Shared services best practices: Six unfailing key essentials

What are shared services best practices?

Shared services best practices are the key rules that help a company centralize back-office work to cut costs and improve internal processes.

They guide how you set the scope, location, and technology of a shared services model. Here is the quick view:

• First, shared services pool functions like finance, IT, and payroll in one place.
• Next, best practices keep the model efficient and cost-effective.
• Finally, the six key essentials are scope, location, technology, costs, roadmaps, and tax.

Companies must always seek better ways to improve their products and services. However, they also need to improve their internal functions. As they grow, they hire more people and spend more on resources. In many cases, money becomes a major roadblock to growth.

Through shared services, companies can cut costs while they improve internal processes. Still, many teams do not yet know shared services best practices or how the model works. So let us walk you through the six key essentials and the basics.

What are shared services?

Shared services is a business model that centralizes certain admin functions. Normally, teams handle these tasks in separate divisions or in different places.

You can share many functions across business units. For example, inventory, finance, IT, hiring, payroll, and purchasing all fit the model.

Shared services also work when different firms form partnerships. For instance, two companies in one building may share maintenance or telecom services.

Another form of shared services runs online. Application Service Providers (ASPs) are one example. These providers give clients access to online apps. As a result, clients skip the cost of buying special software and systems. This is one reason many firms compare shared services with back office outsourcing.

Significance of shared services best practices

Technology plays a big role in the success of shared services. So you should follow shared services best practices closely. This helps you meet the needs of each business model.

Back-office functions make up most shared services. For example, instead of an Accounts Payable (AP) team at each branch, a company can run one global AP shared service. It also helps to know how the model differs from other setups, such as global business services.

Done right, shared services best practices promote the following gains.

Automation

As noted, technology is the backbone of shared services. It lets teams automate their operational processes.

So instead of paying more for hiring, training, and office space, you avoid these extra costs. As a result, you free up budget for growth.

Centralization

Centralization is one great feature of shared services. Take the accounts payable example again. It lets companies invest in economies of scale.

A business within a business

The units that shared services support are called “customers.” Normally, you charge each unit for the services it uses. As a result, shared services often cost less than outsourcing.

Ultimately, shared services best practices help you enhance and standardize your processes. So your operations stay consistent as you grow.

6 key essentials in terms of shared services best practices

If you want to explore shared services, start with these six essentials. Each one is a core part of shared services best practices.

Scope

First, set the scope of your model. Scope covers which functions, processes, entities, regions, and locations you include. So a clear scope keeps the project focused from day one.

Location

Next, pick the right location. A centralized shared service center can bring economies of scale, better output, and cost savings. However, you should also weigh time zones and cultural and language differences. Many firms review offshore outsourcing models at this stage.

Technology

Constant tech innovation is a key part of shared services best practices. For example, Robotic Process Automation (RPA) takes shared services to the next level.

RPA brings better accuracy, speed, and consistency to high-volume, rules-based tasks. As a result, your team spends less time on manual work. You can learn more in this guide to robotic process automation.

Costs

Location and costs go hand in hand here. So weigh your labor arbitrage savings against the cost of staff you will move to shared services.

You should also include the expected costs of your chosen location. In addition, teams often tap offshore back office support to lower these costs further.

Roadmaps

A clear roadmap is another key element. Once you set the scope, location, and costs, lay out a detailed plan.

A roadmap shows the full cost of execution, including professional fees. This matters if you use third-party help for migration, model design, or documentation.

A roadmap also helps with timing. For example, it guides you when your scope includes migrating into several locations.

Investments and tax considerations

Initial investments and taxes are also vital to shared services best practices. Beyond labor costs, plan for travel, hardware, enabling tech, and office improvements.

Withholding Taxes (WHT) are often a main issue when you locate shared services. As a result, WHT will vary by location and by the flow of invoices.

Firms that follow these shared services best practices have a better chance to explore the model with confidence.

Frequently asked questions about shared services best practices

What is the difference between shared services and outsourcing?

Shared services stay inside the company but sit in one central team. However, outsourcing hands the work to an outside provider. In many cases, shared services cost less than outsourcing.

What are the six key essentials of shared services best practices?

First, they are scope, location, technology, costs, roadmaps, and investments with tax. Together, they guide a successful shared services model.

Which functions work best in a shared services model?

In short, back-office functions fit best. For example, finance, IT, payroll, hiring, and purchasing all suit the model well.

How does technology improve shared services?

Technology drives automation and speed. For example, RPA handles high-volume, rules-based tasks with better accuracy. As a result, teams save time and cut errors.

Key takeaways

• First, shared services best practices help you centralize back-office work and cut costs.
• In addition, the six essentials are scope, location, technology, costs, roadmaps, and tax.
• For example, automation and RPA make the model faster and more accurate.
• Meanwhile, location choice affects both savings and day-to-day operations.
• Finally, a clear roadmap keeps execution and timing on track.