Multinational enterprises (MNEs) began using centralized shared services centers three decades ago to standardize and improve efficiency in back-office functions such as finance & accounting, human resources, and IT. Today, finance is the corporate function most commonly managed this way — but longstanding obstacles have prevented the model from being extended to statutory reporting and tax compliance.
For example, the need to work in local languages and comply with local regulations and standards has forced companies to adopt a decentralized approach that assigns statutory reporting responsibilities to local offices in the countries they operate in.
That’s a shame because centralized operations drive consistency, transparency, control, and more effective data analytics — which would benefit statutory reporting operations when tax regulations are subjecting companies to greater complexity, scrutiny, and digital demands.
The good news is technology can now support consistent, accurate, automated global reporting and alleviate local issues related to language translation and country-specific tax rules, document formats and filing requirements, and generally accepted accounting principles.
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Tax & Tech Talks: How to Achieve Global Statutory Financial Compliance
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This topic is explored in a new episode of the Tax & Tech Talks podcast titled How to Achieve Global Statutory Financial Compliance. It features:
- Briony Kempton, head of statutory reporting and direct tax propositions in Europe for Thomson Reuters.
- Pavlo Boyko, a global solutions architect for TMF Group, helps clients develop solutions for multi-country finance and tax process outsourcing. (TMF Group uses the ONESOURCE Statutory Reporting solution from Thomson Reuters in its tax software suite.)
During the podcast, Boyko noted a strong consensus among corporate finance leaders regarding the importance of centralization. He cited a Gartner survey in which 93% of senior finance executives shared a vision for highly centralized digital finance structures that provide their companies with data on-demand, business acumen, and complex problem-solving.
A vision is important, of course, but so is a plan—and that may be lacking for many companies. A recent BDO study found that only 20% of MNEs surveyed had a dedicated tax technology strategy to support key business objectives.
Many companies postponed automation projects amid the uncertainty of the COVID-19 pandemic. Still, they are now revisiting initiatives that leverage artificial intelligence and other technologies to improve efficiency, do more with fewer resources, reduce human error, mitigate operational risk, and free team members to focus on more valuable strategic tasks.
In many cases, this includes exploring their options for managing statutory reporting through shared services centers while also addressing local, country-specific requirements. Data analytics that informs business decisions and delivers strategic value are a top priority for finance departments, and tax reporting functions can make a big contribution to this effort because they produce and capture vast amounts of company data down to the transaction level.
Boyko described the financial operations conducted through shared services centers as a five-course meal—and the addition of statutory reporting as dessert. For TMF, he said, expanding the menu this way started with strategy. “That’s our guiding principle. We have a one-page vision (statement) on where the markets will be,” he said. “We defined the business landscape, and that definition triggered work on our technological landscape. Each initiative that we’ve undertaken is compared to that vision, to that strategy.”
When TMF began investigating the centralization and standardization of statutory reporting compliance, its strategy informed the creation of operational objectives and selected key performance indicators, Boyko said. The next steps included researching available software solutions and drafting a request-for-proposals (RFP) document for vendors. “We were lucky to have very substantial leadership support to push that RFP process through,” he added.
The RFP should include specific requirements that ensure local requirements will be fulfilled consistently. The software solution should:
- Reflect up-to-date information on country-specific reporting requirements, templates, and best practices.
- Provide machine translation to and from local languages in every country the company operates in.
- Support iXBRL digital file mandates enacted in many jurisdictions for the submission of financial statements.
- Provide local Chart of Accounts mapping, which is mandated in many countries.
Support comprehensive audit trails.
- Automate the entry of general ledger data in multiple formats to enable easy statutory adjustments.
- Automate rounding, numbering, referencing, and roll-forward processes to increase efficiency and accuracy.
Manually and locally managing translations and local filing requirements in dozens of countries, as many companies do, requires an inordinate amount of time, is error-prone, and introduces needless risk, Boyko said.
In-country statutory reporting is ripe for harmonization. As part of the global trend towards finance transformation, as organizations look for new ways to drive savings and efficiencies, the old ways of doing things just don’t cut it anymore. By harmonizing statutory reporting by standardizing, centralizing, and automating, your organization not only saves time and money but greatly reduces the risk of human error that can lead to non-compliance.
Harmonizing global financial reporting, on the other hand, delivers speed, accuracy, efficiency, and reduced risk and costs.
For more articles to help you achieve standardized and centralized global statutory reporting, read the latest:
- Statutory accounts software to give you centralized control over global financial reporting
- SSON Report: Statutory Reporting in Shared Services
- The Definitive Guide to Harmonising Global Financial Reporting
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- The future is here.. almost! Questions AI can solve in tax