How to optimize the value of your tax and finance function

Three steps for taking a holistic approach to tax and finance

As companies consider the way forward, they can start by taking a holistic view of their tax and finance function. Key questions to consider are:

• Where does tax and finance fit into the organization?
• How does tax and finance continue to be a strategic part of the business, adding value to the organization?
• How does tax and finance stay on top of leading technologies to continue to drive efficiencies?

Finding the answers to these questions, and the right way forward for the tax and finance function, can be discovered by following a step-by-step process:

Step 1: Scrutinize the current target operating model:

Companies must examine their priorities around cost minimization, value creation and risk management, and how the tax and finance function plays into the overall strategy. With a thorough understanding of their priorities, companies will have a clear view to assess any gaps in their current target operating model and its ability to withstand the future.

Step 2: Determine best-in-class activities:

Companies can then determine those activities where they want to be best-in-class – that is, those activities that are of high value and must be performed with optimal effectiveness and control. Examples of best-in-class activities include tax planning and managing tax controversy.

Step 3: Determine best-in-cost activities:

Similarly, companies should then determine those activities that are lower value, or best-in-cost – which could include items such as data collection and the completion of tax returns.  These activities should be performed at minimal cost through standardization, automation, sourcing low-cost delivery centers, or via third parties who have made these investments.

The pros and cons of 'build versus buy'

Once activities have been designated as either best-in-class or best-in-cost, companies can decide whether they want to “own” a task – keep it in-house – or “buy” or outsource a certain task to an external provider. Some businesses choose a hybrid approach to make the most of the efficiency and effectiveness of their tax and finance function.

The in-house option has pros and cons. An internal transformation that allows a company to retain and improve its tax and finance function may be the most traditional and familiar approach, creating the least disruption. However, it’s an option that requires significant management focus and capital investment. The biggest challenge may not be around the initial investment and effort but the ability to sustain a robust tax and finance function in a rapidly changing environment. 

Outsourcing to a managed services provider can be a more effective way to reduce overall tax costs and risks, by shifting IT and other expenditure to a third party who has already made large investments in world-leading technology, a cutting-edge data platform, global delivery centers and a network of specialist talent.  However, there are also downsides to outsourcing, as it requires a significant transition effort, as well as management and governance of the new operating model. 

Reimagining your function with managed services

Despite the effort, managed services can minimize costs and maximize the performance of the tax and finance function - producing higher quality results, reduced risk and increased transparency. 

In fact, the cost savings and added value achieved by managed services, when delivered by a provider with a trusted tax and finance brand and regulatory credibility, are simply unmatched by even the most well-resourced team. And, critically, by taking the burden of tax and finance compliance out of the business, companies can pivot internal resources for more strategic activities.