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Consolidating the Fixed Asset Process into Shared Services

Introduction

For manufacturing companies with large production facilities, many with more than $100 million USD in active asset valuation, making the decision for how to best complete the work steps in the end-to-end Fixed Asset property process becomes complicated.  While there are benefits to centralizing or performing work activities in Shared Services, there may be enough transactions on a per plant basis to suggest that having local staff is a preferred approach.  However, for most companies, performing the Fixed Asset process in Shared Services is likely to be the best alternative, particularly when you have a global process ownership model in place for the Fixed Asset process.

Company Experience

During a recent Peeriosity PeercastTM, a global manufacturing company with over $25B in annual revenue shared information about their approach to consolidating the Fixed Asset process into Shared Services.  Their approach was to start in the country where most assets were located and transition Fixed Asset processing from plant locations to Shared Services over a two-year period.  Internationally, the approach was to move to a country-by-country ownership model.   

The company includes the following processes within scope:

  • Authority For Expenditure (AFE)
  • Purchase Order
  • Budget Controls
  • Project Execution and Monitoring
  • Capitalization and Depreciation
  • Reporting
  • Physical Audits 

Having a Global Process Ownership model, with involvement from the business and from Information Technology, was cited as an important key to success.  Future steps include setting up regional and global processing centers, continuing alignment with business processes and systems, and growing as a part of the overall expansion of Shared Services.

Process Design Survey and iPollingTM Results Review

The results of Peeriosity’s Process Design Survey that is completed when companies join Peeriosity, plus comments added on a supporting Peeriosity poll created using the iPollingTM technology, provide additional insight.  First, regarding the primary organizational structure for the Fixed Asset process, 64% of member companies have the process in Shared Services, with 11% reporting that Fixed Assets is either centralized or in performed in Headquarters, with 22% indicating that a combination of approaches area is used.  Only 3% indicate that Fixed Assets is performed in a decentralized manner.

When examining the geographic design for the Fixed Asset process, only 12% indicate they have a global design, with 28% indicating a design that is multi-regional, and another 28% indicating a design that is single country.  Obviously, while not global, multi-regional suggests a high degree of process standardization to support delivery from a center that supports multiple regions.  Interestingly, an equal number of companies have a country-by-country model.  Here are the details:

The next important piece of the puzzle is to understand the primary orientation for standardization of the Fixed Assets process.  The results suggest that while there be multiple centers involved, for 31% of member companies the primary orientation is global, with an additional 19% indicating a multi-regional orientation for standardization.  The final 18% indicated either regional or multi-country, with none indicating that their primary orientation is a single country model.

Poll comments from Peeriosity members on this topic include:

  • Most of our fixed asset accounting is handled through our various Shared Services, but we have a few countries that account for assets locally and not through Shared Services. These fixed assets are reviewed by our divisional accounting teams within a corporate structure.
  • Domestic (US) assets are handled through our Shared Service organization, however, foreign assets are managed locally by fixed asset accountants due to system constraints. All assets are consolidated in Shared Services.
  • We have 4 regional Shared Services centers that process the fixed assets for their regions.
  • Our Fixed Assets Accounting is handled by Shared Services located in two areas of the globe, with one in the US and other in Ireland.

Closing Summary

The Fixed Asset process is complicated by a range of legal, accountings, and regulatory considerations, with the added complexity of physical proximity, since fixed assets, by their nature, reside around the world at various company manufacturing or retail facilities.   As companies have moved beyond transaction processing work to include more complicated processes in Shared Services, Fixed Assets has been increasingly targeted to be within scope.  Organizationally, many companies are processing Fixed Assets using a multi-regional or global design, with even more companies looking to standardize the Fixed Asset process on this basis.

What approach has your company taken with regards to consolidating the Fixed Asset process into Shared Services?  What activities are performed in Shared Services and what activities are performed locally?  How standard is the Fixed Asset process globally?

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

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“PeercastsTM” are private, professionally facilitated webcasts that feature leading member company experiences on specific topics as a catalyst for broader discussion.  Access is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from attending or accessing discussion content.  Members can see who is registered to attend in advance, with discussion recordings, supporting polls, and presentation materials online and available whenever convenient for the member.  Using Peeriosity’s integrated email system, Peer MailTM, attendees can easily communicate at any time with other attending peers by selecting them from the list of registered attendees. 

“iPollingTM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility to all respondents and their comments. Using Peeriosity’s integrated email system, Peer MailTM, members can easily communicate at any time with others who participated in iPolling.

Peeriosity members are invited to log into www.peeriosity.com 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.



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