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 key business objective in today’s complex regulatory environment is the promotion of shareholder confidence in a company’s financial statements. Finance functions of major multinationals operate within a corporate culture that places increasing emphasis on the core values of trust and integrity.
Within this culture the overriding strategic imperative of many CFOs is to manage their company’s financial reporting obligations and avoid reputational risks.
Demonstrate reasons for change in a language that finance understands
The deck below shows a conceptual roadmap that could be used as guideline.
Study the financial reports As organization structures or maturity levels are not the same, the startpoint could for every company be different. Important is from a business and finance perspective is that the financial reports are read and studied and when available investors calls that you listen in and analyze to get a grip of the company compliance statements, business objectives & strategy and short and long term forecasting, etc.
Those are the sales arguments for will gain that you need for establishing change. Based on that define the areas where indirect tax (or TP) has the biggest impact and lowest performing process or technology.
See also chapters: ‘Writing a business case, problem statement and calculate Return on Investment‘
Sufficient internal communication
It is essential that the tax function has an excellent relationships with the business, senior management, finance and IT as a mutual understanding of the impact of the company's tax challenges and solutions should exist to realize that investment budgets are actually made available.
Effectiveness and efficiency of operations, the reliability of tax reporting, and compliance with applicable laws and regulation.
Do the right thing for the business
Prove your value Assume that a Tax Function of a company should work under the same market principles as tax advisers and that the in-house customers are the executive management, finance, procurement, IT, logistics, internal audit, HR, legal etc.: a customer focus. Develop an in-depth understanding of the business needs.
Understand the stakeholders
Customer satisfaction is achieved by managing the expectations and relationships of internal customers, tax authorities, external auditors and other stakeholders. A “customer” may be another department, an outside provider, or another operating unit within your organization.
The first is to determine the requirements of client satisfaction of senior management (C-level): your customer.
Entrepreneurial culture approach
Top of the agendaBased on the survey findings it seems that C-level executives consider indirect tax of lower priority than the indirect tax function generally does. Is the root cause misinterpretation or not understanding and speaking the same language?
If you want to improve quality, you have to first understand what senior management thinks is important, and what senior management thinks of you. Anyone who has to work with other people knows that figuring out what makes them tick is the key to getting what you need and want.
Optimize overall indirect tax performance through understanding the role and needs of the finance function and/or head of tax.
Demonstrate reasons for change
Which problems are the most important to solve
The next step – to achieve mutual understanding – is to get agreement with senior management at the level of indirect tax risk appetite of the company in the worst-case scenario.
- Review the categories of VAT risk the company is facing as well as the likelihood of occurrence, its potential impact and mitigation measures
- Review the company's risk appetite and risk tolerance and the way in which risks is measured
If you know the risk appetite, you have to identify the lowest performing indirect tax processes that have the most direct impact on the company’s business objectives (e.g. benchmark and measure), short problem statements for the gaps found should be written.
What do you want to avoid or realize in the future?
- Make it detailed and graphic
- Demonstrate expected Return on Investment
- Excite your customers
Indicate how long the problem has been going on, describe the gap between the current and desired state, describe the impact of the problem, perceived solution or root cause. It should also include an estimate of savings or the amount of hours currently lost due to rework.
Use 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
These statements can subsequently be prioritized and validated with top management.
Buy-in from all relevant stakeholders
Various solutions are presented with cost-benefit analysis, so a constructive discussion with top management can be held about what is needed to close these gaps (e.g. budget and/or resources needed or necessary for change of systems, processes and controls etc.).
In the worst case the gap(s) will not be closed, but at least you have achieved mutual awareness and hopefully responsibility. If the problem is material and addressed in the right way it will more than likely be dealt with accordingly, because it has now become a mutual responsibility.
It is the responsibility of management to identify the key processes of their organization, measure their effectiveness and efficiency, and initiate improvement of the worst performing processes. Therefore start with a small project and use a successful pilot to demonstrate potential and gain buy-in from senior management to support further initiatives.
The ability to define, predict and manage risk and create strategic insight to drive operational excellence by identifying high-return initiatives, allocate resources appropriately, and measure the ultimate ROI.
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Go fast, scale up ... or go home
Written by Richard Cornelisse
Richard advises multinational businesses in improving the efficiency and effectiveness of their Indirect Tax Function and Tax Control Framework.
He started his career as a manager at Arthur Andersen and then became an EY partner where he led the indirect tax performance team for Netherlands and Belgium. Currently, he is a managing director of SAP Tax Consultancy Firm.
Richard has over 20 years of experience advising clients on international VAT issues. He is specialized in the tax aspects of financial transformations, shared service center migration, and post-merger integration work.