Chancen und Risiken im Outsourcing der Accounting- und Tax-Function: Perspektive eines Dienstleisters
1. Scope of Services of Out/ Co-sourcing of the Accounting- und Tax Function 2. Define service management requirements 3. Develop service management governance 4. Risk mitigation in the transition phase 5. Identify and assess key risks 6. Chances and risks in the ongoing services business 7. Lessons learned Page 1
Scope of Services of the Out/ Co-sourcings of the Accounting- und Tax Function (1/2) Service The service catalog defines all the services that are provided by a service provider to meet the client s business needs. Services are defined by the need that supports the wider business strategy and the achievement of function cost-reduction targets. Scope of services covers Tax Accounting, Statutory Accounting, Direct and Indirect Tax Compliance. Key design considerations for a client Define and draft a complete list of value-added services Develop a methodology to associate costs for each of the value-added services provided by a service provider Decide which elements of service will be given to a service provider and which will be retained Provide options to tailor the services for the client based on the business requirements Establish clear accountabilities for employees delivering services Services provided should capture the requirements of clients and business needs Install a service and value-driven culture Record and process transaction Legal entity financial accounting Tax accounting and provisions Statutory accounting and reporting Income tax compliance Tax planning and controversy Indirect tax compliance Governance and control Page 2
Scope of Services of the Out/ Co-sourcings of the Accounting- und Tax Function (2/2) Tax Accounting Overall services Booking entries ETR (Effective Tax Rate) IFRS, US-GAAP, local GAAP group accounting Quarterly Tax Accounting (group) Year End Tax Accounting (group) Tax calculations in local GAAP related to Statutory Accounting Collect data Calculations supported by tax technology Account validation Prepare suggestion of booking entries ETR monitoring Influences of ETR drivers Preparation of Notes Requirements Indirect taxes Overall services Sales and use tax Property tax Maintain and enforce policies and procedures Manage ongoing tax compliance updates with government entities Support record retention Collect and consolidate sales and use tax information from various sources (POS, sales reports, P-card, etc.) Manage tax data consistency Calculate sales and use tax based on location Conduct variance analysis between current year and prior year fixed assets reports Analyze inventory information for exemptions Calculate taxes File taxes/process payments for all jurisdictions Support of audit of financial statements Support regarding questions of auditors of financial statements Exemption certificates Audits Receive and review client exemption certificates with state records Periodically monitor for certificate expirations Support internal/external/government audits Page 3
Define service management requirements Critical success factors (CSFs) versus key performance indicators(kpis) The CSFs and KPIs are best determined by the current environment, objectives and strategies of an organization. They must be measurable, comparable and reportable. CSF categories: Financial Stakeholder Employee Process and product innovation Program/project innovation Service-level innovation Attributes: KPls: Cost, profitability Stakeholder satisfaction Compliance 100% Performance SLAs Program/project management. Skills, competencies, training Service/facility scalability, readiness and redundancy Performance (historic) time, cost, profitability, responsiveness, quality, availability, capacity, reliability Predictive (future) maturity level, capability/skills alignment, key issues, major risks, certification Page 4
Develop service management governance Governance The Governance structure is composed of four tiers to establish strategic direction, drive initiatives, execute operations and enable change. VI I Leading practice four-tiered governance model Strategy Value-driven Provide executive sponsorship Develop enterprise business services strategy Provide organizational buy-in to new projects/changes Review and approve budgets Decide on changes to service delivery model V IV Process III II Leadership and management Drive service delivery initiatives by goals, SLAs, etc. Maintain relationships with business, clients and service providers and review partner satisfaction Suggest investments and changes in scope of services to Enterprise Governance Board Operations and execution Perform day-to-day activities Develop a standard set of policies, procedures, tools and templates to provide standard service delivery Develop/implement [approved] plans for process imps. Analyze and resolve issues escalated (internal/external) Support Provide front-desk support services globally Develop performance reports for management Develop metrics to drive continuous process imps. Provide business process support services globally Page 5
Risk mitigation in the transition phase Risk of a loss of data and effect on the timeline due to transition Risk of loosing knowledge inhouse Risk of not gathering all related information Risk with gathering, utilizing, and reviewing data Risk of breach of information security Page 6
Identify and assess key risks (1/2) Each risk identified can be assessed against a series of criteria Illustration Key Example risk categories Top Ten Risks Strategic Risks Operational Risks Financial Risks Regulatory Risks Reputational Risks Technology Risks Risk consequences Top Ten Risks Catastrophic Major Moderate Minor Insignificant Likelihood of occurrence Top Ten Risks Almost certain Likely Possible Unlikely Remote Uncontrollable vs. controllable risks Top Ten Risks Uncontrollable (management cannot prevent risk occurrence, it can only detect risk occurrence and manage risk consequence) Controllable (management can prevent risk occurrence) Combination of controllable and uncontrollable Discrete vs ongoing risks Top Ten Risks Discrete: One-time nature of risk that impacts operating earnings over a discrete time frame that may reoccur Ongoing Risks: Iterative nature of risk. Economic, market and regulatory conditions that impact operating earnings over an indefinite time frame. Modified effects of risks for individual business units Top Ten Risks Tax Accounting Statutory Accounting Direct Tax Indirect Tax Transfer P Docu Page 7
Identify and assess key risks (2/2) The resulting risks can be plotted on a series of matrices to identify critical risks Illustration Catastrophic 3j # Top 10 risks 1 Risk consequence Major Moderate Minor 1d 3a 1e 4d 4g 2b 4b 1b 3h 5c 3g 4e 1f 4f 1a 2a 2c 3e 4c 4j 4i 5a 5b 1c 4a 2 3 4 5 6 Insignificant 3f 3c 3b 4h 3d 3i 7 8 Remote Unlikely Possible Likely Almost certain Likelihood of risk occurrence 9 10 Page 8
Chances and risks in the ongoing business Tax Accounting Example of chances: Solution of 0,x FTE dilemma Teams around the world Specialisation in IFRS and Tax Use of technology Statutory Accounting Example of chances: Solution of 0,x FTE dilemma Teams around the world Connection between group and local accounting in country / in SSC or CoE Direct and Indirect Tax Example of chances: Highly specialised team Centrally managed services Value driven service Tax law changes Compliance around the world Example of risk constraints: Connection to the business close enough to cover the right facts Consistency in teams Training in case of changes in accounting around the world Non routine transaction knowledge Example of risk constraints: Connection between group and local accounting Outsourcing service provider must be large and have teams with experiences in small countries Example of risks constraints: Delivery in time monitoring of deadlines Data gathering in time, correctly and consistent within the agreed upon procedures Knowledge of business facts to be covered in the returns Page 9
Lessons learned Partnering approach client engagement and buy-in is critical Regular daily contact with service provider team jour fix High level of investment is required in building trust on both sides Documentation critical for success Training must be given focus and not accommodated around day job Feedback and scoring critical aspect of managing transition IT challenges initial teething challenges on IT will happen, and will go away with time If service provider utilize offshore resources, the culture is different and will take time to get adjustedto Page 10
CV Ute Benzel Partner ute.benzel@de.ey.com Tel: +49 221 2779 25648 Background Ute is Managing Partner Tax for Germany, Switzerland and Austria. Ute joined EY/Arthur Andersen in 1991 and is based in the Cologne office Certifications: Graduate degree in Business Administration, University of Cologne. German Certified Accountant and Tax Advisor Skills Tax process and improvement management, Record-to- Report management Direct tax, statutory accounting, indirect tax Tax accounting (IFRS, US-GAAP, HGB) Experience Ute has been engaged in serving a variety of multinational clients with respect to tax accounting and tax risk management in Europe and worldwide Management of Global Compliance and Reporting of multinational clients with operations in more than 80 countries in German DAX 30 companies Audit experience with large clients reporting under IFRS, US GAAP and local German GAAP (including BilMoG) Page 11
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