REALLOCATION OF SHARED SERVICES COSTS FOR CORPORATE REPORTING. BLACHOVÁ MIKŠOVÁ Marcela

Transcription

1 REALLOCATION OF SHARED SERVICES COSTS FOR CORPORATE REPORTING BLACHOVÁ MIKŠOVÁ Marcela 1 Maxion Wheels Czech, s.r.o., Ostrava, Czech Republic, EU, [email protected] Abstract Shared services have being effective step of leading big companies, corporate structured companies, as legally independent subject or part of organization structure in company after merge or complex structured company with plants or diversified production phases. The shared services, as Finance, Accounting, controlling or reporting departments, IT, HR, Purchase or Sales departments can make a saving by less overhead costs related with shared purchase services, purchase materials, logistic of warehouse, sharing headcounts, providing shared services etc. The important part of such shared services system is allocation of costs according defined rule. Such system is usually part of the month closing and has to follow the principles of reporting, cost controlling and other corporate rules. One of the possible principles for allocation costs is automatic system of cost charging as a part of month closing in diversified company. Keywords: shared services, allocation of costs, organization, reporting 1. THEORETICAL BASIS The task of company management at operational level is to exploit the potential of success organized at strategic level, if possible effectively (with respect to achieving goal) and usefully (effective handling with time and costs) and turn them into success and liquidity [5]. The example of operative measures are: ordering of production material, delegating staff by important tasks, negotiation with bank in order to decrease the interest, planning of organization changes in order to increase the effectiveness. The operational management complements the normative and strategic management. In the figure 1 is shown schematically a control circuit of operative management and linking to strategic management including measures in case there would be deviations between the plan and reality [1] [2]. An important issue in the operational management is: what measures are needed to achieve the strategic and operational objectives? The picture shows two groups of aspects: Technical and computational aspects: What data are needed? What procedural steps are necessary to complete? What methods of analysis and calculations can be used? Behavioral aspects: How can be supported by the implementation methodology and communicatively? What obstacles may occur? How the management and controlling can deal with it? The operative management objectives can be defined as: Ensuring the planned effects of applied strategy and achieving strategic goals Achievement of planned profitability, productivity and efficiency Ensuring the liquidity necessary for sustainable existence of the company

2 Profitability, productivity, economy and liquidity are controlling variables at the operational level [3, 6]. One of the steps to achieve greater productivity, increase of profitability, is a progressive reduction [4] of the fixed costs of general overhead services. One of the more efficient routes may be shared services centre, which is usually set up for finance services as accounting, treasury, reporting, controlling and IT services. It may also include HR services or purchase and sales activities, mainly in case of similar production and products. Fig. 1 Link between strategic and operative management 2. CASE STUDY In the case of diversified company Maxion Wheels Czech s.r.o., which is producer of automotive wheels. The main segments are steel passenger car wheels, aluminum passenger car wheels, forklift wheels and individual special wheels. The company was established by merging of three companies and one of the main economic benefits of the merger was the establishment of shared services centre providing a complex of finance, HR, IT, purchase and sales services. One of the fundamental problems of the accounting system after the merge was the setting of accounting providing separate reporting for individual segments (see Fig. 2). This process has been secured within unique tax identification company by usage of business areas. The business areas are superior to cost centres and profit centres and subordinated to the tax code in accounting system.

3 Fig. 2 Setting of the accounting system The system allows you to enter the identification of business area belonging to defined plants (segment). This principle begins during the process of entering purchase order into the system (see Fig. 3). Fig. 3 Process of entering purchase In the case of Maxion Wheels Czech there were offered two possible solutions for inclusion of shared services centre of plants, either by setting of new business area for shared services or inclusion of SHS under business area of the plant (segment) (see Fig. 4).

4 Fig. 4 Proposals of settings The shared services are a part of the complex management system in company and allocation of their costs is an integral part of budgeting and month closing. In the case of setting of business area, the balancing of independent balance sheets is also a part of month closing. The basis for setting system was a definition of the Cost Centre defining departments of shared services according to controlling and reporting needs (see example in Table 1). Table 1 Example of Shared services in Maxion Wheels Czech Company code Business area Cost center Profit center Description of departments Shared services Maxion Wheels Czech HL SHS - Secretary, archive, reception MWC HL Trainee SHS HL General costs - MWC HL SHS - General costs - HR HL SHS - Canteens, catering HL SHS - Training HL SHS - General costs - Finance HL SHS - General costs - Sale

5 HL SHS - Sale of ALU HL SHS - Sale of PCW HL SHS - Sale of FLW HL SHS - General costs - Purchase HL SHS - Warehouse ALU HL SHS - Warehouse PCW HL SHS - Warehouse FLW HL SHS - Warehouse others HL SHS - HSE HL SHS - IT HL SHS - Data Centrum HL SHS - Global HL SHS - General costs - holding An important factor enabling cost allocation of shared services is the definition of allocation key. The access to the definition of allocation keys can be simple or complex and may be by defining either one or maximum two keys to the allocation of costs or finding a different allocation key for each activity separately. For example, allocations may be in the case of HR services a number of headcounts at individual plants; in the case of IT it may be a number of hours worked for each facility in a certain period or number of PC, in the case of buying it may be a value of purchased materials and services, etc. This complex system, however, increases laboriousness to find an optimal solution and followed by analyzing deviations between the plan and reality. In the case of Maxion Wheels Czech was adopted a philosophy of allocation based on planned sales volume (value). The cost allocation should take place automatically during month closing as one of the final steps. In the case of using business areas, the next step is balancing of intercompany receivables and liabilities among the balance sheets of business areas. In Table 2 see example such automatic system for cost centre Table 2 Example of automatic system for cost centre 9900 Sender Cost Center Cost Element Grp Sender BDC G/L Sender Business Area Receiver BDC G/L Receiver Center Receiver % 9900 ALL ALL ALL ALL ALL ALL ALL ALL ALL The cost allocation system of Shared Services in Maxion Wheels Czech is one part of the system of allocating overhead costs to the plants and the setting of allocation system becomes a part of controlling management of costs and reporting by segments (see Fig. 5).

6 Fig. 5 HLC organization in SAP 3. CONCLUSION The setting of allocation shared services costs in integrated reporting system is an important decision for fulfilment of controlling needs and corporate reporting. Above explained recommendation for the setting of allocation costs for shared services in the accounting system diversified company is one of the many possibilities how to set up process of shared services. This system of business areas follows requested reporting for product segments and with simply principle of allocation costs shared services can make easier managerial and strategic decisions of financial and reporting management in diversified company. REFERENCES [1] ESCHENBACH R. Erfolgspotential Materialwirtschaft. C.H.Beck: Wien, [2] ESCHENBACH R., SILLER H. Controlling Professionell Konzeption und Werkzeuge. Schäffer-Poeschel: Munich, [3] KISLINGEROVÁ E. et al. Manažerské finance. C.H. Beck: Prague, [4] PROPESKO B. Moderní metody řízení nákladů. Grada Publishing: Prague, 2009 [5] JAKHOTIYA G. Strategic Financial Management. Vikas Publishing House: New Delhi, [6] VOZŇÁKOVÁ I., JANOVSKÁ K., VILAMOVÁ Š. Cost Controlling in Terms of Metallurgical Production. In METAL 2011: 20th International Conference on Metallurgy and Materials. Ostrava: Tanger, 2011, pp