To support COVID-19 crisis-management efforts, tax and finance functions need to accelerate the transformation of their operations.
Respondents also indicated they want tax and finance professionals to spend less time on routine compliance and more time advising the business on broader strategies, while also reducing overall costs of the function. This sort of agility will be even more important during the post-pandemic recovery.
Many businesses were already falling short of these objectives before COVID-19. Some 39% of respondents were having trouble attracting and retaining people with the necessary skills to be effective in the modern tax and finance function. And 65% said their biggest barrier to achieving their tax function’s purpose and vision was they lacked a sustainable plan for data and technology.
While some organizations have the ability to both attract and hire the right talent and develop the best tools in-house, most can’t keep up given the rapid pace of legislative and regulatory change and technology advancements. It’s not surprising that 73% said they were more-likely-than-not to co-source tax services in the next two years and rely on vendors who stay current by investing in both people and technology.
The speed with which stimulus measures were passed in response to COVID-19 is an acute reminder of just how quickly the tax legislative landscape can change. And because much of the emergency stimulus legislation is relying on deficit spending and tax expenditures, it’s likely that tax legislation, in particular, will continue to remain fluid as countries reckon with their fiscal balance sheets.
In addition, the pressure to stay current with tax technology is unrelenting – and expensive – at a time when many companies are coming under cost pressure as part of their own financial recoveries from economic shock from the pandemic.
Agility to spend less time on routine compliance and more on advising the business on broader strategies will be even more important during the post-pandemic recovery.
As businesses stabilize amid the immediate crisis, tax and finance functions will be called upon to play an even stronger role in helping companies determine next steps and what happens beyond the COVID-19 pandemic. Transforming the operating model to include some co-sourcing may help reduce overall 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, technology and data strategies to keep pace with an ever-changing world.
Every global business should now take four critical steps to get on a resilient path.
- First, they should scrutinize their current tax and finance operating model. Now is the time to examine the organization’s priorities around cost controls, value creation and risk management to understand how the tax and finance function contributes to the overall business strategy. Once these priorities are clear, it is easier to identify gaps in people, processes and technology and decide how sustainable the current model is for the future.
- Second, they should determine what capabilities to build. Keeping tax and finance activities in-house generally requires some degree of internal transformation to optimize existing people, overall tax 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 them with effectiveness and control. Other more routine tasks may be better done using a multi-tenanted, state-of-the art technology platform owned by a capable service provider.
- Third, they should 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.
- Finally, 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 improve 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.
Corporate tax and finance functions need to accelerate transformation of their operations if they are to support COVID-19 crisis-management efforts and their organization’s future recovery.