Transforming the tax and finance functions can mean a big win for CFOs

Even before the pan­dem­ic, many com­pa­nies were fac­ing impor­tant deci­sions about man­ag­ing their finance oper­a­tions. In 2021, those deci­sions are more press­ing than ever.

Chief Finan­cial Offi­cers (CFO)s need to take a strate­gic view of man­ag­ing the entire finance func­tion, includ­ing their tax oper­a­tion. Get it right and they can deliv­er long-term val­ue, cre­at­ing teams and process­es that can cope with the road ahead, which has a series of very real chal­lenges.

The challenge of digital tax

In the 2020 EY Tax and Finance Oper­ate (TFO) sur­vey of 1,013 tax and finance pro­fes­sion­als, 67 per cent of the com­pa­nies with annu­al rev­enues of US$20bn and above said the biggest bar­ri­er to achiev­ing their vision for their tax and finance func­tion was lack of a long-term, sus­tain­able plan for data and tech­nol­o­gy.

These func­tions urgent­ly need the trans­for­ma­tion that mod­ern tech­nol­o­gy plat­forms can bring. It is not just the abil­i­ty to sup­port seam­less coop­er­a­tion across glob­al teams, essen­tial though that is. They need flex­i­bil­i­ty, such as being able to pro­duce new ana­lyt­ics and report­ing when the busi­ness piv­ots. The tech­nol­o­gy plat­form also needs peri­od­ic updat­ing as tax codes change and to incor­po­rate state-of-the-art tech­nolo­gies when they become avail­able.

Get­ting all this tech­nol­o­gy to work requires tal­ent and there lies the sec­ond chal­lenge. The CFO needs a skilled team that blends tax knowl­edge with tech­nol­o­gy insights plus an entre­pre­neur­ial, prob­lem-solv­ing mind­set. Skilled peo­ple like these will only build a career with you if they solve inter­est­ing, strate­gic prob­lems.

The third chal­lenge fac­ing com­pa­nies is how to iden­ti­fy, inter­pret and then act on the many leg­isla­tive and reg­u­la­to­ry changes. For exam­ple, we have seen near­ly 3,000 pan­dem­ic-relat­ed tax law changes offer­ing incen­tives, relief and sup­port to busi­ness­es just in the last year. But even before the pan­dem­ic, the pace of leg­isla­tive change was rapid with gov­ern­ments seek­ing to cap­ture rev­enue from dig­i­tal ser­vices and cross-bor­der com­merce.

Gov­ern­ments are also expect­ed to increase tax­es as they man­age deficits and debts exac­er­bat­ed by the pan­dem­ic. And, they will con­tin­ue to impose more dig­i­tal fil­ing require­ments, demand­ing rapid report­ing of more gran­u­lar data, plac­ing stress on tax com­pli­ance oper­a­tions.

And there is a fourth chal­lenge, which cre­ates the per­fect storm: the need to cut costs.

In light of these chal­lenges, chief exec­u­tives have increas­ing­ly been ask­ing us how to dri­ve more effi­cient tax and finance func­tions.

How can tax and finance professionals do more with less?

How can CFOs meet this long list of tough chal­lenges? We argue that now is the time for a quick but thor­ough strate­gic review.

This review should be ground­ed in oper­a­tional issues, but look above and beyond. It needs to con­sid­er broad­er mat­ters, such as tax gov­er­nance and how the company’s tax pro­file will be reflect­ed in its report­ing on envi­ron­men­tal, social and gov­er­nance (ESG) met­rics. The focus should be on long-term val­ue and not only quick fix­es for today.

Then it is time to ask the crit­i­cal ques­tion: which parts of the tax and finance func­tion can your busi­ness sus­tain­ably own and oper­ate? And which process­es should be done with lead­ing pro­fes­sion­al ser­vices organ­i­sa­tions that can spread costs across thou­sands of com­pa­nies?

Even before the pan­dem­ic, these were ques­tions CFOs were ask­ing. In our 2020 TFO sur­vey, 98 per cent of large com­pa­ny respon­dents said they were trans­form­ing their tax and finance oper­at­ing mod­els and 73 per cent said they were more like­ly than not to co-source some crit­i­cal activ­i­ties in the next 24 months.

Is technology the key to finance transformation?

Many CFOs want to keep oper­at­ing the high­er-risk, high­er-val­ue process­es in-house, such as strate­gic tax advice and com­plex tax pol­i­cy and con­tro­ver­sy mat­ters. This makes sense: after all, that is what both they and their team are qual­i­fied to do.

Many organ­i­sa­tions are look­ing to work with ser­vice providers such as EY, which is invest­ing con­stant­ly in tech­nol­o­gy designed to help clients meet com­pli­ance oblig­a­tions in a cost-effi­cient man­ner so that they stay cur­rent with rapid leg­isla­tive and reg­u­la­to­ry changes, which helps mit­i­gate risk.

For instance, EY com­bines the cloud-based EY Glob­al Tax Plat­form, which runs on Microsoft Azure, a secure, scal­able and cost-effec­tive plat­form, to deliv­er tech­ni­cal excel­lence with the sup­port of EY pro­fes­sion­als glob­al­ly who bring a deep knowl­edge of tax to client ser­vice.  

The EY Glob­al Tax Plat­form can ingest a vari­ety of data from many enter­prise resource plan­ning sys­tems, and then val­i­date and trans­form the data into a com­mon mod­el that can be used to facil­i­tate rou­tine com­pli­ance process­es and dri­ve reuse pro­vid­ing valu­able ana­lyt­ics, plan­ning, trans­paren­cy through real-time dash­board­ing and man­age­ment report­ing.

And because the Glob­al Tax Plat­form is a data man­age­ment plat­form, built with state-of-the-art tech­nolo­gies in a plug-and-play fash­ion, it is eas­i­ly updat­ed as tax laws change and tech­nol­o­gy advances, mak­ing it a future-proof solu­tion.

Building the modern finance function

The impact can be trans­for­ma­tive. For years, the finance func­tion has been mak­ing trade-offs between risk, cost and adding val­ue to the busi­ness; tech­nol­o­gy allows all three to be improved at once.

Finance chiefs now have more choic­es than ever. Every organ­i­sa­tion needs to decide on its mix of work done inter­nal­ly and that done with ser­vice providers. As our col­league Tim Steel, EY TFO leader for Europe, Mid­dle East, India and Africa, notes: “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.” He adds that this dri­ves over­all effec­tive­ness and effi­cien­cy, while empow­er­ing their own peo­ple to focus on high-val­ue strate­gic mat­ters.

Cre­at­ing this kind of vision is a chal­lenge, but also an oppor­tu­ni­ty to reimag­ine the tax and finance func­tion so it con­tributes to the company’s deliv­ery of sus­tain­able, long-term val­ue to all its stake­hold­ers.

To learn more please vis­it www.ey.com/tfo.

The views reflect­ed in this arti­cle are the views of the authors and do not nec­es­sar­i­ly reflect the views of the glob­al EY organ­i­sa­tion or its mem­ber firms.

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