One needn’t be a business executive or a financial analyst to know that the current outlook on U.S. tax policy is murky at best.
While tax planning has long been a common pain point for CFOs, the modern political and economic climate has made it even harder to stay proactive in this area. To remain competitive, companies large and small will need to do all they can to understand changes to corporate taxation and respond quickly. This will require a centralized, streamlined method of financial reporting that is only feasible through strategic partnership.
The state of corporate tax rates
Prior to his inauguration, President Donald Trump revealed an ambitious roadmap for the policy objectives he sought to accomplish within his first 100 days in office. Among those goals was a plan to stage a sweeping overhaul of the U.S. tax code, for the benefit of individuals as well as corporations. But the precise details of this plan have remained shrouded in uncertainty and inconsistency.
As Andrew Ross Sorkin explained in The New York Times, business leaders around the world are scrambling to connect the dots between what President Trump has pledged to do on tax reform and what could reasonably be enacted.
- From the campaign trail to the Oval Office, President Trump has repeated his desire to lower the corporate tax rate to 15 percent of annual income without increasing the federal budget deficit.
- At the same time, the administration would like to enact a border adjustment tax, fostering a protectionist trade policy that discourages importing goods.
- However, precisely how the government will achieve all of these goals without negatively impacting business interests or adding to the deficit remains an open question.
From the moment he became president, Trump’s tax promises have been met with enthusiasm from the corporate world. But based on recent stock market behavior, that sentiment appears to be wavering. While finance chiefs will certainly be keeping an eye on developments in Washington, in many cases, there is already much work to be done if they expect their firms to be reasonably prepared for even minor tax policy changes.
“In such an uncertain environment, tax planning is becoming a big challenge for corporate America,” David Katz wrote for CFO.com. “To continue formulating their plans, CFOs need a basis for forecasting the laws and rules that will govern them.”
F&A pros need answers
Today’s CFOs might wish they could hire a fortune teller to read the tea leaves on coming regulatory changes. In reality, an investment in top-tier reporting tools and the necessary IT framework is the best route forward. But in an age where the standard playbook doesn’t get anyone very far, there’s no sense in sticking with the same old operating procedures.
As accounting professionals John McGaw and Jeff Johnson explained, the usual accounting go-to’s like the average ERP system are no longer viable options for firms looking to stay ahead of the curve. Even the most advanced ERPs that specialize in automated revenue reporting and other critical functions can’t keep up with the swift pace of regulatory change.
“The myriad of industry-specific guidance made the full automation of revenue accounting a problem too unique and complex for ERP vendors to universally solve,” McGaw and Johnson wrote. “The result is that most organizations choose to let their ERP system do the best it can and supplement with spreadsheets or homegrown solutions to solve what the ERP system cannot – not the most efficient method.”
While CFOs keep watch over Washington, the time to prepare for tax changes has already arrived.It’s not just clunky ERPs that are bogging down F&A teams, though. This common patchwork solution could easily work as a symbol for the woes of many beleaguered finance professionals, hamstrung time and again by inefficient processes, lacking insight, and without the time or money to fix either problem.
CFOs should always be pushing their teams to think outside the box, but perhaps they really need to be thinking outside the walls of their own offices. To keep up with regulations that change at breakneck speeds, more F&A teams are partnering with firms that can unload their accounting and reporting burden. By outsourcing their most critical processes to an industry-leading company, businesses are finding it much easier to centralize their data, streamline their reporting and gain a better understanding of where to pivot next.
Any strategy is only as useful as it is adaptable, and that’s especially true for tax planning purposes. Consero provides the people, processes and technology to enable strategic change throughout a business. By helping F&A teams stay lean and nimble, Consero allows partner companies to react quickly in an uncertain regulatory environment.
