Optimizing Tax Operations: Strategies for Efficiency and Cost Savings Through Co-sourcing and Outsourcing
03 June 2024
Many organizations face the challenge of increasing operational efficiency while reducing costs and retaining the strategic personnel they need. Talent shortages and the resource drain associated with recruiting, onboarding, on-the-job training, and continuing education have prompted many organizations to seek a more efficient and practical approach. Flexibility in allocating resources to align with organizational objectives is imperative.FustCharles excels in delivering exceptional Integrated Tax Solutions (ITS) that leverage our extensive experience. We provide access to resources, processes, and tools developed to help you address common challenges and focus on your strategic priorities.
Strategies such as co-sourcing and outsourcing can help fill gaps and meet the growing demands of the finance function and tax department. Generally, co-sourcing involves an outside professional services firm performing anything from a single departmental function to nearly every function in the department, with the ability to scale based on fluctuating needs.
As organizations evaluate the bench strength of their tax function, they should consider the following questions:
- Should we build a department or partner with an accounting firm?
- If we choose to outsource, how can we manage cost?
- Is it staffed with the right number of resources?
- Are team members in the right roles to be successful?
- Do they have the skills required to succeed in a dynamic tax environment?
Determining When to Co-source or Outsource Tax Services
Maintaining specialized tax department resources and managing everything in-house may not always be the most judicious or cost-effective approach. Organizations may prefer to work with an outside vendor or consultant as part of a tax co-sourcing or outsourcing arrangement.
A flexible co-sourcing arrangement can scale services up and down as needed based on the demands of the tax department, allowing internal talent to focus more on value-enhancing activities. Taking routine and repetitive tax compliance tasks off the plate of top performers can help create a career path for them within the organization, improving engagement and retention. With the right arrangement in place, organizations benefit from cost savings and gain access to advisors who stay current with regulatory and legislative changes and can consult on organizational strategy.
An organization may decide to pursue a tax co-sourcing and/or outsourcing arrangement when faced with:
- Turnover or difficulty hiring
- Inability to fulfill strategic priorities due to resource constraints
- Undergoing a merger, acquisition, or divestiture/spin-off
- Encountering gaps in tax specialty areas or technology
- Implementing or integrating a tax system
- Reducing time and costs spent on recruiting, training, and onboarding
- Needing flexibility to scale resources based on fluctuating workloads
- Facing headcount reductions for budgetary or other reasons
Establishing a Tax Outsourcing or Co-sourcing Arrangement
When embarking on an outsourcing or co-sourcing arrangement, organizations should consider the type of work to outsource and for what length of time. Assessing the current state of the tax department can help identify and prioritize areas for improvement and the top areas for co-sourcing impact.
While areas to outsource or co-source will vary, tax returns and other tax compliance projects with repetitive tasks or a high volume of work are often good places to start. For example, the complexity of income tax and sales and use tax compliance continues to increase, making this a prime candidate for outsourcing. Organizations may begin with a short-term project to meet an immediate need before determining a long-term strategy.
In addition to the type of work, it is crucial to consider how the work will be managed and delivered. Streamlined processes and an established method for communicating and sharing information are essential for success. In a co-sourcing arrangement, using common technology platforms makes it easier to collaborate across teams.
With increased complexity in global tax laws, higher turnover, and work-from-home workforces, many tax departments are turning to outside firms to address their staffing concerns.
We can help.
For more information, please contact:
Patrick A. Capella, CPA - Tax Partner
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