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Shared Services Charge-out Methods for Core and Incremental Services

Ask a Shared Services leader their philosophy on charge-out methodology and you are likely to hear diverse opinions ranging from “charge-outs don’t add value, so why bother” to “charge-outs drive value-creating behavior – the more detail the better” and everything in-between.

Recently, a Peeriosity member performed custom research using iPolling1 functionality to request feedback from peers with experience in charge-out methodologies. They were interested in the method currently used for core services (defined as services provided to the vast majority of their internal customers), as well as for incremental services (defined as services provided in addition to core services, but limited to a single business unit or operation).

Representative comments included:

Many leaders have pointed out that the charge-out methodology in their organizations has changed over time, depending on priorities and maturity of services. For instance, with the initial rollout of Shared Services, the priority may be to consolidate the services, standardize, and deliver a consistent high quality service. The change management associated with such a transition can be complicated by discussions related to charge-out policy, and some organizations choose to defer the implementation of a charge-out.

Once initial implementation is completed and services are stable, charge-outs can be introduced or become more targeted. For instance, charge-outs may be cascaded to specific operating unit segments based on specific drivers to encourage best practice behaviors throughout an end-to-end process. It is not uncommon for first-pass-yield (for Accounts Payable) or pricing accuracy (for Accounts Receivable) to be a driver of the actual charge to cost center in operations.

It’s important for Shared Services leader to review their charge-out methodology at least annually to determine if it is adding value or not. Since there is a cost to the activities associated with charge-outs there should be a business case that is justifiable and measurable. What was value-adding activity to drive behavior a few years ago may be profit reducing overhead today.

As with all Peeriosity custom research and iPolling, members have full visibility of respondent names by company, as well as the ability to contact them for follow-up discussion using Peer Mail, Peeriosity’s integrated email system.

How are you leveraging the knowledge and experience of your peers in determining the charge-out methodology for your Shared Services organization?

Who are your peers and how are you collaborating with them?

1 “iPolling” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content.

Peeriosity members are invited to login to www.Peeriosity.com [1] to join the discussion and connect with Peers.   Membership is for practitioners only, with no consultants or vendors permitted.  To learn more about Peeriosity Click here [2].