The New Norm for Today's CFO: Compliance without Borders
The role of the today’s CFO has never been more complex, even as technology aspires to make the CFO’s life easier. The pace of information flows, technology evolution and competitive threats in today’s business climate poses real and constant challenges for corporations seeking to thrive and grow over the long term. Against this backdrop, the CFO often bears responsibility for navigating through the myriad issues ranging from government dysfunction and economic uncertainty to cybersecurity and technological disruption. Perhaps one of the most persistent challenges CFOs in global businesses must grapple with today is global compliance broadly ranging from various tax regulations to statutory, regulatory, reporting, employment and cultural matters.
It is not enough to merely maintain routine regulatory compliance with core systems of record within your region or country of origin as the problem becomes exponentially more complex as your business expands across borders over time in pursuit of new avenues of growth. Even for a company with experience outside of the United States in certain of more traditional Western European and Asian markets, the growth of the “BRIC” (Brazil, Russia, India and China) and other important emerging markets compels companies today to push into newer international markets with more complex and precarious legal, commerce and political environments.
For organizations with even modest growth plans, fundamental localization compliance can become one of the more challenging matters to tackle, turning into a seemingly endless array of moving parts in a process that feels as daunting as growth itself. And although there are numerous studies correlating native language to buying preference, localization issues extend far beyond those related to language translations. Understanding business requirements across borders–within foreign countries in which you operate and do business–has historically been daunting. Traditional use of local employees or partners, and even external consultants, has managerial challenges beyond those of a financial nature for any size business. Moving into new markets abroad is just not an easy problem to solve. As the digital revolution continues to transform how companies do business affording even the smallest, most agile businesses access to unchartered global markets, the side effect has been an increased risk of falling out of compliance. Beyond the typical compliance duties the CFO and corporate risk management teams must navigate, strengthening compliance monitoring is a constant requirement as changes originating from both exogenous changes in regulations and standards or changes are brought on by one’s own corporate expansion into new geographies poses a constant threat to even the most sophisticated change management skill sets. Enter the next generation of software technology as an emerging new hope.
A multi-tenant cloud-based software solution is an ideal tool that better addresses the localization compliance of multiple countries all from a single instance of the ERP software
In recent years, there have been a number of big-box software companies that have waded into the murky waters of global compliance offering products which on the surface are designed to ease the burdens of localization. The value proposition for CFOs is simple - time is money. Basic compliance has become too time consuming for most organizations attempting to stay current on the multitude of requirements they must maintain across many jurisdictions, not to mention managing the sourcing, updating and interpretation of the various requirements and underlying data needed for compliance requirements. Although according to Mark Newsome, Product Management Director at Infor, “To ensure comprehensive localization compliance it’s essential to know not only the headlines of what is required by country, but also the detail of how these statutory, regulatory and cultural requirements are applied to all constituent parts of an ERP system that spans Manufacturing, Customer Service, Logistics, Procurement, and Financial applications.” More often, these requirements include, but are not limited to, transaction or indirect tax, excise and customs duties, government reporting and auditing, inventory management, fixed asset depreciation and more. A multi-tenant cloud-based software solution is an ideal tool that better addresses the localization compliance of multiple countries all from a single instance of the ERP software.
With this growing complexity, 63 percent of compliance offices (including CFOs) spend upwards of 10 or more hours each week monitoring and analyzing regulatory developments. Beyond that, they are required to spend longer hours each week to track, monitor and update internal systems of record with changes in rules and regulations from every region in which they do business. And while the use of a payroll service, for example, in a specific location may provide updated tax withholding or vacation accrual requirements, the breadth of rules require more heavy-lifting to contend with changes and ensuing requirements. It’s no wonder that studies show 64 percent of companies polled believe their compliance workload will increase each year in order to keep up with new rules and regulations. The true time required to manage these changes grows when one considers the additional requirements to amend and enforce corporate policies and procedures to reflect new rules and changes to existing rules.
Software that handles localization compliance can vary in terms of business size, scope and price, but the core tenets remain the same: easy, dependable, accurate and automated. Similar to how the emergence of the digital era has forever changed the business landscape, so too have cloud-based software solutions allowed companies of all sizes to leverage the expertise and scale of third parties for work traditionally done in-house. Localization compliance should be no different. CFOs have a vested interest in aligning and consolidating their corporate compliance goals with those of other parts of the organization, be it finance, HR, R&D or sales and operations. Since the problem of compliance stems largely from the sheer number of different information sources involved in the effort, solutions that offer a consolidated and proactively updated access point or portal make more sense. Finance teams lack the time and coordination to deal with multiple tools across multiple specialty sources to tackle the localization problem. Dealing with one simple, trusted version of the truth should be the expectation, not the exception. Software should empower CFOs to be proactive instead of reactive regarding compliance and the constantly changing rules, many of which have larger repercussions across a company’s business.
Globalization has inevitably forced businesses along with their CFOs to take a long hard look regarding their readiness to manage a multi-national business and ultimately how they deploy Enterprise Resource Planning (ERP) and Business Intelligence (BI) solutions globally. Companies need software vendors who act like partners and think the way they do, be it large or small or in the context of one specific industry versus another. Software vendors today need to deliver solutions that help guide and lead the user, navigating complex dependencies and streamlining processes, in effect delivering what Forrester Research refers to as customer-obsessed technology. The idea is simple- create engaging, easy-to-use solutions that customers love in order to drive customer adoption and long-term retention. Localization compliance solutions should be no different. Technology today is sophisticated enough to ease, not burden, multi-national companies who are pushing the geographical and technological boundaries with their own business offerings.
As CFOs work to enable corporate growth mandates and objectives while mitigating unnecessary risk, they should take comfort in knowing there are solutions available to maintain localization compliance without borders.