The path forward
The way companies operate their tax and finance functions is on the cusp of a permanent, necessary change. Nearly all businesses recognize this and say they are in the process of transformation.
While it is positive that the vast majority of organizations continue to transform their operations, there are still disconnects between the strategies in theory and how change is actually being executed. Questions also remain about how sustainable those strategies are.
In light of the findings in this survey, it is evident that organizations should look broadly across their tax and finance operations both now and in the future and address them as a cohesive whole as opposed to siloed competencies. Similarly, it appears that outsourcing and co-sourcing will have a pivotal role to play.
All businesses should choose their own path forward, using the following guide:
1. Scrutinize your current target operating model. Now is the time to examine your organization’s priorities around cost controls, value creation and risk management to understand how your tax and finance function contributes to your overall business strategy. Once these priorities are clear, it is easier to identify gaps in people and technology and decide how sustainable the current model is for the future.
2. Determine what to build. Keeping tax and finance activities in-house generally requires some degree of internal transformation to optimize existing people, data processes and technology. Some organizations may decide to keep activities they consider higher value and best-in-class — for example, planning or managing tax controversy. But they need to be sure they can perform these activities with improved effectiveness and control.
3. Determine what to co-source. Some organizations may decide it’s better to co-source some activities, especially those that are more routine such as completion of tax returns, regulatory filings and data collection. It may be that co-sourcing these tasks can be performed at lower costs through centralization or use of third parties.
4. Find the right mix. Many companies will decide a hybrid approach is right for them, where they decide to continue to own some tax and finance functions they consider to be critical, while co-sourcing others. The right hybrid approach can maximize both effectiveness and efficiency while empowering their people to focus on being a value-added partner to the business by focusing on activities that improve the bottom line.
Co-sourcing to a third party can reduce overall tax costs, control unpredictable information technology expenses, and redirect internal resources to more strategic activities. It also enables organizations to leverage the vendor’s considerable and ongoing investments in the necessary talent and technology to keep pace with an ever-changing world.