Improve Your Corporate Tax Function Through Benchmarking

 In Wolters Kluwer

How is your corporate tax function performing? Is it keeping pace with ever-changing tax laws, disruptive technological advancements and the latest compliance and regulatory standards, while meeting the increased pressure of getting more done in less time?  

Before you answer the question, consider this: many companies believe that their corporate tax function is not performing as well as it could be. And in a CFO Research Service study, they revealed why. 

So  many challenges. So little time. 

The CFO study served up a great deal of food for thought. Finance and tax executives surveyed, believed that there was a lack of alignment when it came to tax matters. Many respondents pointed out that their tax departments were focused  more on “technical tax matters and not on strategic business activities.”1 Quite a few stated that “increased tax requirements and complexities added to their tax department’s already overwhelming burden.” 2 

Numerous executives revealed that their corporate tax departments were being pressured to do more with fewer – and in some cases – less-talented resources. They were not confident that their corporate tax department had “the ability to measure and mitigate tax and business risk.” 3 

Finally, a large number of executives thought that “decentralized, redundant and unreliable data continued to inhibit the efficiency and effectiveness of their tax function.” 4 

Benchmarking will help your corporate tax department make its mark. 

Now, back to you. Let’s say you’re not satisfied with how your corporate tax function is performing. What possible recourse do you have? 

Perhaps, the most viable solution is benchmarking. It is a powerful tool that allows you to reflect on your corporate tax department’s current status and use your observations to plan how the department can prepare for the future. 

Benchmarking involves comparing the business practices and performance standards of your corporate tax department to those of other departments within your organization, or, to corporate tax departments at other organizations within your industry or outside it. You can determine how you are evolving in terms of structure, processes, governance, performance measures, the use of technology and any other factors you might be interested in assessing. 

It is a process with lasting impact. 

Let’s go through the benchmarking process step by step. It begins with an evaluation and measurement of your corporate tax department’s current processes. Once you have these metrics,  you have a baseline for comparison that will allow you to gauge improvement down the road.  

Next, you conduct the actual benchmark study. If you are conducting surveys or interviews, you will need to have a code of conduct in place that will protect confidentiality and facilitate information exchange. Questions should be designed to unearth common best practices and characteristics among the potential benchmark companies. Comparison to a company similar to yours may be helpful, but it may also be of limited benefit. This is why you should consider looking beyond your industry, because quite often, there is valuable out-of-the-box learning that you will be able to draw into your sector. 

Gather, evaluate, implement and transform. 

Once you have gathered all your data, you need to evaluate the gaps that exist in processes. Identify the differences that are present and evaluate why this is the case. However, do not ignore the culture and circumstances associated with each company or neglect best practices that have worked in the past. You might want to consider assigning a value to each process, allowing your corporate tax department to set priorities by knowing which measures are most important or cost effective. 

Your final step is to implement the best practices that have been pinpointed. Have an action plan for how they can best be instituted, recommend the resources that will be required, establish a time line and list the necessary financial resources.  

Do not forget to get buy in from everyone involved in the implementation stage and establish how you are going to measure the success of the transformation initiatives that have been put in place. 

That is the benchmarking process from start to finish. Once you have completed it for the first time, may want to think about establishing a regular benchmarking review to ensure your corporate tax department is keeping pace with colleagues at your competitors’ firms. 

Benchmarking, and the subsequent implementation of best practices, will lead to a greater appreciation of your corporate tax function and allow the department to make a higher-value contribution to your overall business. Just as important, will have valuable insights into how your company should be evolving in the areas that are most important to you.  

References: 

1 http://www.ryan.com/globalassets/imported-content/news-and-press-room/whitepapers/key-challenges.pdf 

2 ttps://www.thetaxadviser.com/issues/2008/sep/creatingvalueinthecorporatetaxfunctionthroughbenchmarking.html 

3https://www.thetaxadviser.com/issues/2008/sep/creatingvalueinthecorporatetaxfunctionthroughbenchmarking.html 

4 http://www.ryan.com/globalassets/imported-content/news-and-press-room/whitepapers/key-challenges.pdf 

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