Accounting Best Practices, Fifth Edition

13–8. Sell the Shared Services Center

Larger corporations have been working for the last decade to centralize their far-flung transaction processing operations, on the grounds that increasing the transaction volume in a single location will reduce the cost per transaction processed. This theory has proven to be true, resulting in the centralization of such functions as accounts receivable, accounts payable, payroll, and cash application. It is even listed earlier in this chapter as a recommended best practice.

As a result of this intense focus on efficiency, many organizations have achieved remarkably low costs per transaction. However, one must ask if the focus of company management should be centered on activities that are generic transactions or on value-added activities—in short, has the drive toward excellent operations been in the wrong area of the company? If the answer to this question is “yes,” then perhaps the next step is to sell the shared services center.

By selling the center to a supplier that specializes in outsourced services, a company can realize a cash gain from the sale for a one-time jump in profits and cash flow, while also writing into the sale agreement a clause that requires the buyer to continue to use the center to provide services to the company for a designated period of time and at prespecified rates. This approach eliminates the management time invested in the process, continues to result in low transaction costs, and yields a cash payment. Why ...