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ACCA Strategic Professional · Strategic Business Leader · Finance transformation

Lumora plc has set up a shared service centre (SSC) for finance transactions. Business unit managers complain that they receive the service but have no idea what it costs, and they treat it as a free resource, submitting many low-value queries. The CFO wants to encourage efficient use of the SSC and make it accountable for its performance. Which action is most appropriate?

Introduce chargeback or transfer pricing for SSC services, based on activity volumes and service-level agreements. Making users see the cost of what they consume discourages wasteful demand and makes the SSC accountable for quality and efficiency, whereas free central funding keeps the behaviour that caused the problem.

  1. AFund the SSC from a central head office budget with no charging to users
  2. BIntroduce transfer pricing or chargeback for SSC services based on agreed activity volumes and service-level agreementsCorrect
  3. CReturn the transactional activities to each business unit to remove the problem
  4. DRemove all performance measures from the SSC to reduce administration

Explanation

Charging users on agreed activity volumes, supported by service-level agreements, makes costs visible, encourages sensible demand and holds the SSC accountable for its service. Central funding with no charging keeps the problem, while returning activities loses the benefits of centralisation.

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