How Did I Get Stuck with this Job?

Posted by Kelley LearcloseAuthor: Kelley Lear Name: Kelley Lear
Email: kelley.lear@redmoonsolutions.com
Site: http://blog.redmoonsolutions.com
About: Kelley is a member of the executive leadership team and leads our sales and marketing efforts at Red Moon Solutions. Kelley’s extensive experience in project management, product management, and consulting with Fortune 500 and Global 1000 clients is extremely important in this role.See Authors Posts (127) on Jan 12, 2012 | 0 comments

Over the years, I have been to many different tax and industry conferences across the country, and have worked with small to large global corporate tax departments…and it is interesting how many times I have heard the phrase, “I don’t know how I got stuck with this job, but I have been doing it for years”.  Typically, this is related to one aspect of their job such as exemption certificate management, 1031 exchanges, property taxes, or fixed assets management and compliance.  Sometimes however, the tax professional may even have that tax function as their full time job!  Yikes.  I am sure that is not what every budding starry-eyed college student dreams of doing while toiling away at their studies and attending college frat parties.  

It is actually always interesting to hear how they took on these tasks and whether or not they “love” them, and if they feel that these jobs are exciting, fulfilling or rewarding.  In most cases, I would say that they are most definitely NOT any of the above.  What is even more interesting is that people seem to be finally starting to think outside the box and say, “there must be a better way”.  For some, this will mean that they will change one or more of the following:  people, process or technology.  This might mean hiring a staff person to take over some of these responsibilities, implementing a new more automated system to significantly reduce time spent on these activities, and/or changing the process altogether.  Others are looking towards outsourcing the specific function as a point solution (and others are dead set against it).  We have seen a trend towards outsourcing within our own client base with respect to fixed assets management and compliance.  

For example, one of our clients, a business data and analytics provider who has a very small tax department (in terms of personnel), but deals globally with over $725M in revenue, acquisition activity and ongoing operations and compliance, decided to try out outsourcing for his fixed assets management.  This included having our team receive his adds, disposals, transfers and any adjustments each quarter.  We receive the data, analyze it, l import it into our fixed assets management solution, reconcile the data and prepare all the reports that this client needs for provision and compliance (including a report with all book/tax differences).    What used to take them several painstaking weeks each quarter, now takes them less than an hour to review and/or follow up on any data related questions.  This client is now able to spend time working on other key areas of provision and FIN 48, compliance and audit activities.  His skillset is being used more effectively in analyzing data to reduce ETR and improve cash flow, rather than struggling through fixed assets management reconciliation. 

Similar to a decision to outsource your lawn or pool care (and yes, I do both here in Florida), you have to assess what is right for you (or not right for you).  This includes analyzing:

• Cost of doing the work in-house versus outsourcing (total cost of ownership) – calculate the time spent on these activities based on the fully loaded hourly cost of the employees participating in those processes.  Calculate the cost of errors, possible material weaknesses, audit costs, penalties and interest, other possible downstream effects (for example, for fixed assets this could include property tax costs, insurance costs, and other risks to the business).  For some large organizations with plenty of skilled staff, it may be more cost effective to keep in house.  For those that may lack or need a specific area of expertise or are strapped for resources, this cost/benefit might work out well.
• Benefits to the organization of having highly skilled tax professionals focus on tax analysis, review, compliance and planning.  Try to monetize these assumptions for your business case.  Some companies have determined that for every so many tax department focused hours that are saved for value add activities, the company receives $10K in tax savings.
• Possibility of improved quality – determine if you can achieve a steep change in quality through contracting out the service with a new service level agreement.  In the example I shared, the client was originally plagued with tracking and calculating assets at a summary level, which became problematic for tax and reconciling book to tax due to adds, disposals, transfers, etc.   Under the outsourcing arrangement all books are tracked at the detail level.  In addition, there may be some tasks that are only done once per quarter, or once a year, and therefore these tasks may be clumsy or forgotten from year to year.  These are good areas to consider for outsourcing.
• Specialized knowledge – potential access to intellectual property and wider experience and knowledge (as your provider may have dealt with a broader industry and customer base that they can leverage for your engagement). Or, in some cases, the lack of need for specialized knowledge may also make an area look attractive for outsourcing.  A rote or monotinous task may even be a good candidate for outsourcing.

As more companies debate whether to outsource some part of their tax functions, one thing is certain, tax outsourcing is a growing trend, similar to how information technology (IT) outsourcing was 25 years ago. The question now, as then, is whether to outsource portions or all of the tasks (or even co-sourcing).   Shifting resources to more productive, value-added work, such as overall tax planning, planning for critical upcoming business transactions, and attending to broader risk management activities within your organization can be a win – win for all!