Be business minded
Create, protect and prove value and write a business case for investment to realize business objectives such as improve cash flow, reduce costs, improve tax processes and manage tax related risks.
A primary business objective in today’s complex regulatory environment is to foster shareholder confidence in the accuracy of a company’s financial statements. The finance functions of major multinationals operate within a corporate culture that increasingly prioritizes core values such as trust and integrity.
Within this context, a key strategic imperative for many CFOs is to effectively manage their company’s financial reporting obligations while minimizing reputational risks.
Communicate the Need for Change in Financial Terms
Given the varied organizational structures and maturity levels, the starting point for each company may differ. From a business and finance perspective, it is crucial to thoroughly read and analyze financial reports, as well as participate in investor calls when available. This approach allows for a better understanding of the company's compliance statements, business objectives, strategies, and both short- and long-term forecasts.
Such insights provide compelling arguments for the necessity of change. Based on this analysis, identify the areas where indirect tax or transfer pricing has the most significant impact and where processes or technologies are underperforming.
Effective Internal Communication
It is vital for the tax function to cultivate strong relationships with business units, senior management, finance, and IT departments. Establishing a mutual understanding of the company's tax challenges and potential solutions is crucial for securing the necessary investment budgets.
This collaboration enhances the effectiveness and efficiency of operations, ensures the reliability of tax reporting, and promotes compliance with applicable laws and regulations.
Prioritize the Best Interests of the Business
The Tax Function of a company should operate under the same market principles as external tax advisors, serving in-house clients such as executive management, finance, procurement, IT, logistics, internal audit, HR, and legal departments. This customer-focused approach necessitates developing a in-depth understanding of the business's needs and challenges.
Understand Your Stakeholders
Customer satisfaction is attained by effectively managing the expectations and relationships of internal customers, tax authorities, external auditors, and other stakeholders. In this context, a "customer" could be another department, an external service provider, or a different operating unit within your organization.
To start, it is essential to identify the satisfaction criteria of senior management (C-suite executives) as your primary customers.
Adopting an Entrepreneurial Culture
Survey findings indicate that C-level executives often perceive indirect tax as a lower priority compared to the assessment made by the indirect tax function. This discrepancy may stem from misinterpretation or a lack of mutual understanding and communication.
To improve the quality of tax operations, it is essential to grasp what senior management considers important and how they perceive the tax function. Effective collaboration relies on understanding what motivates your colleagues and aligning your objectives with theirs.
By optimizing overall indirect tax performance, you can better address the needs and priorities of the finance function and the head of tax.
Demonstrating the Need for Change
Identifying the most critical problems to address is essential for achieving mutual understanding. The next step involves securing agreement with senior management regarding the company’s indirect tax risk appetite, particularly in a worst-case scenario.
Begin by reviewing the categories of VAT risks the company faces, assessing their likelihood of occurrence, potential impact, and available mitigation measures. Next, evaluate the company's overall risk appetite and tolerance, including how these risks are measured.
Once you clearly understand the risk appetite, identify the lowest-performing indirect tax processes that directly affect the company’s business objectives. It is important to benchmark and measure these processes, followed by drafting concise problem statements that highlight the gaps identified.
What Do You Want to Achieve or Avoid in the Future?
Articulate your vision with detailed, compelling narratives.
- Demonstrate Expected Return on Investment: Show how the proposed changes will yield tangible benefits, providing a detailed analysis of the anticipated ROI.
- Engage Your Audience: Excite your stakeholders by painting a vivid picture of the future.
- Detail the Problem: Specify how long the issue has persisted and describe the gap between the current state and the desired outcome.
- Describe the Impact: Elaborate on how the problem affects operations, including financial implications and morale. Highlight perceived solutions or root causes for more in-depth understanding.
- Quantify the Losses: Include estimates of potential savings or the number of hours currently lost due to rework, providing concrete evidence of the need for change.
By combining these elements, you can create a persuasive case that resonates with your audience and drives action.
Use the scientific method
The scientific method is a systematic approach used to investigate phenomena, acquire new knowledge, or correct and integrate previous knowledge. It provides a structured process for solving problems and is fundamental to scientific inquiry. Here’s a concise outline of the key steps involved in the scientific method:
- Identify a problem,
- Measure its magnitude,
- Determine why the problem exists, and
- Generate a set of solutions to ensure that the problem goes away
The scientific method is inherently iterative. As new information is uncovered, researchers may revisit and refine their hypotheses or formulate new questions. This ongoing process significantly contributes to the advancement of knowledge and understanding across various fields. The findings can then be prioritized and validated with top management to ensure alignment with organizational goals.
Gaining Buy-In from Relevant Stakeholders
To effectively address identified gaps, it's essential to secure buy-in from all relevant stakeholders. Presenting various solutions alongside a comprehensive cost-benefit analysis facilitates constructive discussions with top management regarding the necessary budgets, resources, and changes to systems, processes, and controls.
In the worst-case scenario, if gaps remain unresolved, you've still fostered mutual awareness and accountability. When issues are significant and addressed appropriately, they often become a shared responsibility, ensuring they are managed effectively.
Management plays a critical role in identifying the organization's key processes, measuring their effectiveness and efficiency, and initiating improvements in the areas that underperform. Starting with a small project and implementing a successful pilot can demonstrate potential benefits and help gain support from senior management for future initiatives.
Additionally, the ability to define, predict, and manage risks is crucial. This strategic insight drives operational excellence by identifying high-return initiatives, allocating resources effectively, and measuring the overall return on investment (ROI).
