Overall direction and making progress

KEY Group new logo long

Senior management frequently perceives often VAT/GST as a low risk because the flow of taxes is similar to a “cash in and cash out” scenario. As said that is a misperception. However, in order for any structural change to increase the effectiveness of the (indirect) tax function to be fruitful, both the formal support and active involvement of senior management are required.

Many organizations try to establish change without this active senior management involvement.

Projects are assigned, tools implemented and results tracked. However, optimum process improvement or business transformations will not likely be realized by the sum of individual independent efforts. The risk is that individually everybody knows what needs to be done within his or her own area of expertise, but what is lacking is overall direction and thus progress.

Important is to get every stakeholder aligned to the same direction and way of thinking: speaking the same language of performance improvement.

When improvement is made in one area, improvements in other areas should also be made. What sense does it make if cost reduction is the business strategy, but from an indirect tax perspective the implemented changes result in substantial commercial risk, tax risks and a hidden costs (significant amount of rework due to corrections) if not properly managed in time?

Hidden factory or hidden operation definition: the rework and cover ups, the hours and days of wasted time in a company of people who constantly correct mistakes (unnecessary rework).

The objective is to make the hidden factory visible (measure/calculate ROI) and as result returns precious time and money to the business.

Examples

The business model has changed as a result of the implementation of a centralized procurement model. This can create not only VAT risks, but commercial risks as well. These include logistics problems with importing goods into a country and subsequent delays and hold offs of shipments resulting in disruption of daily business.

Some root causes are: the company forgot to register for VAT and/or procurement staff forgot to communicate with suppliers which party is responsible for importing the goods.

How much re-work is required before numbers received from finance systems can be used?

From: Why is management necessary and what needs to be done ?.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s