How tax and finance teams can meet the ‘do more with less’ mandate

2024 EY Tax and Finance Operate Survey reveals insights into benefits of co-sourcing and data modernization for retail and consumer companies

In brief

• How can leaders help organizations navigate unprecedented industry disruption?
• How can teams prepare their data for emerging regulatory and business needs?
• What are the ways that co-sourcing can help overcome diminishing budgets, skills gaps and resource constraints?

The US consumer products and retail industries are wrestling with unprecedented levels of disruption that show no signs of stopping or even slowing down. On one hand, continually rising consumer prices have caused inflation fatigue to settle in, and cash-strapped consumers are increasingly selective about what they buy and how much they spend. On the other hand, retailers are knee-deep in navigating business model changes resulting from widespread digitization and fast-changing consumer preferences and behaviors. In fact, according to Coresight Research, 7,327 US retail stores closed in 2024, up 57.8% from 2023. And now, with the new presidential administration in place, the impact of looming tariffs on consumer prices and supply chain strategies have also fast become top-of-mind concerns.

Perhaps now more than ever, leaders are looking to their tax and finance function to help them succeed, which is certainly a savvy move given that tax is uniquely positioned to protect the business, support operational change and enable growth.

However, many tax and finance teams are struggling to provide the guidance that businesses need because they are wrestling with massive disruption themselves. They’re already overwhelmed by day-to-day responsibilities. According to the Americas 2024 EY Tax and Finance Operate Survey, tax personnel in consumer products and retail businesses spend nearly half of their time — 44% to be exact — on routine compliance activities including data gathering and wrangling. And talent shortages are such a problem that 59% of respondents are considering candidates without college degrees. Teams are struggling to keep up with today’s demand — never mind taking on strategic activities like pricing or scenario planning. 

While leaders are looking to tax and finance to step up and help the business, the reality is that tax and finance professionals are struggling, too. As a result, the pressure for tax and finance function teams to “do more with less” has never been greater.

Tax and finance teams are feeling the pressure to do more with less

Co-sourcing can help tax and finance tackle disruption

As retailers rethink their strategies and operations, now is the time for tax and finance teams to rethink theirs. By modernizing their operating model for efficiency and effectiveness, they can better position themselves to persevere through changing businesses climates, impending regulations and shifting workforce dynamics ¾ and to meet the mandate to do more with less. As a result, 53% of leaders are changing their tax and finance operating models. Nearly as many ¾ 50% ¾ plan to make co-sourcing a part of their modernization initiatives, and 40% want to leverage technology such as generative artificial intelligence (GenAI) more effectively to drive insights, predictive analytics, forecasting and automating reporting.

Following are five benefits of leveraging co-sourcing as a strategic lever for operating model modernization: 

1. On-demand access to reliable (and much-needed) additional resources

As organizations feel the pressure of impending regulations and shifting workforce dynamics, co-sourcing is becoming more mainstream.

With emerging global minimum tax obligations, public tax transparency disclosures and digital tax filings that require more real-time calculations and audit support documentation, tax and finance teams need fast access to high-quality and reliable data. However, only 34% have a consolidated tax data lake or data warehouse. As a result, 66% rely on external service providers to access and consolidate data out of multiple ERP systems because it is too complicated and time-consuming to do it on their own.

Through co-sourcing, tax and finance teams benefit from a dedicated service provider working alongside them to not only address compliance and reporting obligations but also assist with creating and maintaining data lakes and other data gathering tools. Company employees oversee operations and decisioning, while the co-sourcing provider takes over all or a percentage of compliance-related activities, along with supporting data aggregation needs. The provider contributes a deep pool of talented specialists, both local and remote, who understand tax laws, are adept at process standardization and automation, and can address specific issues identified through the compliance process. It enables a flexible staffing model that can scale up or down based on departmental needs. 

Tackling tax tasks:

How survey respondents leverage third-party providers to help with core tax function responsibilities:

Deep tax and technology knowledge transfer from proven experts

Third-party providers are well-versed in local and global compliance requirements, ensuring timely and accurate filings, which potentially can help to reduce the risk of errors, penalties and audit exposure. Given the trade-intensive nature of the consumer products and retail industries, leaders are rightfully concerned about the impact of looming tariff proposals on pricing and possible supply chain disruption. New or higher tariffs can raise the cost of imported goods, raw materials or components, squeezing already thin margins, and companies must decide whether to absorb increased costs or pass them on to consumers, risking reduced demand and competitive disadvantage.

Tax and finance functions also face significant challenges when it comes to:

• Meeting increased reporting requirements of emerging regulations
• Reconciling trade, tariff and tax data across ERP systems, supply chain tools and compliance platforms
• Evaluating various scenarios for tariff impacts and their downstream effects on margins, pricing strategies and supply chains

These are additional areas where the value of co-sourcing shines strong. Co-sourcing provides access to specialized talent and skills including the retail industry and regulatory knowledge that in-house teams might lack, particularly for emerging tax regulations. Third-party providers are well-versed in local and global compliance requirements, ensuring timely and accurate filings, which can help to reduce the risk of errors, penalties and audit exposure. Companies gain on-demand access to experienced professionals in areas such as statutory reporting, VAT/GST compliance, and digital tax filings when they can’t find or afford full-time hires.

3. Data readiness/analysis for regulatory and business needs

With advanced data analytics tools, tax and finance teams can help stakeholders plan for future tax liabilities and model the tax implications of business decisions.

With artificial intelligence (AI) and machine learning, tax can potentially automate more complex, cognitive tasks such as interpreting tax regulations, identifying compliance risks, and analyzing tax considerations. AI models can also potentially predict potential tax liabilities, perform advanced tax scenario analysis and support strategic decision-making.

Additionally, the transformative potential of GenAI will help shift tax and finance functions from examining past transactions to working with them in near real time. That will position the functions to play a more strategic role in the organization and deliver a plethora of data-driven insights to help the business. However, AI models can’t deliver on their promise unless specific data management requirements are met. Lack of accessible, high-quality and reliable data — along with lack of skilled talent — are the two biggest barriers to using GenAI within the tax function, according to survey findings.

Co-sourcing with a third party can provide access to experienced professionals who utilize advanced technologies such as AI and tax automation tools to streamline data gathering and compliance tasks. What’s more, tech-savvy co-sourcing partners can help tax teams define new data requirements to create more granularity and transparency in their ERP systems and related data sources to capture and aggregate data to meet regulatory requirements such as BEPS and e-invoicing, as well as to help business leaders navigate changing business dynamics.

4. Cost management – or even cost reduction

Working with a co-sourcing partner can help finance and tax teams address the dual challenge of controlling costs and managing talent shortages.

Ongoing economic and geopolitical uncertainty, along with continually shifting consumer preferences, are causing retailers to radically rethink their strategies and transform their operations. They are seeking efficiencies given that they can’t risk sacrificing quality and values to achieve a lower price, but they can’t expect customers to continue to pay inflated prices. As a result, organizations are prioritizing initiatives to increase sales and improve the customer experience. And they are funding these efforts by diverting working capital previously earmarked for building best-in-class back-office departments including finance and tax.

Working with a co-sourcing partner can help finance and tax teams address the dual challenge of controlling costs and managing talent shortages, particularly in light of rising consumer prices and trade tariffs. Here's how: