In this three-part series, we will outline the impact Shared Service Centers have on statutory reporting and unveil a forthcoming feature of Thomson Reuters ONESOURCE Statutory Reporting.
We took our last snapshot of how multinationals are handling statutory compliance in 2016, when we found that roughly half of the multinationals we surveyed were using or planned to centralize statutory financial reporting. The other half were presumably using a decentralized approach, outsourcing the statutory compliance process, or some combination of the two.
It is likely that those numbers have edged up a bit since then in favor of centralization. Compliance methods based on a decentralized framework tend to take a long time to perform, lack transparency, and introduce inconsistent manual processes that create considerable risk. In short, the problem here is inefficiency.
But becoming more efficient is only part of the story. Centralizing statutory financial reporting also helps scale an important, recurring requirement that tax and finance teams face.
Global enterprises continue to grow bigger, which oftentimes means doing business in more jurisdictions that have unfamiliar statutory financial reporting requirements. Regulatory bodies are becoming more sophisticated in how they regulate global companies. And considerable political risk lingers in the background, which could affect how corporations do business globally in myriad ways. Scaling the statutory financial compliance process by creating a repeatable method for doing it, in a centralized location and with a common team, insulates tax and finance departments from these trends.
Growing demand to centralize the management of statutory financial reporting means increasing usage of shared service centers for the statutory reporting process. Bottom line: Finance and tax departments need to be well-acquainted with how shared service centers operate and how they can improve the tax and accounting functions, particularly for companies that have a growing global footprint or ones that have business interests concentrated in sparsely used jurisdictions.
Integrating shared service centers into the statutory reporting process is a nuanced matter because, although centralization seeks to minimize their involvement, local and regional teams are nevertheless an important ingredient of the statutory compliance process. Finance teams cannot have everything centralized: with statutory reporting, having relationships with local authorities, and knowing the language and social norms, are important requirements. The process is not completely autonomous. Finance teams will have to communicate with living, breathing humans at different points of the process.
There are also numerous stakeholders in the mix. Executive management needs airtight governance and a guarantee of accuracy. They’re motivated by reducing risk more than cutting costs. Finance teams need confidence in the process. They’re motivated by having a stress-tested and efficient way of preparing and reporting statutory requirements . Regulators need a pipeline of data. They’re motivated by having access to financial information quickly. Information technology teams need a framework that, once facilitated, can run on its own. They’re motivated by the desire to work with as few vendors and integrations as is realistically possible.
It is finance teams that want the scale that centralization through shared service centers can provide. They’re motivated by the flexibility and reliability of a scalable process, and the fact that every day they don’t have to wrestle with Excel and Word is a day they can think about strategic matters and develop ideas that add greater value to the company.
The second post of this series will outline four ingredients for enabling shared service centers in a way that satisfied the needs of each stakeholder.