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Seizing the opportunity in Global Compliance and Reporting: Use the momentum of finance change - EY - Global

Seizing the opportunity in Global Compliance and Reporting

Use the momentum of finance change

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"We are just inefficient. We end up being accurate, but it takes way too much effort." Fortune Global 500, materials company

Summary: Companies that focus on GCR within the context of a broader finance transformation can greatly reduce risks and realize benefits earlier in the transformation process.

Almost half of companies surveyed excluded tax-related GCR functions from their finance transformations, and almost a third excluded the statutory accounting and reporting processes.

A large percentage of finance transformations exclude one or more GCR process

EY - A large percentage of finance transformations exclude one or more GCR process

Involvement of GCR activities in finance transformations

New finance operating models impact GCR

Overlooking GCR is common when responsibility is dispersed
While some companies make a conscious decision not to include GCR in their finance transformation, we believe too many overlook GCR because of the way responsibility for these processes is dispersed throughout their organizations.

Others may not yet have seen the global shift in the organization and delivery of GCR processes. In these instances, GCR processes are omitted from a broader finance transformation, as the benefits of their inclusion are not fully understood.

The downside of having GCR activities embedded in financial processes
Many GCR-related activities are embedded within larger financial processes, so when major changes in finance are implemented, essential GCR activities and processes are impacted — often adversely.

But once a company recognizes the interrelationship between GCR processes and a broader finance transformation, this risk of GCR disruption is converted into an opportunity for GCR optimization.

Improvements through standardization
Leading companies are using the foundation of finance transformation to make great strides in improving and, where appropriate, standardizing and automating their GCR processes.

Standardized processes offer:

  • Greater confidence in the timeliness and accuracy of filings
  • Improved responses to regulatory and tax inquiries and position companies to identify and sustain cost savings
  • Opportunities for greater efficiency and effectiveness through automation, centralization and enhanced leverage of outside service providers

Many companies have achieved standardization in certain GCR processes. That said, significant opportunities remain to extend and enhance standardization in GCR.

GCR processes and systems in most companies lack standardization

EY - GCR processes and systems in most companies lack standardization

Percentage of respondents with global standards for GCR processes and systems

See how companies were able to increase efficiency and control

Case study: taking advantage of finance transformation

A Fortune Global 500 company took advantage of a broader finance transformation to simultaneously redesign its GCR operating model. The company was implementing a European SSC and consolidating onto a single enterprise resource planning (ERP) system. At the same time, it standardized and automated its US corporate tax compliance and reporting processes.

The company decided to leverage both these initiatives and create a European corporate tax CoE. European return preparation, US and local GAAP reporting and the controversy management of more than a dozen countries were migrated to the CoE. Through standardization, including consistent roles, responsibilities and data management, the new GCR model enabled the CoE to work more effectively with the finance function as well as with external, in-country service providers. The overall results include improvements in efficiency and control.

Case study: optimizing working capital through enhanced GCR processes

A Fortune Global 500 company determined that the rationalization of its indirect tax operations in Europe could present a significant working capital opportunity. Following an analysis of its current state, it improved data collection and standardized processes. This resulted in a more robust GCR data supply chain and provided the ability to undertake focused data analytics.

This in turn enabled the company to reduce its working capital requirements by close to US$150 million, generating financing savings of well over US$12 million. The company is now applying similar improvements to its supply chain operations and cross-border transactions worldwide.

What’s at risk?

Tax administrations around the world are rapidly developing ways to share information about companies. They are coordinating with each other to engage in simultaneous and (or) joint audits. This means that an issue arising in one country can, and increasingly will, quickly surface in others.

Responding to more aggressive regulatory actions is a major driver behind improving GCR processes.

At the same time, the dangers relating to the exclusion of GCR from a finance transformation are significant. They can include:

  • Incomplete data
  • Ineffective processes
  • Increased penalties
  • Increased tax burdens

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