Efficient and Effective Tax, Treasury and Compliance Management Lead to Outperformance in Finance, According to New Findings in 2010 Hackett Finance Book of Numbers

Capabilities in compliance, tax and treasury are essential for companies to be able to establish a solid control environment that supports the protection of company assets; improved financial reporting and cash positions; exposure to currency, commodity and interest-rate risk; and after-tax profits. World-class finance organizations achieve these goals using about two-thirds of the FTEs and at two-thirds of the cost required by the peer group. Beyond efficient and effective processes, today’s finance organizations need the capabilities that allow them to help the company preserve or free up cash so they can deal with risk and volatility and support investments needed for competitive advantage.

Ten Actions Finance Organizations Should Take Now in Enterprise Performance Management to Prepare for 2010

The likelihood of a slow economic recovery lasting well into 2010, if not longer, makes it essential to shape EPM priorities in a way in a way that will help companies be competitive within the context of an increasingly competitive global operating environment. While the cost of the overall finance function continues to drop, many areas remain in which most FP&A/Controlling organizations have room to improve. Based on its proprietary database of the best practices of over 2,000 companies, The Hackett Group has identified 10 key actions that increase the effectiveness of EPM, which can be funded by improvements in the function’s operational efficiency.

Increasing Efficiency in Tax Management Can Help Reduce Costs and Enable Tax Professionals to Do More Value-Added Work

While both the peer group and world-class companies operate with about the same effective tax rate, the cost of tax management among the peer group is far higher. Beyond the pure cost advantage they enjoy from improved tax management processes, world-class companies have created an environment that supports both efficiency and effectiveness in tax management through technology leverage and the use of shared services.

The Do's and Don'ts of Cash Management

With increasing interest rates, oil and commodity costs, and Wall Street pressures to increase shareholder value, it is surprising that many companies do not take more specific steps to drive effective cash management and increase cash flow. Working capital is a highly effective measurement of a company's operational and financial efficiency and effectiveness. The better its condition, the better positioned the company is to focus on developing on its core business. By addressing the drivers of working capital, a company is sure to reap significant operating cost and customer service improvements. This Insight details the steps to understanding and incorporating proper working capital and cash management practices in any company that will result in significant balance sheet bottom-line improvements.

Coughing Up Cash: Alleviating the Ails of Big Pharma

The pharmaceutical industry is rethinking the way it has been conducting business over the past two decades, paying more attention to working capital management as a source of cash and reduced costs. Caught up in a time of unprecedented change, the pace of sales growth for big pharmaceuticals has slowed considerably due to intensifying competition, pricing pressures, patent expirations and a slowdown in new products to market. Going forward, improved operating efficiencies should be looked to as a major contributor to long-term value growth of the industry. As a result, management has begun to pay more attention to working capital management as a way to deliver significant cash and reduced costs. Hackett-REL analysis indicates that the largest US and European pharmaceutical companies by sales have a total of $25 billion in cash unnecessarily tied up in working capital, equivalent to 1.8% of their current total enterprise value. Implementing best practice working capital strategy and processes could result in annual cost reductions of up to $1 billion.

Value Creation and Working Capital Optimization

A sizeable majority of investors and corporations still do not appreciate or understand the importance of working capital management as a key driver of business value creation. Hackett-REL recognized a need for more quantitative research and examined the impact of a significant change in working capital on sector enterprise valuations. The approach is based on a scenario of a 20% reduction in net operating working capital after one year - a rate that corresponds to results achieved when implementing observed best practices in working capital management. This Insight includes detailed metrics of the analysis regarding enterprise value multiple impacts per sector in Europe and the US.

World-Class Tax Management at BT Group

BT Group is the largest telecommunications provider in the UK. The company recently benchmarked its selling, general and administrative (SG&A) operations with The Hackett Group, and found that its tax management function had achieved world-class performance levels. The principal reasons for this are very much in line with the company's use of Hackett-Certified Practices. Under the guidance of the Head of Tax, BT's tax management function has pursued a strategy of outsourcing its standard transactional activities on terms which have proven cost-effective over the last several years. It has, however, retained more strategic work in-house and is able to attract and retain high-quality staff to do the work effectively and efficiently. The department's in-house activities focus on areas where tax management can add value to the enterprise. BT won the Lexis/Nexis UK "Best In-House Tax Team" award in May 2004.

Compliance and Risk Management -- Tax Management

Compliance and Risk Management -- Tax Management