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Statutory Reporting

Centralized Statutory Reporting Requires People and Technology to Work Together

· 6 minute read

· 6 minute read

In the world of global finance, many multinationals are transitioning their statutory reporting and tax functions from local, regionalized offices to a more centralized model organized around shared service centers or global centers of excellence. These transitions come with their own challenges, but according to Thomson Reuters’ Andrew Hay, the technologies that enable companies to centralize these operations are more capable than ever, and the ultimate benefits—greater efficiency, accuracy, timeliness, and savings—are definitely worth the effort.

Hay is head of Proposition, Statutory Reporting and Shared Service Centers at Thomson Reuters. Speaking on Ernst & Young’s “The Better Finance Podcast,” Hay shared with host Myles Corson his thoughts on what organizations currently considering or undergoing global finance transformations should consider when centralizing their statutory reporting and tax functions.

According to Hay, the first thing companies should understand such centralization initiatives is that they are a challenge to the status quo, so some resistance is natural. Traditionally, companies that have entities in multiple countries have had personnel located in those regions do the legwork on local statutory reporting, compliance, and tax preparation. The logic behind this approach is that the laws and regulations in different countries are often written in the native language, so there are advantages to having people on the ground who understand the local language and legal customs, and who can ensure compliance at the local level while also acting as intermediaries to the larger enterprise.

Centralizing such operations in a shared service center—where statutory reporting for multiple jurisdictions is done in one place—means less work at the local level and less duplication of efforts across the enterprise. Until recently, however, it also meant having to find other ways around regional language issues. And even then, says Hay, compliance personnel were haunted by the question, “Do you know what you don’t know?” In other words, did you miss something? And if you did, was it because you didn’t have enough local knowledge?

Fortunately, says Hay, technology is taking much of the sting out of such worries.
For example, the Thomson Reuters solution to the language problem was to incorporate a universal language-translation function into its global statutory reporting software, essentially “de-languaging” the entire process. Without having to overcome the language barrier, it is much easier to transfer data and documents from different jurisdictions to a centralized service center, where it can be processed much more efficiently and easily integrated into the organization’s overall workflows.

To execute a successful finance transformation, Hay suggests stepping back and looking at the overall process more holistically, while keeping four basic factors in mind: people, process, data, and technology. Ultimately (and ideally), all four need to work in harmony; otherwise, the project may not deliver the intended results.

In terms of people and processes, Hay says that one of the most important factors in a successful transformation is having someone involved who “owns” the process. This person shouldn’t just be the global controller, either—it should be someone who is responsible for overseeing the entire process in detail, from the trial balance to final financial statement, complete with all the supporting paperwork and everything else involved.

Another key is having a dedicated project manager who keeps track of goals and milestones, conducts regular check-ins, keeps track of project details, and ensures consistent buy-in from other key stakeholders. Having personnel available who are intimately acquainted with the entire process, from start to finish, making it much easier to realize the benefits of centralization and take advantage of the synergies it provides.

For example, in multinational finance departments, most of the statutory reporting work is completed before tax returns are prepared, and much of that statutory information can be re-purposed to avoid duplication. But in order for that data to get where it needs to go, everyone involved needs to understand what their colleagues are trying to achieve, what data they need, and in what form they need to receive it. Silo thinking won’t work; communication between stakeholders and a shared understanding of the process are essential for a centralized system to function properly. That need for communication extends to external auditors, who need to be alerted to internal process changes and notified what to expect on their end.

All finance transformations are essentially challenges to convention. Indeed, one of the big challenges many organizations have, says Hay is holding onto manual processes and familiar Excel models in what amounts to an endless series of workarounds, rather than embracing the advantages and efficiencies that new technology can provide. Automating certain manual tasks is one benefit, certainly, but not the only one. If the organizational data is handled properly, for instance, it can be integrated and harmonized in a way that serves the entire enterprise, across platforms—e.g., ERPs or other third-party systems—and is available for further analysis.

Cloud-based platforms are particularly well suited for this type of work because they allow global enterprises to consolidate operations through a system that all stakeholders can access, whether they are physically in the central office or not. Local representation can still exist, but their roles change, and their communications are channeled through the central system. Cloud-based platforms also allow organizations and their clients to share data more easily and can be scaled to meet the specific needs of an organization as they grow and evolve.

When it comes to running a world-class shared service center, however, technology is only one component of success. Making sure the right people are in place is critical, as is a concrete plan for training and motivating staff, including long-range personnel-development programs that plot career trajectories and encourage loyalty. Retention is important, says Hay, because a “revolving door” of personnel at a centralized shared service center invites miscommunication and potential errors.

Centralization isn’t the right solution for everyone, says Hay, but organizations with dozens or hundreds of entities in different countries can certainly benefit. According to Hay, organizations that are considering centralizing their statutory reporting and other tax functions need to step back and take these first steps:

  1. Identify the people that need to be involved;
  2. Understand the process they have and how they want to change it (e.g., which functions can be automated, and which ones can’t?);
  3. Assess the organization’s data needs;
  4. Identify the technology that can best facilitate the current and future vision of the organization.

Once a system is in place, scaling staff regionally and globally is the next big opportunity that centralization provides.

For more from Andrew Hay, listen to this episode of “The Better Finance Podcast,” with Ernst & Young’s Myles Corson.

For more information about technology solutions that can help you automate, centralize and standardize compliance tasks in a Shared Service Center, visit our Statutory Reporting and Indirect Tax Compliance pages.

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