Why Finance Departments of Shared Service Units are turning to Big Data

Background

The transition to a Shared Service Operating model typically involves the creation of new Group-owned Legal Entities (LEs). These LEs may or may not be domiciled in the same location as that of the current legal entities providing the services. While some of these entities are setup as asset holding entities for the purposes of tax efficiency, others are setup to consolidate staff or vendor contracts to maximise procurement and productivity efficiency gains respectively.

Such a structure while delivery financial benefits to the wider organisation, typically results in adding layers of complexity to the Finance Team responsible for managing and reporting on this costbase. The additional demands are specifically in relation to the computation of intercompany charges. These charges need to be robust, justifiable and compliant with globally accepted Transfer Pricing policies.

Challenges

In order to meet the demands above, Finance need to prove to their Auditors, and, if operating as a regulated entity, to their Regulators, that these charges are accurate.

They need the following:
• a consumption led IT Allocation Cost Model
• a tool that can model the complex nature of cost flows from source legal entities to consuming target entities at a very granular level of detail
• to demonstrate and justify these charges end-to-end from source to target.

What further complicates matters, is that Shared Service organisations are constantly evolving. While the targeted end-state may be a fully ‘clean’ centralised model, it may take several years to get reporting challenges for Finance in the interim. Additionally, the desired end-state may not always be implemented due to legal, regulatory, political, vendor and ownership hurdles. This results in a hybrid model with some functions centralised and others fragmented, leading to further complexity in managing and reporting on the costbase.

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