Introduction on how CBS Project started

In the Solvay Group, certain functions are performed by central service providers (and not within BU’s) for the benefit of companies in the Solvay Group as it is more economical and efficient for these to be performed centrally by specialists than separately by each group entity. Examples include Human Resources, Payroll, Invoicing, Credit Control, SBS IS .., these services are provided by organizations known as “Function Service Providers” which collectively form part of “Corporate & Business Services” (CBS).

Similar services were performed centrally in both Solvay and Rhodia before Solvay acquired Rhodia.  Following the acquisition there has been in a continuing process of internal merger and restructuring. This created a need for a new harmonized system of cost recording, reporting and invoicing of centrally provided services; this was referred to as the “CBS Project” and consisted of three sub-projects:

• P&L Structure;
• BW Cost Tracking; and
• Charging and invoicing of Centrally Provided Services.

The CBS project was launched with three main objectives:

• Harmonize practices of Solvay and Rhodia legacies, with an extension to Cytec following its acquisition by Solvay in 2015;
• Simplify and enhance visibility of global service charge for BU’s; and
• Ensure compliance with accounting, legal and tax requirements

For each objective, there were corresponding main guiding principles. 

The CBS model has been managed in Excel until 2019. As Solvay seeks to improve efficiency, reduce cash leakage and reduce non-compliance risk, in 2020 EY was engaged to automate the CBS model using SAP’s Profitability and Performance Management (PaPM) application, to reconsider the services invoicing process, with a priority given to transpose and automate the existing process supported by the PaPM application.

PaPM maintains and executes complex calculations, rules and simulations automatizing and improving all manual calculations. The data can be analyzed for real-time data insights, and the traceability of the data allows easy identification of outliers or potential errors in data. PaPM outputs are built as queries where the data is compiled and edited.

It calculates the amounts to be charged and invoiced by each service provider entity to each entity that obtains benefit from the services that it provides. 

In PaPM, the whole process can be breakdown as the steps:

• Calculate cost at origin.
• Calculate Service Costs.
• Allocate Charges.
• Update Overhead Rates.
• Prepare Invoice Data.
• Create Invoicing Output.
• Review Margin.

Please see in the section Process Detail to see more information about this process.

Previously the process for the Segmented P&L in Solvay was done mostly manually in MS Excel on a quarterly or annual basis. This work was done with complex files managed in Excel which were very time consuming and to slow to delivery the Segmented P&Ls, which caused slow provision of data for audits, TP Documentation (compliance statutory requirements) and planning.

The Group incurs costs related to year-end adjustments: double taxation (corporate income tax) and customs overpayments. By producing the new solution for the Segmented P&Ls this will improve:

• Checks on a more regular basis, the users we can more accurately and regularly proactively update unit prices to target arm’s length outcomes. This will reduce the value of year-end adjustments, reducing double taxation and customs overpayments.
• A better Group-wide compliance with national & supranational regulations and lower tax audit risks by more consistently achieving arm’s length results for controlled transactions. 
• Faster and more consistent data for tax audits. This faster and more consistent data can also be leveraged for tax & TP planning. In addition, the solution will free up time from the manual data processing tasks currently involved in preparing the Excel Segmented P&Ls, to be refocused on higher value analysis such as updating prices and other TP compliance tasks such as TP documentation, notifications and interco agreements.

This new solution was implemented in PAPM application. Main objectives with this integration in the PAPM application:

• Add more transaction types in the transfer price table - aligning the table used for price setting with the transfer pricing classifications used in the Segmented P&Ls and TP Documentation.
• Automate the calculation and allocation in PAPM, minimize manual workload, to migrate the Segmented P&L from Excel to PAPM.
• Implement new Segmented P&L solution in PAPM for all Solvay Entities in WP1 and PF1.

Framework

To see more information about the process and how to work with this please check see the link for the Segmented P&L in PAPM  and to see more details for the blueprint solution please see in the link 11490 Segmented P&L in PaPM BBP_PaPM Solution.