www.ryan.comJanuary 17, 2012

TEI - Nebraska Chapter MeetingEffective Process Improvement

Process Improvement

John FioreDirector

630.515.0477john.fiore@ryan.com

Chicago, IL

Anne GiffelsSenior Project Manager

312.214.4244anne.giffels@ryan.com

Chicago, IL

Determining Your Starting Point

Where should you focus your time and budget?

Attribute Examples

High Level of Integration • Compliance and provision technology configuration is matched

Tax Sensitized Source Data

• High percentage (>50%) of book-tax differences are automated

• Very little manipulation of data after it is received

Company Recognition • Tax is included in M&A due diligence

Focus on Effective Rate • Materiality and a risk-based approach to preparation and review

Continuous Improvement

• Ongoing process improvement workplan that is updated every year

What are Best Practices?

• Short-term– Immediate results– Build momentum– Foundational

• Long-term– Two to five years– Strategically focused– Company supported

Establish a Vision

Approaching the Process Review

Questions for the Audience

How are you currently scheduling and communicating process improvement initiatives?

Which tax department attributes are you focused on improving in your one-year and five-year plans?

What steps are you taking to maintain the energy for continuous process improvement?

Marketplace ObservationsYou w

ant to be here.

Starting with the Data

–Start with the Data

Estimated payments from business units

M&A Activity (basis, sales

price) - Finance

Partnership bonuses from business units

Sales by state from business

units

SAP - G/L

Compliance Tool

Payroll Dept. - officer

compensation

Subsidiary G/L

FAS - intercompany

reports

SAP - G/L

K-1 for outside partnerships

SAP - Total Sales

SAP - Payroll

FAS - property by state

SAP - Franchise tax information

Provision to return

reconciliation

Treasury/holding company G/L

Miscellaneous tax credits

Estimated payments from business units

Budgeting / forecast

information from ??

Spreadsheets for Provision

Spreadsheets for Return

–Understand the Process

Provide Visibility

Key Considerations

• Evaluate Your Technology – Improve or Replace– Compliance– Provision– Document Management– Calendar

• Automate Book-Tax Differences– Provision– Return

Technology Evaluation

• Define Your Requirements– What You Need vs. What the Current Software

Provides• Rank the Requirements– Must Have– Should Have– Would Like to Have

• Evaluate Your Technology Against Your Requirements– Identify Gaps– Identify Matches• Next Steps– Evaluate Other Software?– Request Additional Modules and/or

Improvements?

Book-Tax Difference Automation

• Prepare a List of Your Book-Tax Differences– Brief Description of the Calculation– Data Sources

• Separate Into Groups– Reversal of Book Expense – Full or Partial– Change in Balance Sheet Balance– Change in Balance Sheet +/- Payments– Scheduled– Other

• Weighted vs. Unweighted

• Map Into Matrix– Simple or Complex Calculation– Simple or Complex Data Source(s)

Book-Tax Difference Visibility Chart

Examples of Improvements to Undertake

• Book-Tax Difference Visibility• Book-Tax Difference Automation• Debrief – Provision, Compliance, Data

Collection, Audit Closing• Technology Evaluation – Provision,

Compliance, Workflow, Tax Data Warehouse• Technology Training• Implement/Improve Compliance Technology• Implement/Improve Provision Technology• Document Retention Evaluation• Document Retention Improvements

Planning for Improvement – When?

Jan

Feb

March

April

May

JuneJuly

AugS

ept

Oct

Nov

Dec

2nd Q Estimated Payments

1st Q Estimated Payments

Return Extensions

YE Provision

Q1 Provision

Q2 Provision

3rd Q Estimated Payments

Begin ReturnsQ3 Provision

Federal Returns Due

State Returns Due

4th Q Estimated Payments

Process Improvements Project List• Book-Tax Difference Visibility• Book-Tax Difference Automation• Provision Debrief• Data Collection Debrief• Compliance Debrief• Provision Technology Evaluation• Compliance Technology Evaluation• Technology Training• Implement/Improve Compliance

Technology• Implement/Improve Provision Technology• Document Retention Evaluation• Document Retention Improvements

• Normal Activities– Year-End Provision

• To Do List– Provision Debrief

What worked well? What needs to

improve?

January

Jan

Feb

March

April

May

JuneJuly

Aug

Sep

tO

ct

Nov

Dec

YE Provision

• Normal Activities– Data Collection for Tax

Returns– Prepare for Compliance– File Extensions

• To Do List– Complete Compliance

Implementation/Improvement

February/March

Jan

Feb

March

April

May

JuneJuly

Aug

Sep

tO

ct

Nov

Dec

Return Extensions

• Normal Activities– Begin Tax Return– Q1 Provision– Q1 Estimated

Payments• To Do List

– Evaluate Provision Software

April

Jan

Feb

March

April

May

JuneJuly

Aug

Sep

tO

ct

Nov

Dec

Q1 Estimated Payments

Q1 Provision

Begin Returns

• Normal Activities– Continue Preparation of

Tax Returns– Q2 Estimated

Payments– Q2 Provision

• To Do List– Implement Provision

Software

May/June/July/AugustJan

FebM

archA

pril

May

JuneJuly

Aug

Sep

tO

ct

Nov

Dec

Continue Returns

Q2 Estimated Payments

Q2 Provision

• Normal Activities– Complete Federal

Return– Q3 Estimated Tax

Payments• To Do List

– Implement/Improve Federal Tax Packages

– Federal Compliance Debrief

September

Federal Returns Due

Q3 Estimated Payments

• Normal Activities– State Returns Due– Q3 Provision

• To Do List– Evaluate Tax

Compliance Technology

– State Compliance Debrief

– Plan for Year End– Implement/

Improve State Tax Packages

October

Q3 Provision

State Returns Due

• Normal Activities– Q4 Estimated

Payments• To Do List

– Implement Changes for Year End

– Automate Book-Tax Differences

– Implement Compliance Software

November/December Q4 Estimated Payments

How Much Time Do You Need?

Process Improvement Initiative Duration Effort

Provision/Compliance Debrief 1 Week 1 Day

Technology Selection 3–4 Weeks 5 Days

System Implementation 3–4 Months 3–4 Weeks

Book-Tax Visibility 2 Weeks 2–3 Days

Book-Tax Automation 4 Weeks 10 Days

Resources

• People– Within Tax– Outside Tax

IT – Utilize Their Project Management Expertise Accounting/Finance Internal Audit

• Process– Workplan– Measurement – What Gets Measured Gets Done– Budget – $ and Time

• Technology– Project Management Tools

Questions for the Audience

What observations do you have about your current process improvement plans?

How do they fit into the bigger picture of creating a more efficient tax department?

Are there any process improvement experiences, good or bad, that you would like to share?

How do you set priorities among a list of process improvement initiatives, and how do you build process improvement into the calendar?

Keys to Successful Redesign

• Identify the Root Cause of the Problem, Not the Symptom • Reconnect the Tax Department to the Organization• Shift Resources From Compliance to Value-added Activities• Outsource Appropriate Processes

Process Improvement is a Process

• The World Series isn't won or lost on Opening Day• Don’t Try to do Everything at Once• Workplan to Stay Focused• Strive for Continuous Improvement• Start with Smaller Projects to Build Momentum• Know the Stakeholders and Make Sure They’re Involved

• Unrealistic Deadlines– Aggressive

Timelines– Flexible Planning

• Scope Changes– Poorly Defined– Badly Managed

• Risks Not Managed– Identify and Assess– Mitigation

Common Mistakes

• Poor Communication and Collaboration– Competing Priorities– Silos

• Stakeholders Not Engaged– Not Properly Identified– Excluded

• Undefined Goals and Objectives– Share the Vision– Repeat Often

• Trust the Team– Include the Team to Set Timelines and Scope – Bottom-Up, Not Top-Down

• Face Your Fears– Don’t Focus on the Benefits at the Expense of

Identifying the Problems– Prepare Mitigation Plans

• Communicate, Communicate, Communicate– Weekly or Bi-Weekly Status Reports– Regular Steering Committee Meetings

How to Avoid the Mistakes

Where Do You Want to Start?

Meaningful and Lasting Improvements

• Employ a dynamic combination of approach, expertise, experience and style that positions us to deliver sustainable results

• Provide an integrated and total solution to the tax process needs of our clients

• Recognize there is no single element, no simple formula, for achieving successful change and that each solution is as unique as each client

• Demonstrate that capability and knowledge transfer are key, so that tax processes can continually improve after the project is complete

• Engage professionals throughout the process to manage change and build ownership and support for lasting results

• Focus on results that bring meaningful change to your organization

Questions?

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