Transcript Product/Session - Red Moon Solutions

The Next Generation of Global Tax Management
The Chicago Tax Club – 55th Annual Fall Seminar
November 19, 2008
The Complexity of the Global Tax
Environment
Globalization & velocity of business
Increasingly complex transactions and
organizational structures
Heightened demand for accuracy
Increased enforcement by taxing jurisdictions
and regulatory bodies
Drive toward currency
Current and forecasted shortages of qualified
personnel
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Total Tax Function Risk Defined
TTFR = (FR + OR + TTR)
IR
TTFR = Total Tax Function Risk
FR = Finance Risk
OR = Operational Risk = Process Risk +
Knowledge Risk + Technology Risk
TTR = Tax Technical Risk
IR = Integration Risk
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Total Tax Function Risk Defined (cont’d)
Finance Risk: The quality and accuracy of data
from accounting in accordance with existing financial
reporting standards
Process Risk: The failure points in existing
processes
Knowledge Risk: The risk of the loss of business
intelligence and human error
Technology Risk: Improper or poor utilization of
technology
Tax Technical Risk: The risk of misinterpreting or
incorrectly applying tax statutes, regulations, case
law, and financial reporting standards
Integration Risk: The failure to properly link and
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manage the flow of information
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The Next Generation of
Global Tax Management
One
Company’s
Story
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Company Profile
Publicly traded manufacturer based in the
United States
Annual revenues in excess of $3 billion with
sales in 50 states and Canada
Locations in 20 states and Canada
Legal entity structure comprises 50 entities
Oracle Financial based on management
reporting
Tax Function Resources
– Four full time professionals
– One contractor
– One intern
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Tax Function Current State
Significant Reliance on Excel
– All tax processes: Income tax reporting and
compliance, sales and use tax, and property
tax are spreadsheet based
– Spreadsheets are stored on network drive
– Password protected files utilized
Document Retention
– Binders and hard copy files
Workflow tool
– Email
Status Reporting
– Email and meetings
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Tax Function Current State (cont’d)
Tax Reporting
– In excess of 200 spreadsheets to develop
provision
– Not scalable for acquisitions
– No linkage to financial reporting systems
– Manual process prone to error
Tax Planning and Analytics
– Spreadsheet based and relatively inflexible for
modeling
– Inability to view the business in the same
manner as the rest of operations
– Not much time for analysis
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Tax Function Current State (cont’d)
Tax Compliance Functions
– Income Tax Compliance
• In Source Express
• Only trial balance imported, all other data
manually entered
• Significant tax calculations performed in
hundreds of spreadsheets
– Sales and Use Tax
• Manual processes - spreadsheets for
completing sales tax returns
• Taxability of purchases made by AP clerk,
no automated tax decisions
• Exemption certificates kept in a file cabinet
by customer service, no review by tax
• Tax rates updated manually, no defined
process
– Property Tax
• Spreadsheet based and manual
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Tax Function Change Agent
Significant consulting fees in prior year end
close to prepare and review tax reporting as a
result of errors in spreadsheets
Planned acquisition that would result in
doubling in size of the organization
Existing process would not scale to handle
additional complexity associated with recent
acquisitions
Movement by external auditors toward
eliminating reliance on spreadsheets for
analytics and calculations
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Tax Function Identified Risks
Data flow risks
– General ledger and trial balance not
maintained at the legal entity level
– Legal entity data from accounting reports are
poorly understood and lacked transparency
back to the general ledger and trial balance
– Top-side entries that are not pushed down to
the legal entities
– Poor controls related to reconciliations and
Oracle queries
– Over 600 spreadsheets in use manipulating
data
– Redundant data and processes with the same
data cut and pasted from other spreadsheets
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Tax Function Identified Risks (cont’d)
Data flow risks
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− Each tax function process ran own reports from
Oracle resulting in data inconsistencies
– Examples:
• Apportionment for provision not the same as
for compliance or FIN 48
• Sales by state from sales tax reporting
different than apportionment
• Wages by state from employment tax
reporting different than apportionment
– Data moved from spreadsheet to spreadsheet
via cut and paste resulting in multiple versions of
the truth
– Updated data not necessarily carried through all
spreadsheets
– Both data and calculations stored on
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spreadsheet resulting in the inability to lock
down data during review
Tax Function Identified Risks (cont’d)
Workflow Risks
– No Work flow management in place
– Coordination dependent on meetings and
emails between the tax professionals
– Lack of transparency of work progress
resulted in deadline driven work flow
– Management could not easily tell what
capacity existed for special projects
– Tasks transferred via email resulting in
multiple versions of the same document and
version control issues
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Tax Function Identified Risks (cont’d)
Process Risks
– Process documentation nonexistent or dated
– Critical institutional knowledge known only to
key personnel, not documented
– Controls established for only SOX relevant
sub-processes
– No milestones or signoffs other than on end
product
– No process for periodic review of calculations
and data sources (SALY)
– No retention of accounting data at the time of
compliance
– Paper binder based document retention made
location difficult, control impossible
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TTFR = (FR + OR + TTR)
IR
FR - Finance risk is high due to large amount of data
manipulation in Excel. In addition, a high reliance on
reports from source systems that were poorly
understood by tax and rarely tested.
OR – Operational Risk extremely high.
– Reliance on a single tax professional and tax
consultants presents an exposure to personnel
shortage and turnover problems.
– Lack of visibility of entire process, coupled with
difficulty coordinating activities
– Ineffective use of technology resulting highly
manual processes prone with error
TTR – High tax technical risk to do lack of planning
and analysis. So much spent getting it done, no time
to get it right.
IR – High, tax processes ( Provision, State
Compliance, Federal Compliance, Audit etc) treated
as disconnected “waterfall” activities
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The Next Generation Solution
Process and technology changes occur in tandem and iteratively
Processes and technology changes include all stakeholders; vendors,
outside consultants and client
All vendors and stakeholders work in a coordinated and cooperative
effort:
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Single vision
Single set of requirements
Single project plan
Single success measure
Single methodology
Developed through multiple iterations rather than a single monolithic
project
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Tax Function Re-engineering (cont’d)
Implemented a tax portal (cont’d)
– Assignment of tasks to tax professionals
• Visibility on progress on tasks
• Visibility on capacity of tax department
– Integrated into a single view
• Calendar
• Tasks
• Tools
• Documentation
– Provide a single collaboration site for internal
stakeholders and outside consultants
– Captured institutional knowledge on processes in
work flow
– Reduced training time for new personnel
Single tax calendar
– Milestone and tasks associated with all deliverables
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Tax Function Re-engineering (cont’d)
Implemented OLAP Analytics and Reports
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Separated data from calculations
Calculations are secure and auditable
Reports are standard and provide drill down
Eliminated need to cut and paste data
Provided rapid analytics
Provided integration with compliance tools (In Source)
Eliminate spreadsheet risk by limiting ability to alter
formulas
– Reporting and analytics available across all tax
lifecycles
– Complete transparency to source accounting and tax
data
– Reduced ramp up time for new personnel by
eliminating the need to understand spreadsheets
– Reduced training time by using an intuitive MS Office
interface
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True Partners Consulting – Project Lead
Tax Risk Management & Tax Advisory
Defined Next Generation Solution
– Mapped existing state of the tax function
processes
– Identified areas of operational risk, financial
risk, tax technical risk, and integration risk
– Determined and validated requirements with
key stakeholders with a focus on risk
management, increased efficiency, and value
to the organization
– Developed the desired state based on best
practices and latest technology in order to
achieve a fully integrated tax function
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Tax Risk – Process Definition
Mapped existing tax processes:
– Tax Reporting
• FAS 109, FIN 48, FAS 5
– Income Tax Compliance
• International, federal, and state & local
– Indirect Taxes
• Sales & use, VAT/GST
• Exemption certificate management
– Property Taxes
– Unclaimed Property
– Significant Sub-Processes
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• Fixed assets; section 199; apportionment;
intercompany transactions; transfer
pricing; credits and incentives; earnings &
profits; stock basis calculations; purchase
accounting
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Tax Risk – Process Definition (cont’d)
Process mapping used to identify:
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All source data
Outputs of each step of the process
Process weaknesses
Automation points
Financial and tax technical risk
Interviewed all key stakeholders to
develop desired state:
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Tax function
Accounting and finance
Internal audit
IT function
Management & operations
– External consultants
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Tax Risk – Process Design
Developed risk profile incorporating:
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Identified risk
Management’s risk tolerance
Cost benefit analysis
Prioritization of objectives
Re-engineered tax function based on:
– Process mapping
– Requirements established in stakeholder
interview processes
– Best practices
– Risk profile
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Tax Risk – Tax Function Re-engineered
Execute re-engineering plan
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Develop formal plan
Validate with key stakeholders
Identify technology enablers
Work with tax to communicate vision
Provide project management
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Planning
Change & scope control
Project tracking and communication
Change management
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Tax Risk – Tax Function Re-engineered
(cont’d)
Validation of data & system results
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Data cleansing to ensure quality of data
Provide testing methodology
Expected results testing & reconciliation
Tax technical analysis
Signoff on tax technical results
Manage user acceptance of new
process
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Change management communication plan
Deployment
Training
Follow-up validation of user acceptance
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Intelysys Project Role –
Technology Automation
Built Data Source
– Designed & Built Accounting Data Store
– Built Import Tool for loading Accounting Metadata
– Built Import Tool for loading Trial Balance, GL,
Fixed Asset, Property Tax data from several excel
sheets into Accounting Data Warehouse
– Built Tax Data Store
– Provided exports for FAS 109 and Fin 48 Systems
Built Web Enabled Tax Portal
– Built eFileRoom (embedded electronic data
storage)
– Built eWorkflow (embedded Project Management)
– Built Tax Issue Tracker
– Built Tax Calendar and Integrated with Vertex Tax
Calendar
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– Integrated Power OLAP within eTaxPortal
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Tools for Tax Risk Management
and Process Automation
eTaxPortal - Single Point of Entry for all Tax
Department related tools. Key Components of
eTaxPortal:
– eTaxFileRoom: Tax Document System to Store
eTaxWorkflow: Tax Task Management
– eTaxTER - Manage Budget vs. Actual, Time and
Expense Reporting
– eTaskManager: Tax Project Tasks, Scheduling
and Resource Management
– eLegalEntity: Legal Entity Manager
– eTaxCalendar: Filing Dates Tracker by Entity
– eTaxWorkPapers: Work Papers Management
Tool
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eTaxPortal - Tax Portal for Today's
Tax Department
Embedded Tax Document Repository
– Tax data categorization and taxonomy implementation
– Search across projects, documents, tasks, attachments,
messages
– Application, Project, Document Access control and Field
Level Security
– Access Logs for SOX Compliance
Embedded Tax Project Management
– Assignment of tasks to tax professionals
– Visibility on progress on tasks and capacity of tax
department
Personalized (Dashboards) for customization
Tax Calendar for tracking filing deadlines &
milestones
Centralized communication & messaging
Publish Tax department specific content
Links to internal, external web pages and Tax
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Tools
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eTaxPortal - Open Architecture for
Integration
Integration with Accounting and Tax Data
Sources
Integration with Accounting Data Import
utility
OLAP Integration for tax reporting and
analysis
– Provision, compliance, various tax types
– Reports accessible via the eTaxPortal
Outlook Integration
Work Paper Integration
Flexibility to integrate with existing tax
technology utilized resulting in a fully
integrated system
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Red Moon Solutions – Project Role
Implementation & Reporting
OLAP and BI Tools
– Eliminate integration risk
– Reduce data flow risk by creating a
single source of data
– Mitigate operation risk by providing
flexible planning and analysis
– Manage financial risk by providing
the view of the data from tax to
accounting
– Control tax technical risk by
separating the calculations from data
SAP Expertise
Experience with tax, OLAP and BI
tool
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What is Business Intelligence &
OLAP?
Business Intelligence (BI)
Programs and technologies for gathering, storing,
analyzing and providing access to data to help
enterprise users make better business decisions
- Web definition
On-Line Analytical Processing (OLAP)
Provides ability to retrieve and analyze multidimensional, summarized views of business data
to reveal business trends and statistics not directly
visible in data directly retrieved from a relational
database.
- Web definition
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Multi-dimensionality
account
asset class
location
asset class
entity
entity
actual/
forecast
entity
period
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The Next Generation of Global Tax
Management
TTFR = (FR + OR + TTR)
IR
By looking at tax risk in a holistic manner
incorporating all components driving risk for a
tax function, the next level of tax risk
management can be achieved
It is the proper alignment of people, process,
technology within the tax function effectively
integrated with all business processes that will
allow an organization to achieve the next
generation of global tax management
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Today’s Presenters
Andrea Gronenthal
Khaja Syed
Managing Director – True Partners Consulting LLC
President – Intelysys, Inc.
Chicago, IL
Ashburn, VA
[email protected]
[email protected]
Telephone – 312-835-1184
Telephone – 703-939-0084
Joseph Ochoa
Kelley Lear
Senior Manager – True Partners Consulting LLC
Managing Director – Red Moon Solutions, Inc.
Chicago, IL
Sarasota, FL
[email protected]
[email protected]
Telephone – 813-447-9421
Telephone – 941-379-7108
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Tax Advice Notice
We are required by regulation to inform you that
any tax advice contained in this communication
(or in any attachment) is not intended or written to
be used, and cannot be used by any taxpayer, for
the purpose of: (i) avoiding U.S. federal, state, or
local tax penalties or (ii) promoting, marketing, or
recommending to another party any transaction or
matter addressed in this communication (or any
attachment).
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