, moreover, now have a central point of contact to make this happen.
In another example of how Shared Services Centers are evolving into new centers of excellence, Deutsche Bank highlighted its recently-created regional Cyber Incident and Response Centers. Their Asia Pacific center head described the work these centers do to protect the business and clients from cyber attacks. The aim is to improve the bank’s ability to detect threats and provide a robust response to incidents around the globe and around the clock.
Other examples shared involving SSCs and finance-business cooperation include the use of Robotic Automated Processes to retrieve point-of-sale data and relieve finance teams of confirmation calls and store managers from having to stop caring for customers to field their calls. Some companies are also distributing dashboards and other data visualization-intensive reports to line managers via WeChat, so they can receive and process important data from their smartphones without retreating to their office desks.
A well-functioning SSC is so important that many members noted initiatives to create a global SSC Head to boost efficiency and spread business value enhancing best practices across centers globally. The talent level and experience required to scale finance support to fast-growing, transformational businesses in a highly-regulated market like China means that SSCs based there often set the global standard. And thus, the heads of China-based SSCs serve a very important role even if they are not the global head. “My SSC head is who really helps me sleep at night,” as one CFO noted.
Building on meeting presentations showing the growing importance of SSCs, and the introduction of robotic process automation introduced at the prior meeting, NeuGroup will work with members and their SSC heads— both in the region, and those coordinating standards and best practices globally—to continue exchanging knowledge and insight on their use cases and evolution. Since they are so critical to finance and business partnerships, and SSCs in China appear to be at the forefront on global trends, we encourage all our stakeholders to pay attention to what is going on here, within their organizations, those of their peers and those of their banks and other suppliers. It’s a space worth watching.