Mastering Metrics: 5 Essentials for Excellence

In today’s complex landscape of shared services and global business services (GBS), measuring and benchmarking performance is no longer optional—it’s a game-changer. Imagine navigating a complex maze without a map. That’s what managing your SSC without key performance indicators (KPIs) is like. To help you optimize performance and efficiency, I’m highlighting 5 essential metrics that can act as your guideposts in this intricate journey.

1. Days Sales Outstanding (DSO)

Definition: Days Sales Outstanding (DSO), also called days receivables, is a financial ratio that illustrates how well a company's accounts receivables are being managed. DSO = (Amount of accounts receivable in a year x 365 days) / Total value of credit sales in a year. It is a measure of the average number of days that a company takes to collect revenue after a sale has been made.

Let's have a look at the DSO result from the Top 20 Most Admired SSOs in the World.

Top 20 Most Admired SSO/GBS Benchmarking Study 2023 Global

Within SSON Research & Analytics' Metric Intelligence Hub™, we can see the performance:

• Top Quartile: 15 Days-<30 Days
• Median: 30 Days-<45 Days. This is a decrease from last year's median of 45 Days-<60 Days
• Bottom Quartile: 45 Days-<60 Days

2. Days Payable Outstanding (DPO)

Definition: Days Payable Outstanding (DPO) is a financial ratio that indicates the average time (in days) that a company takes to pay its invoices. The ratio is typically calculated on a quarterly or annual basis and indicates how well the company's cash outflows are being managed. A higher DPO enables short-term use of the funds, hence higher numbers are better. However high DPO can lead to problems: If the company takes too long to pay its creditors, it risks jeopardizing its relations with the suppliers and creditors, and also be losing out on any discounts on timely payments. Example formula for DPO = (Accounts Payable x Number of Days)/COGS - COGS means Cost of Goods Sold: Beginning Inventory + Purchases - Ending Inventory

Managing this metric carefully leads to improved cash flow and working capital. Here we see how the industry is performing when it comes to DPO.

SSON Research & Analytics Metric Intelligence Hub (All Industries & Locations)

3. Annual Attrition Rate (Overall Shared Services)

Definition: This metric refers to the number of employees who externally separate from the SSC on an annual basis. It calculates the overall attrition of the SSC (which may be single or multi-functional) and includes voluntary and involuntary attrition. Excludes a) internal transfers within the SSC, b) employees who are on military service, pregnancy leave etc.

SSON Research & Analytics Top 20 Most Admired SSO/GBS Benchmarking Study 2023

4. Savings Gained in Average FTE Hours Per Month for Highest Performing Automated Process

Definition: This metric provides a comparison of the best automation technology projects across organizations. It measures the savings gained in average FTE hours per month for the highest performing automated process within the SSC.

Here we look at the automation benchmark from SSON Research & Analytics' World's Best GBS Study & Award. Among the top five, 80% have realized significant gains of 500 or more FTE hours per month for their highest performing automated process. To health check the maturity of your SSO/GBS, this rapid instant benchmark reveals your positioning against the best GBS in the world

SSON Research & Analytics World's Best GBS Study & Award 2024

5. Cost Per Invoice

Definition: This metric measures the cost per invoice processed in your SSC. Calculation: No. of full-time equivalent (FTE) in your AP team multiply by the total unburdened salary (salary only, without overheads or benefits) divided by the total number of invoices the SSC processed in the period (month).

SSON Research & Analytics Metric Intelligence Hub (All Industries & Locations)

Every successful SSC has a story that can be told in numbers of metrics. By leveraging these KPIs, your organization can benchmark performance against industry standards, identify areas for improvement, and implement effective strategies for operational excellence.

Through a subscription to SSON Research and Analytics, users to drill down into each of our 140 metrics by industry or region/s to get more tailored benchmarks. Learn more here.