Much has been written about transformation in the last year and finance is no exception to this rule. As this global trend continues to develop, statutory reporting also falls under scrutiny for potential centralisation. With many finance departments looking for further ways to drive savings and efficiencies, the standardisation and automation of statutory financial reporting presents another opportunity through shared services.
However, as Andrew Hay, Head of Proposition, Statutory Reporting and Shared Services Centres at Thomson Reuters, discusses, statutory reporting can often present a veritable minefield of compliance and risk with some organisations opting to retain it in-country.
The benefits of moving to a centralised approach far outweigh those of remaining in-country. Businesses risk falling behind best financial practices where statutory reporting processes are standardised and assure that content-based knowledge and translation facilities address any localisation concerns.
Many of the apprehensions that cause statutory reporting to be retained in-country in the first place – for example, the ability to offer language-based services, or staying on top of changing local regulations – no longer exist. They have been addressed by modern technology platforms that can be effectively deployed to overcome these challenges and successfully automate the statutory reporting process through a centralised model.
Indeed, the recent Statutory Reporting in Shared Services 2019 report found that many organisations recognised statutory reporting as a strong candidate for centralisation, standardisation and automation – driving improved cost efficiencies and quality services not just for the financial department but also the business as a whole. The report, which recently surveyed 150 finance practitioners, found that nearly three quarters (74%) of respondents confirmed that automation is the leading strategy for driving process transformation, followed by better use of data analytics (47%) as well as the expansion of geographical coverage (20%).
Lack of investment prioritisation
One hurdle that is slowing down the adoption of a centralised model for statutory reporting is the lack of investment prioritisation. Only a small fraction of respondents currently lists statutory reporting as their top investment priority. Current priorities, as far as Tax and Finance are concerned, tend to focus on Enterprise Resource Planning (ERP) consolidations and Exchange to Exchange (E2E)/Accounts Reconciliation.
Many organisations still operate with dozens of different legacy ERP systems, and their priority is to get things in order. Statutory reporting, the “last mile” in Record to Report (R2R), is often neglected and still highly manual. However, it’s key to understand that just because this reporting comes at the “end” of the R2R workflow, it should not be relegated in terms of priority.
On the contrary, while updating the service delivery model is certainly resource intensive, it vastly simplifies the process going forward. For example, Accounts Receivable depend on this data to be correct on a monthly, if not weekly, basis. So, the frequency of data required makes ERP and data clean-up the logical priority. What many teams are overlooking, however, is that although statutory reporting comes at the end of the reporting process, it should not be relegated to last priority, which often seems to be the case.
Improving cost and performance
The findings also highlight that while the opportunity to improve the cost and performance of statutory reporting exists, what’s holding finance teams back is concern around exposing themselves to the risk of non-compliance.
A concern that becomes more significant as local regulations and reporting requirements are expanding and becoming more stringent. While one third of respondents plan to move in this direction in the future, a major concern expressed is the perception that they will be exposed to increased risk as a result of gaps in local knowledge requirements. Other concerns relate to timely updates in reporting requirements and meeting local deadlines. Taken together, nearly 40% of respondents list the risk of non-compliance as a result of centralisation being the reason for remaining embedded in-country.
As those organisations that have already migrated to a shared service centre (SSC) for statutory reporting know, ensuring all relevant content and data is up to date is paramount. Moving to an SSC for statutory reporting will also help organisations to de-risk their overreliance on people. These language or regulatory experts are eagerly sought after and all too often businesses are left exposed when their specialists are recruited elsewhere. The findings show that businesses are now looking towards technology to reduce this people risk and drive a more comprehensive, centralised approach to statutory reporting.
Worth the effort
As with any considerable change there are certain barriers that must be overcome. These initially start with the reservations of local in-country teams and their concerns regarding a centralised operation – countering any concerns around the risk of non-compliance as a result of moving work out of local jurisdictions. Both risks can be successfully addressed through a combination of technology, automation, and work allocation. In addition, a robust change management strategy should underpin the transitioning of this work to ensure its success.
Ultimately, standardising the statutory reporting process is worth the effort, particularly for organisations that do business across multiple jurisdictions or have complex regulatory reporting responsibilities. Efficiencies delivered through modern technologies, including the reduction in data collection as well as iterations of reports, will certainly pay off. Also, moving statutory reporting into a centralised shared services model means that businesses will be able to leverage shared services’ expertise in eliminating redundancies, driving leaner and more efficient processes.
Andrew Hay is Head of Proposition, Statutory Reporting and Shared Services Centres at Thomson Reuters.