5 Ways CFOs Can Unlock The True Value Of Tax
Today’s CFO is responsible for many things – increasing profitability, improving operating efficiency, tightening the cost structure and developing analytical tools for risk management and decision making. Tax can play an important role in all of these things, however it is often overlooked or underutilised.
Ignoring tax or not incorporating it correctly can create increased levels of tax risk, missed opportunities for tax savings and a loss of forecasting data to improve the tax and finance function in the future.
Below are five ways CFOs can utilise the tax function to enhance finance transformation and unlock hidden value for the business.
1. Involve tax from the start
Treating the tax function as an ad hoc consideration can lead to unnecessary costs and tax penalties down the line. By taking tax implications into consideration from the beginning of any finance transformation or strategic discussion, CFOs set the business up to effectively manage risk, limit costs and create tax savings for the future.
2. Incorporate tax into underlying processes
Every decision a CFO makes could potentially create tax consequences for the business. Incorporating tax into underlying processes ensures management is prepared for potential tax impacts and can plan strategic decisions accordingly.
3. Recognise signals that call for tax planning
If the tax function hasn’t been incorporated into the finance department from the beginning, there are certain signals or milestones in the business that call for tax to be brought in. Some of these signals include times when the business is evaluating overall performance, conducting benchmark studies, assessing technology solutions or whenever the CFO is developing short term and long terms goals.
4. Connect tax with other departments
It is important that the tax department is connected with the operations, finance and IT departments. Strong integration between departments facilitates flow of information, allowing management to identify and implement tax opportunities such as foreign tax credits or R&D credits.
5. Understand the importance of data
The tax department relies on data and information to ensure effective tax planning for the business. Providing the tax department with a budget for IT gives the department access to crucial information for improved tax planning and more efficient structures.
CFOs who are able to incorporate tax into strategic discussions and align it with business objectives will see how tax can add value to the business or a finance transformation. This could translate to tens of millions of dollars in tax savings from more effective tax planning or a reduction in cash taxes.
If you would like to know more about how tax can add value to your business, please contact us or call your ESV engagement partner on 02 9283 1666.