Shared service costing

This question is being posed more frequently as many organizations face increasing global competition and economic uncertainty, resulting in the need to reexamine operating models with a focus on better understanding operating costs and the value that support services bring to an organization. In our experience, consumption-based costing models that allocate costs using a catalog of services provide BU owners with more insightful information than traditional allocation models that allocate costs based on static or generic sets of metrics.

Shared service costing

Overview[ edit ] A shared service is an accountable entity within a multi-unit organization tasked with supplying the business unit, respective divisions and departments with specialized services finance, HR transactionsIT services, facilities, logisticssales transactions on the basis of a Shared service costing level agreement SLA with a costs charge out on basis of some type and system of transfer price.

Shared service centers are not to be confused with corporate staff departments. Different from staff departments, shared service centers have measurable outputs by quantity and qualitywith costs per unit of service provided.

Tasks not organized in shared service centers include corporate control, corporate Shared service costing, management development policy, IT-governance and other support typical for the statutory duties of the executive board.

Many organizations in private and public sectors use a competency-based training course to identify and fill skill gaps. Specific requirements[ edit ] To reap the benefits a multiple shared service centers sets specific requirements to the resource allocation process in the internal organization of the firm.

A critical issue is that the manager of a business unit and the manager of a shared service center will prepare a service level agreement SLAbut the approval of the SLA is a reserved power of the executive board. This is to balance the overall budget of the firm as well as to avoid budget gaming between the managers of the business unit and the shared service center.

A common mistake is to grant the shared service center a status equal to that of business unit or division. This creates confusion as it conflicts with the primacy of the units responsible for managing market opportunities.

Shared service costing

Also shared service centers should not report to their corresponding corporate staff department with the exception of the financial shared service center as this creates the risk that the corporate staff department uses the shared service centers to deploy functional authorities.

Managers of business units will then perceive the shared service center as an implicit control device, impairing the quality of services. It is equally important that deploying a shared service center in a multi-unit organization makes the executive board accountable to the managers of the business unit for the performance of the shared service centers.

This is because the use of the services of the shared service centers is mandatory, the executive board reduces the scope of resources of the business units, whilst the accountability of the manager of the business unit for business performance remains unchanged. Deployment[ edit ] The deployment of shared service centers requires that the managers of the business units develop the competence to be a professional principal of the shared service, knowing how to articulate their demand and what value services have to their business.

In the accounting system a shared service usually will have the status of cost and investment center. As some shared-service centers, e.

Cost charge[ edit ] With respect to cost charge out a critical issue is that costs charged based on activity based costing ABC do not provide an incentive to the shared service center to be efficient because ABC implies that the costs of non-used over capacity will be charged out as well.

It is better to cost charge out on time-driven activity based costing. This method eliminates the effect of double marginalization inherent to transfer prices and subsequently improves the performance of the firm. At the end of the day shared service centers have to contribute to the competitiveness and the financial performance of the firm.

As competition shifts to innovation of business models and in relation to this there is a higher dynamics in the composite customer value proposition to be performed, changes in the customer value proposition need to be translated timely and effectively in back office processes.

As a consequence standardization of processes cannot be based on "best practice processes" as used to be promoted by IT enterprise systems [5] but need to be based on basis of modularity. In sync with the shift in business firms from budget-driven strategy execution to strategy execution based on validated cause-effect diagrams, the specific performance of shared service centers needs to be defined through cause-effect relations, linking the customer value proposition to back-office processes and vice versa.

Also this is an enormous boost to the morale and motivation of workers in shared service centers.Costing in a Shared Services Environment,” co-authored by Tony Adkins and Bob Misch.

The full article is available via subscription to Cost Management. Tags activity based management activity-based costing cost and profitability management shared services.

Pricing Models for Shared Services | Peeriosity

A shared services center – a center for shared services in an organization – is the entity responsible for the execution and the handling of specific operational tasks, such as accounting, human resources, payroll, IT, legal, compliance, purchasing, security.

The cost of IT shared services consumption-based costing models that allocate costs using a catalog of services provide BU owners with more insightful information than traditional allocation models that allocate costs based on static or generic sets of metrics.

not all service catalogs define services in a way that’s meaningful for BU. Cost of IT shared services Shedding light into the black box 02 Global competition and economic uncertainty (IT) costs, IT customers or service consumers, also referred to as business unit (BU) owners for this paper, are often unable to answer, or even explain, what they are costing models often use a broad set of static and/ or.

Costing in a Shared Services Environment,” co-authored by Tony Adkins and Bob Misch. The full article is available via subscription to Cost Management. Tags activity based management activity-based costing cost and profitability management shared services.

THE SECRETS OF COSTING SHARED SERVICES RUSS HOFFMAN AND KURTIS VARGA U SHO FM AN, as e nio rm gtDI h 14y f cu lxp - If a key service means something different to each line of business, each country, and each department, then uniformity is lost and chaos reigns.

Shared Service Costs using Activity Based Costing (ABC) | Profitiability and Cost Management Blog