Finance and Tax as strategic business partners.
The perception of the finance and tax function within multinationals has drastically changed over time. Business partners are increasingly expecting swift feedback in order to be successful in a fast-moving and globalized economy.
How to pivot your finance and tax function from a never-ending firefighting situation towards a valued and strategic business partnership?
The evolution of Finance & Tax
Finance and Tax were often perceived as back-office functions at the beginning of the century, characterized by a clear focus on administrative controlling and reporting. Following the exponential growth in data and tooling, part of these historic functions pivoted towards capabilities in planning and analysis. Moreover, with full process and reporting automation now making its way through, companies are taking the next step in their evolution towards a future-proof Finance and Tax function. This function of the future is able to deploy predictive analytics as an enabler for planning and business controlling.
How? Strategic planning!
Business units are constantly (re-)validating options and opportunities in their decision-making processes that may have a profound impact on Finance and Tax.
- What if we change our supply chain flows?
- What if we make an R&D investment in China?
- What if we set up a regional hub for marketing and sales support?
Traditionally the Finance and Tax function would be involved during or even at the end of such decision processes. For some projects, the tax function might not be consulted at all. The reason for doing so is often attributable to a lack of speed, time and resources in the Finance and Tax departments. Since each modelling activity requires a batch of spreadsheets, different ERP data downloads and loads of data manipulation, it can be particularly challenging for a Finance or Tax function to efficiently perform modelling tasks on top of the day-to-day firefighting. As a result, business units have the tendency to sometimes move along without having a clear view on the financial impact.
Having a strategic planning process and technology in place, helps to overcome the lack of speed and enables you to respond to business requests within days. By having base scenarios available in real-time, financial modelling does no longer require to start from a blank sheet every single time.
Steps towards real-time strategic planning
1 – Own your digital transformation
All positive evolution – from the automation of your controlling process to full outsourcing of your reporting obligations – widens the resource window to increase strategic activities. Particularly the digital transformation has proven to be key in the successful evolution towards a future-proof Tax and Finance function.
On the contrary, complex systems and poor business integration can have opposite effects. As Harvard Business Review rightfully pointed out in a recent article, don’t put a digital expert in front of your digital transformation. Your digital transformation journey – as well in Finance and Tax – should be steered and owned by the people that are affected by it on a day-to-day basis.
This digital business-ownership is equally important in the selection process of planning technology. Business-ownership should always prevail over complex features. If you end up in a situation where the IT-department needs to step in for a financial modelling exercise, the balance between business and technology has likely moved into the wrong direction.
2 – Make your planning dynamic
Although external factors are constantly impacting business environments, planning exercises are still considered as once-a-year phenomenons characterized by slow approval processes and a labyrinth of excel files. This static view on planning often paralyzes businesses in having a dynamic view on the future.
A recent book* by Mickinsey and Company identified “continual planning” as one of the key factors contributing to the probability of corporate success. A company that knows its own success levers based on historic data, is empowered to make informed decisions faster than its competitors and therefore outperform the market. The data is often there. It’s mostly matter of a powerful activation.
(* Probably one of the most insightful strategy books I’ve read in the last year. An absolute must-read for those that are interested in the social side of strategy setting.)
3 – Turn planning into strategic insights
Having the right planning technology in place are two crucial enablers. Transforming these planning insights into strategic business input is a next step in bringing your company’s Finance and Tax function back into the boardroom. Business partners are more likely to involve the Finance and Tax function at the beginning of decision-making processes when they are able to respond swiftly and be of strategic importance.
With these three steps towards strategic planning, your Finance and Tax planning function is future-proof and ready to make an impact!
How do you see the Finance and Tax function of the future?