KPIs to define end-state

A first step in improving tax processes is to undertake a current state analysis of the tax function. This often involves carrying out benchmarking and tax risk reviews to better understand the existing tax processes and determine where the tax function wants to be in the future. Organizations are establishing KPIs that will help identify gaps. These KPIs often have a clear link with the objectives of the wider business and many include ETR, cash tax, demand management, key risks, key controls, internal resources and control activities.

The use of KPIs will help define an end-state – where the tax function wants to be in say 5 years time. Organizations that are planning ahead in this way are setting up overarching systems that benefit multiple tax processes. This requires the formalization of key objectives around how they think their tax function should operate. These tax objectives should cover every aspect of tax management. As an example, typical tax objectives could include:

– reducing the resources spent on compliance by 25% by 2016;
– cutting the tax financial close process by 1 week;
– more resource allocated to tax-effective business planning; and
– improved level of standardization and consistency across tax to enhance governance across all tax processes.