Divesting authority and control away from Head Office and out to operations in the field has been a popular business model for many years.
In the 1700’s, the East India Company allowed all of its factories around the world to operate locally and control their own affairs. This decentralized approach became the dominant structure for organizing and running any business that operated on a multinational basis. The business model worked and tea became a global commodity.
Of course, much of the popularity of decentralization was driven by necessity. Before the availability of the Internet or even telephones there was little choice but to make local, on the spot decisions if you wanted to capitalize and react to events as they happened.
However, the popularity of decentralization endured long after technology had started to provide methods of collaboration and instant communication. In the 1980’s the UK Government began to devise measures to decentralize the economy by privatizing public sector enterprise. Seemingly in step with the political climate the majority of business consultants began to espouse the decentralized mantra and businesses strived to implement it as a key element in their business strategy.
By the early ‘90s organizations were waking-up to the idea that decentralization (at least in some contexts) missed many of the opportunities for economies of scale and standardized working practices. The growth and rapid development of information technology began to turn the tables. The internet and other electronic information systems made the distribution of information ubiquitous and cheap. It became clear that centralizing financial processing, particularly across borders, enabled economies of scale, improved control and provided greater visibility of these important processes. And the Financial Shared Service Center (FSSC) was born.
Today over 60% of fortune 500 businesses have shared service centers, and this continues to grow. Consolidation of processes requires standardization, but this standardized approach can prove costly to reintegrate with the wider business where internal or customer-facing touch points exist. One such touch point is invoicing.
E-invoicing in an FSSC
Both e-invoicing and the shared service center offer efficiency gains as well as centralized, aligned and more visible processes. In particular, the function of e-invoicing can help take a singular, standardized invoicing feed from financial systems and create the rich variety of invoice formats and template-driven layouts, with localized nuances, required across the breadth of recipients.
Equally the reverse can be true; FSSCs can operate separate and sometime disparate legacy systems, incorporated from various territories, divisions and acquisitions. In such circumstances an e-invoicing solution can become an aggregator, unifying the process into a single, brand consistent and uniform output.
E-invoicing to save costs while improving efficiency and flexibility
In some cases reductions in staff costs of up to 35% have been achieved. Often the maximizing of existing staffing resource isn’t about head count reduction but about reducing the need for costly and time consuming recruitment drives.
The reduction of print and paper invoicing supports this increase in efficiency further, enabling fewer credit control and collections staff to achieve far more in the same time.
Where there is still a requirement for printed and posted invoices and other financial documents, e-invoicing and document management solutions exist that take advantage of local postal fulfilment. This helps reintroduce the low, localized postage costs not often associated with centralized financial processing.
E-invoicing as a creator of value in the FSSC
Today, in addition to being an important part of the drive for financial and process efficiency, there is also a demand on Financial Shared Service Centers to increase the quality and professionalism of support processes for the business and its customers.
E-invoicing should form an essential component in the makeup of a FSSC as it can help achieve both goals. Without e-invoicing, an FSSC may be creating efficiencies in many areas and yet struggling to realize the impact of this due to the bottleneck in manual invoicing processes. Electronic invoicing also provides a platform to enable more immediate identification of bottlenecks, through greater analytical insight and accessibility of performance data.
The East India Company never survived long enough to see the pendulum swing towards centralization. Running into financial difficulties, and providing the catalyst for revolution on at least two continents, the Company was eventually dissolved in 1874. Given their prominence and success in working the decentralized business model it’s perhaps ironic that today India hosts the largest number of shared service centers in the world. From the last quarter of 2014 India’s economy became the world’s fastest growing major economy, replacing the Peoples’ Republic of China.
I’m not sure if those two facts are related, but it’s certainly something to think about as I go and put the kettle on.