The following document is a complete replication of the conclusions arrived at by the 2000 dissertation carried out by Ulrike Dwane at the Dublin Institute of Technology on Finance Shared Serivce Centres in relation to the management of credit.

CONCLUSIONS

At the outset Finance Shared Services Centres appeared to be homogenous operations, but in fact have turned out to be quite heterogeneous. The degree of centralisation, in-house outsourcing and outsourcing (upstream and downstream) differ considerably. Some Finance Shared Services Centres have centralised only their cash allocation/accounts receivable function whilst the credit management function remains in the regional business units; some have centralised the cash allocation and collection together with the billing but have left the cash management / treasury at head office; some have in turn outsourced the cash allocation and risk assessment locally; some have not only centralised functionally but also regionally (and that in varying degrees), operating one or more Finance Shared Services Centre around the globe depending on size and scope of the organisation.

Irrespective of this diversity, the basic functions of the credit manager – risk assessment of new and existing customers, establishment and maintenance of the credit policy, maintenance of the sales ledger, monitoring and controlling customer balances, management reporting, litigation - are carried out according to business practices.

Establishing and maintaining the credit policy holds a central role in any organisation. Finance Shared Services Centres in a start up situation have a great opportunity to shape their credit policy with regard to the credit management function. A close working relationship with head office is required to determine acceptable debtor levels, to decide on credit limits and payment terms as well as lines of responsibility and authority amongst business units.

The credit manager’s line of reporting does depend on the company’s policy. Credit Managers operating out of Finance Shared Services report to heads of finance. Credit Managers who have remained in the regional business units have a closer affiliation with Sales / Marketing, but their direct line of reporting has not been established here. Both lines of reporting have their draw backs. The suggestion that the credit manager, as a bridge between sales and finance, should report directly to the managing director or the suggestion of a director of credit or VP-credit as part of the management board may be the way forward.

In any case, it is imperative that close liaison exists between finance and credit, but even closer liaison between sales and credit. Regular meetings exchanging information on prospective customers followed by checking their financial condition leads to a mutual agreement on how to go forward in terms of expected sales, required credit terms and limits, forms of security and methods of payment. In terms of Finance Shared Services Centres this is proving more difficult because of the existing physical separation. However, the capabilities of information technology by way of electronic transmission of verbal, oral and written signals of communication can, to a certain extent, be of assistance in overcoming these drawbacks. The variety of inevitable shortfalls in the short- and long-term, resulting out of communication via distances and within a plethora of diverse cultures, must be considered as a cost of credit and factored in as such.

The cost of credit as a fixed cost of overheads has been greatly reduced. The corporate strategy to establish Finance Shared Services Centres is paying off in terms of cost savings ranging between 10 and 25 per cent and head count reductions between 10 and 30 per cent. Ireland, in this scenario, is the net gainer of high employment figures and fiscal revenue as well as favourable image within the global business community.

At present, the main tool used by Finance Shared Services Centre to measure the cost of credit resulting from credit sales is the calculation of DSOs. DSO trends within the community of Finance Shared Services Centres will emerge over time.

Emerging trends relating to the credit manager’s portfolio described in the CRF survey, are becoming apparent in the Finance Shared Services Centre environment such as banking relationships; close proximity to accounts payable within the FSSC and cash forecasting context; cash flow and working capital management.

The CRF findings of a trend towards further centralisation of the credit function, encouraged by factors such as economies of scale, elimination of duplication, fostering expertise and standardisation of processes is manifested in the emergence of Finance Shared Services Centres. However, recognition must be given to the fact that this development may encounter more difficulties in Europe than the US, due to cultural differences and the non-completion of the European single market.

Hence, the challenges for the credit managers lie in computers, new technologies, leadership, multi-lingual communication and negotiation skills, process re-engineering, systems and statistical knowledge, global risk management, management information systems, legal/bankruptcy regulations and financial analysis, and more than ever the art of credit.

Finance Shared Services Centres are here to stay. It is up to the credit management profession to impact on the function of the management of credit.

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