Responsibility for Journal Voucher Posting in a Shared Services Environment

As a service organization, Shared Services’ accountabilities are delivering value (balancing cost and service levels) and identifying ways of further leveraging the Shared Services operating model.  The broader objective is to gain efficiencies beyond consolidation through a methodology of continuous improvement ^[1] that results in more efficient and standardized processes, with much of the activity automated through enabling technology.  Complexity arises when the responsibilities themselves need to be “shared” between the centralized delivery organization (called “Shared Services”) and the business units that are the end customers Shared Services is supporting.  

The responsibility for posting journal vouchers is a good example of this dilemma.  On the one hand, centralized posting has the advantage of grouping experts who can complete responsibilities according to standard and consistent decision rules. However, there may be instances where the knowledge for what adjustments are needed resides locally, in which case centralizing the work actually adds complexity and reduces accuracy and efficiency.

For companies that embrace a “full scope ^[2] migration” to Shared Services, where the default is that every aspect of a work process goes to service centers, it can be difficult to overcome resistance from business units to give up their ability to post journal entries ^[3].  Recently, a Peeriosity member at a global manufacturing company worked with Peeriosity to create iPolling^TM  questions to find out how other companies approached this issue.  Within a few hours after the poll was released the member had direct insight into the actual experiences of peers, with the ability for the member to see immediately who responded and what company and region they represent – with the opportunity to contact individual respondents directly using Peeriosity’s built-in communication tool, Peer Mail^TM.   

The first polling question asked about where the responsibility for posting journal entries currently resides.  For 59% of member companies this role is split between Shared Services and the business units; a rate more than twice as common as the approach where all journal entries are posted by Shared Services (28%).

The second question asked how the split of the preparation/calculation of journal entries was determined.  For 31% of companies, this split was determined based on defined standard templates or catalogs of entries, and for an additional 21%, the split was determined as negotiated in service level agreements.  Here are the details:

The poll generated a healthy discussion between participants.  Here are some of the many comments added by iPolling^TM participants:

• Our Global Cornerstone concept is that all journal entries are posted within the Shared Services Centers. We are currently in the process of migrating the business unit to that concept. We have also defined a catalog of journal entry types to identify entries that should be calculated and posted by the SSCs, and that should be calculated and posted at the plants. We are in the process of rolling out the standard with the goal of bringing more entry calculation/preparation into the SSCs.

• Even though Shared Services prepares and posts all journal entries, the business units have the ability to submit re-class requests (with documentation) that are then reviewed and either rejected or approved for upload to the general ledger.

• No one in the business units can post directly into our SAP system, with all posting done through our Record-to-Report organization at the Shared Service Centers. The requester, though, is required to meet company policy and local legal requirements in determining the posting to be made, and we have people in our Shared Services Center who can help them as needed.  In addition, our Corporate Accounting group ^[4] also has a small team in each region that can assist the local business units.

• We have a mix, with some journal entries prepared by Shared Services and some prepared by the responsible business units.

• Our company continues in its maturity of the use of a Shared Service support model, which includes a review and justification of the alignment of responsibility for journal entries. Generally, if the business process is well defined, the associated journal entries are routine and require little or no business judgment.  In this case, the journal entries are aligned by SLAs to the Shared Service support team.

• Posting journal entries is a mix between our Corporate Accounting team and Shared Services.

• We analyze each entry and depending on language, technicalities, the information needed, and complexity, we decide if it should be prepared and approved in Shared Services (either by company employees or our outsource service provider) or in the business unit.

• While the goal is to do more, not all activities requiring journal creation and entry have been migrated to Shared Services.

• Rule-based and judgment-based entries are posted at the Shared Service Center.  The business units can suggest changes in rules.

• Our Shared Services and business units are divided by responsibilities, and this also determines how journal entries are done. In general, the group that calculates the journal entry completes the posting.

• Different ERPs have different setups regarding journal entry posting. In JD Edwards, all journal entries are made within the Shared Services Center.  In SAP, journal entries are shared between the Shared Services Center and plant accountants, and the owner of the entry is determined by a number of factors, including the source of the information used for the entry and whether the entry affects just the plant accountants location or a region as a whole. For journal preparation, in JD Edwards preparation is based upon who has the information needed for the entry, with approximately 70% done by the Shared Services center and 30% by the operation staff.  In SAP, the person completing the entry mostly does preparation.

What organization has primary responsibility for journal entry posting at your company?  If responsibility is split, what structure is used to clearly define who has responsibility, and how do you ensure consistency in the process for entries created at the business units?

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

 “iPolling^TM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility of all respondents and their comments. Using Peeriosity’s integrated e-mail system, Peer Mail^TM, members can easily communicate at any time with others who participate in iPolling.