five steps to tax department happiness
DESCRIPTION
In “Five Steps to Tax Department Happiness,” Kelley Lear, Managing Director at Red Moon Solutions, shows you how to automate workflow, increase communication between departments, and improve workplace efficiency. Lear covers 5 steps that will help you take progressive steps forward to increase overall tax department happiness.TRANSCRIPT
“Five Steps to Tax Department Happiness”
Gaining control, start with the fundamentals:
Tax Department Workflow
Tax’s Traditional Role: Ever Changing
o The tax function, in the past, would provide tax advice to finance, manage local compliance matters and defend technical positions during audit
o The tax function’s new role should be based on contributing value to the company’s overall strategy as an integral part of the business.
oTax is reliant on an enormous amount of data from Finance. That data/information is the “start” of the process.
oThe quality of that source data is key (both to accurate financials, but also for accurate compliance).
oFinance and tax processes are highly interdependent. This means that finance and tax must work together efficiently and effectively—without question.
Where Does the Tax Process Begin?
Why Aren’t Finance and Tax Working Together?
o Sometimes, the groups are in separate physical locations, even multiple locations across the globe.
o Communications may be infrequent and on an “as needed” basis during critical processing times only.
o Tax may not be brought in on material accounting or finance decisions.
o Because of this, issues often arise during the process of preparing financial statements—due entirely to lack of interaction between tax and finance.
How Are Finance and Tax Not Working Together?
o Tax may not be brought in when there are accounting transactions. This is a big mistake. Tax should consider the consequences for their department, not solely on a federal level, but for states and S&U tax, as well.
o Tax isn’t always consulted regarding other accounting decisions, as well, such as financial investments, pensions and goodwill impairment.
o Finance and tax may not be discussing why tax needs certain data at a specific level of detail and why those things make a big difference for tax.
o Tax often is not even included in original ERP implementation, meaning that:
Chart of accounts is not tax sensitized Entity structure is not “tax sensitized” or
mapped to legal entity and filing structures
Reporting functionality and standard reports do not meet tax’s needs
o As tax is often “downstream” from Finance, they are reliant on Finance closes, adjustments and timelines to complete before they can start and/or finish certain tasks, further condensing already tight deadlines.
Technology Often Doesn’t Support Both Finance and
Tax
o Finance and Tax do not often share collaboration tools
Little shared document management Much work completed through e-mail
communications Version control concerns/issues Comments and Q&A often maintained
through complicated email strings Continued need for training and
education sharing for relevant content
o Finance and Tax do not often share workflow tools, either, when they need:
Shared calendars Shared checklists Deadline reminders Status tracking
Technology Often Doesn’t Support Both Finance and
Tax
What can be done to remedy this problem?
Tax and Finance need better communication and compatibility…but how can you instigate the change your department needs?
How Can Things Change?
Getting Today’s Tax Function the Solutions They Want
Challenge Proactive SolutionsTax Departments are usually not “driving the bus”
•Tax representation on Steering Committee•Assign Tax “champions” for internal or cross functional projects. •Train tax on Project Management•Take Finance, Accounting and IT leads out for lunch (or invite to internal parties or team building events) – build relationships
Reliant on others for their data •Work with Finance and IT to determine if access to other systems or further automation can be provided to tax
Reliant on systems that were implemented without tax involved
•Make sure Tax has a SME on each tech project
Getting Today’s Tax Function the Solutions They Want
Challenge Proactive SolutionsLack of understanding about what tax can do for your company
•Educate finance on why tax needs data and why it is helpful to have certain data a specific way•Educate teams on the repercussions of decisions made without considering tax ramifications
Difficult for tax to get budget •Make business case for tax projectsAllocate portion of finance budget to tax—benchmark of 20%
Inconsistent use of accounts •Develop controls around accounts and their usage—provide detailed definitions with examples and ongoing training. Review metrics regularly.
Those solutions solve some concerns…but, how can you start getting what you
want on a daily basis?
STEP 1: Evaluate the workflow for tax and finance interaction.
o The key to mapping this through and making improvements is in the answer to the following:
Who is responsible for the tax deliverables around the tax process?
o When responsibilities between Finance and Tax are not clearly defined, reporting and communication is not properly considered. From this point, issues tend to arise.
How do you get what you want?
STEP 1 – CONTINUED - Evaluate the workflow for the interaction between tax and finance
o Map the process from start to finish:
High level first Into detail for each workflow,
such as provision, estimated payments or federal income.
Keep process mapping simple. Know who is doing what, when they’re doing it and who is responsible for that part of the process.
Document using tools that both you and others on your team will understand.
How do you get what you want?
Step 2: Understand where Finance and Tax intersect, as well as where communication points do and should exist:
o Determine how you can enable individuals to combine and share knowledge on a cross functional basis
o Create training sessions and regular exchanges between departments to optimize the use of those resources
How do you get what you want?
Step 3: Time Management:
o Prioritization of tasks Standardize and document processes Recommend where tasks can be
consolidated, eliminated or improved
o Automation of tools for calculating relevant dates for annual reports and statutory reporting, compliance, planning and other relevant dates
How do you get what you want?
Step 4: Chart of Accounts:
o Tax Sensitized Financial Chart of Accounts (CoA) is the key to a successful tax department
Determine if “re-implementation” of existing CoA is possible and would be supported
If CoA tax sensitization cannot be done immediately in the GL system (ERP), due to timing, cost, resources or politics, can it be done in a data warehouse? Another compliance tool?
Define CoA and provide examples of coding and when and how to use accounts
Regular review of coding and use
How do you get what you want?
Step 4: Chart of Accounts:
o Tax Sensitized Financial Chart of Accounts (CoA) is the key to a successful tax department. Be sure it includes:
Post definitions, training videos, materials on portal
CoA Dictionary Governance and maintenance
procedures
How do you get what you want?
How do you get what you want?
Step 5: Automation and Workflow Tools:
o First and foremost…an automated tax calendar.
Implement a calendar that can be shared by all teams and groups
The calendar should calculate all tax and non-tax obligations of finance, as well as all tax groups (plus custom obligations for other key dates
Should be shared amongst Finance and Tax
Must be an integrated solution with Outlook Calendars (other calendars) and Emails
Needs basic workflow—task assignment, status, approvals, etc.
How do you get what you want?
Step 5: Automation and Workflow Tools:
o While there are many areas of tax you should automate, it is important to begin with Provision to Compliance automation:
Implement solution that aids in data collection and review
Integrates with GL Integrates with Compliance (data load
and true up Detail and reporting that is needed Manage cycle with online workflow
solution
Provision
Compliance
How do you get what you want?
Step 5: Automation and Workflow Tools:
o Portal Solution to improve collaboration and workflow:
It should provide all finance and tax departments access from any location
It must allow users to upload checklists and workflow tasks, dependencies and approval processes
It needs to provide dashboards for status tracking
It should contain document management, including versioning
It ought to include communication spaces and document sharing
How do you get what you want?: Workflow Solution Example
Where do you start getting what you want?
Step 5: Automation and Workflow Tools:
o A Portal Solution will also help improve collaboration and workflow space as it:
Includes tax-specific tagging, as well as fields and drop-downs such as jurisdiction, tax year, tax type, business unit and legal entity.
Tracks IDR’s, RAR’s, NOPA’s, including audit and appeals end to end tracking
Provides for data collection Maintains SOX Controls and risk
management
o Take measurable steps to get your arms around the process.
o If nothing else, make sure Tax and Finance truly understand roles and responsibilities. This includes the what, when, why and how of each cycle.
o Forge cross functional relationships.
o Educate.
o Implement solutions!
Start Getting What You Want: Improve Your Tax
Department Today
Thank you for reading!For more information, contact me at:
Kelley [email protected]
941-379-7108
www.redmoonsolutions.comblog.redmoonsolutions.comtwitter.com/redmoonsolution
References
The following publications were used as references:
1. Tax Management in Companies, Tax Reference Library No 44, December 2008, PriceWaterhouseCoopers
2. Tax operational strategy and execution - can tax departments keep pace? – Deloitte, 2009