Study on Establishment of Financial Shared Service Center of the State Grid Corporation of China Xiang-bo NING 1 and Hong-yi XIE 2

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1 nd International Conference on Social, Education and Management Engineering (SEME 2016) ISBN: Study on Establishment of Financial Shared Service Center of the State Grid Corporation of China Xiang-bo NING 1 and Hong-yi XIE 2 1 School of Economics and Management, North China Electric Power University, Beijing, China 2 Finance Department, Yunnan Power Grid Co., Ltd., Yunnan, China Keywords: State grid corporation, The financial shared service center, Financial management. Abstract. State Grid Corporation implements intensive construction, but many problems still exist: low efficiency of accounting, the system of headquarter cannot realize centralized fund management and control, system data plays small role in the participation and support of the decision-making. Therefore, actively study of the theory and practice of financial centralized shared service is significant to improve the financial management and information management lever of the State Grid Corporation and even the whole power sector. Introduction Since Ford's establishment of first financial shared service center in the early 1980s, 86% of "Fortune" 500 companies and more than half of the European multinational companies have or are building financial Shared service centers. On a global scale, financial Shared service have been fully applied, which are also trends and directions of financial intensive development. As a key state enterprise of national energy security and national economy, State Grid Corporation have planed and constructed "SG186" project, but the financial accounting and control still have many problems. In view of this, the financial shared service center of State Grid Corporation has sufficient necessity, urgency and feasibility. Optimization of State Grid Corporation's financial information system could: Effectively support State Grid Corporation to achieve maximum efficiency at group level; Provide reference to other power companies to realize financial Shared; Explore the initial management innovation project. Theory and Practice of Financial Shared Service Center Many domestic and foreign scholars have spent a lot of time to study the concept of financial shared service center, although expressed in different forms, the conclusion is highly consistent. Namely: Financial Shared Service Center is a business unit for unified processing of the shared service, and process reengineering and standardization of easily standardized financial service, providing professional service to internal business units and external enterprises, according to customer demands, market price and service level agreements to decrease costs, improve customer satisfaction, service quality, and business operation efficiency. Shared service is the organic "integration" of finance instead of a simple mechanical "concentration", the specific differences is shown in Table 1. Management objective Table 1. Difference of Financial Centralization and Financial Shared Service. Content Financial centralization Financial shared service Focus on centralized control and reduce costs Reduce costs, improve efficiency, standardization, and integration of resources Operation form Simple and centralized Focus on process optimization and process reengineering Process features Original process and the same standard Consistent processes, systems and models

2 Service orientation Responsible for managers Responsible for customer demands Center position Transaction processors Service providers Service features No options for business companies Chosen by customers Supervision Business company not involved customers can monitor the quality of service Location Headquarters in General The site selection not related to headquarters Comprehensive Design of Shared Service Center of State Grid Corporation State Grid Corporation is China's largest power company, the members include five districts of North China, East China, Central China, North China and Northeast China, 26 provincial power companies and 36 subordinate companies. The comprehensive program is designed as follows: Goal: to enhance the quality of accounting, data sharing, and degree of control within the group. IT support: Enterprise Resource Planning (ERP), image management system, network reimbursement system, online payment, bank and enterprise interconnect system. Service: Specific service design is shown in Table 2. Table 2. Finance Shared Services. Stage Stage one Stage two Finance Shared Services Management of tax Reimbursement declaration Receivable and Fund concentration payable accounts management Contract management Staff Salary management Comprehensive budget Financial statements management Tax administration Performance reports Organization structure design: each of the SSC staffing shown in Figure 1. Figure 1. Division jobs of Financial Shared Service Center Organization of State Grid Corporation. Core Functionality Operation Mode of Financial Shared Service Center Organization of State Grid Corporation Reimbursement Management With the network reimbursement model of State Grid Corporation, expense reimbursement process is shown in Figure 2.

3 Figure 2. Reimbursement Process of Financial Shared Service Center. County branch reimbursement approval process: County branch estimator Department head of county branch City branch head City financial auditor Municipal finance manager (Over 20,000 yuan) Provincial audit accountant. City reimbursement approval process: City department estimator City department head Finance manager General manager Provincial audit accountant Posting: Background automatically generate proof of account payable in batch. Generating payment data: Posting accountant provides recommendations for payment, the cashier export data payable by potal, the branch makes the required data disc in accordance with the agreement with the bank (once a day). Receivable and Payable Account Management The sales process is mainly that the grid companies send electricity and charge statements monthly to finance department of various companies, confirm with their management departments, and submit the related income application in the system, and scan the issuance of VAT invoices. Financial shared service model controls the respective customer receivable processing in the account receivable module according to payments received in the online banking system. Figure 3. Receivable Accounts Operation Process of Financial Shared Service Model.

4 Centralized Management of Fund Centralized management of fund is realized by interconnection of the bank and the enterprise. Interconnection of the bank and the enterprise is connected with the payable module and reimbursement system. Interconnection of the bank and the enterprise can reduce the cashier staff of financial shared center of each province to 1/3 in number. Meanwhile it can also reduce the bank loans, and improve credit rating, the specific operation process is shown in Figure 4. Comprehensive Budget Management Figure 4. Fund Management Process of Financial Shared Service Center. It is essential for State Grid Corporation of China to implement a comprehensive budget management, as financial shared service model requires budget management and control based on financial strategic planning model (centralized). Corporation prepares and issues the budget of provincial branches, from top to bottom, the provincial companies determine budget allocation, assign budget tasks and related indicators strictly based on the approved budget and their own actual situation; branch companies combine with its own specific business development and management, and decompose the annual budget plan to the county branches under the province's guidance and supervision. All levels of the companies strictly examine and supervise the annual budget and target liability of its branch companies. Budget management operational process of financial shared service mode is shown in Figure 5. Figure 5. Budget Management Operation Process of Financial Shared Service Center.

5 Expected Operating Effect Analysis of State Grid Corporation Financial Shared Service Center Significant savings in labor costs and operational management costs. The traditional model of financial management of State Grid Corporation requires a total of about 30,000 people for financial accounting and management. Financial shared center probably need 11,000 financial staff. It can reduce about 19,000 financial staff. Accounting at RMB 60,000 per year per individual human cost, it can save about 144 million per year for the cooperation. Thereby, it can reflect that the cost and management efficiency of the financial shared service model is very large. As shown in Table 3: Table 3. Cost and Management Efficiency of Financial Shared Service Model. Item Before After Labor cost saving The number of financial staff Labor costs per capita / year RMB RMB RMB Total labor cost RMB RMB RMB Financial efficiency is greatly improved. Under traditional reimbursement model of State Grid Corporation, it generally takes 4 days from filling orders to receiving the payment, but after the implementation of the reimbursement system and the imaging system, the expense can be reimbursed within 1 day including money arrival and transfer, and its efficiency can increase by 75%. Summary The main findings are as follows: This article defines the goal and scope of building financial shared service center, and prepares the organizational structure and IT support design from a macro and comprehensive point of view. Based on the comprehensive program guidance of State Grid Corporation financial shared service center, this article selects the four core functions, reimbursement management, receivable and payable account management, centralized management of fund, and comprehensive budget management, to describe the actual operation mode of State Grid Corporation financial shared service center. Each core function compares the operation models between before and after the construction, and also discusses in detail the operation process of each module system corresponding to the function, including staffing, approval process, and operation effect. This article provides a strong reference for the building of implementation of the financial shared service center of other companies in the power industry and other industries. References [1] Elizabeth Van Denburgh, Denis Cagna. Doing More with Less, [J]. Electric Perspectives, 2000:66-68, [2] Maya Atrill. Financial Management for Non-specialists [Z]. China Machine Press, [3] Zhong Bangxiu, Study on Financial Shared Service Center Construction Models of Large Multinational Company [J], Financial Management (5). [4] Li Shaowu, Bi Qiang, Peng Fei. Brief Analysis of Related System Construction of the Internal Control of Financial Shared Model - Financial Shared Service Center Example of China Telecom Guangdong Branch[J]. Finance and Accounting, 2012 (01): [5] Zhangrui Jun, Chen Hu. Key factors of Financial Shared Services Process Reengineering of Enterprise Group-based on ZTE Group Management Practice [J]. Accounting Research, 2010 (7): [6] Qi qigong Unicom "Big ERP" [J]. Chief Financial Officer, 2011 (9):