Flexible advisory services critical to tax and finance transformation, experts say

Flexible advisory services critical to tax and finance transformation, experts say

Research shows the majority of firms are planning to overhaul their tax and finance business model in the near future

Flexible advisory services critical to tax and finance transformation, experts say

The changing business environment is increasingly pushing businesses to look for external assistance with financial matters in more flexible and strategic ways, according to market participants.

“I think you will have more of what we might term ‘as a service’ arrangements,” says Clive Webb, head of business management at the Association for Chartered Certified Accountants.

“Outsourcing may imply going to one entity and buying a whole lot of services, while actually you can go to an individual and bring them in as you need to.”

According to an EY survey released in January this year, the overwhelming majority (81 percent) of companies are more likely than not to co-source some tax and finance activities in the next two years.

In addition, 84 percent of respondents said they are planning to transform their tax and finance business models during the same period.

But according to Daniel Barlow, managing partner for Deloitte’s regional business in the UK, some organisations are going down the route of asking global tax and advisory firms to essentially fill all of their most senior positions.

“In our language we call it a full operate, where a client just says, ‘can you run my entire tax function please?’, because the client sees it as non-core for their business.”

This is most common among multinational businesses following a trigger event such a merger or sale, Barlow explains.

But Dave Helmer, EY’s global tax and finance operate leader, believes that co-sourcing remains the prime focus for most businesses, as it allows them to dedicate more time strategic activities.

“If you look at what happens in a [tax] function, it’s the direct compliance, statutory accounting, income tax provision and preparation – that is where the big hours are.

“On high-end strategic planning and controversy, I still see companies working with providers in those spaces. But that is an area that is high-risk, high value, that they generally invest their time in as a company and maybe work with a provider on one-off pieces of advice.”

Helmer adds that one notable exception to this is ESG, with the EY survey results finding that 69 percent of respondents were co-sourcing ESG and 26 percent were considering doing so. Just six percent were not planning to co-source ESG.

However, points out that the motivation for this is different to the less strategic compliance activities, with some firms fearful of making mistakes in what is a relatively new area, and therefore seeking a way of minimising risk.

While providers may be pitching ESG as an efficiency play, some of their clients were in fact “viewing it as an insurance policy, that if anything went wrong with ESG they had somebody as a backstop”, he says.

Webb goes on to agree that ESG poses a particular challenge for many firms.

“It requires organisations to stand up and understand more data in different ways and I think a lot of organisations are struggling at the moment to bring the data that they need for those disclosures together.

“A lot of them are using spreadsheets to collate data from very disparate sources and the extent of rigour over that data is not as good as it could be over some financial data.”

Barlow stresses that, whether it’s ESG or another area, there is a need for each company to undertake a rigorous assessment of their own strengths and capabilities rather than looking at what others are doing.

“Five or 10 years ago we would get asked the question by clients, ‘what is the trend, is it insourcing, outsourcing, co-sourcing?’. We are asked that question a lot less now.

“They have got all these pressures and changes and they tend to figure out the best response to that themselves, in terms of what elements of strategic tax management and compliance they have in-house.”

Whatever they opt for, it’s important they review the position regularly, says Barlow.

“The businesses that merely ask a service provider to take on a part of their function and then leave that for a three or five-year fixed term, and only review its performance and how they want to progress at the end of that contract, tend to conclude they have fallen behind a little bit.”

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