When it comes to doing the complicated corporate tax provision, we have discovered in our surveys many corporate tax professionals are still using an in-house, homemade excel format. The problem is an in-house Excel spreadsheet may be easy to use but the program will miss important information and calculations. What we learn from experts is the disproportionate amount of time people are spending on making certain the Excel spreadsheets are calculating correctly versus the real technical issues in an ASC 740 context.
For most companies, the facts change from year to year. For example, changes occur to accommodate new facts such as new entities, states or foreign jurisdictions, uncertain tax benefits or even new perms and temps. These changes require significant knowledge of the design and links within the excel spreadsheet model. Spreadsheet users are often required to make modifications to multiple tabs in the spreadsheet and ensure that they don’t break any formulas. This whole process introduces risk into the spreadsheet. For example, something that should be very simple like adding a new entity will require numerous changes to a spreadsheet model.
The federal current payable calculation and totals need to be updated. New deferred calculations will need to be set up including the appropriate tax effecting. State calculations will need to be set up or modified for each state the new entity is taxed in. The rate reconciliation will need to be updated to ensure that the new entity’s information is being captured correctly. A new payable tie out will need to be created for the new entity.
Another point made by tax provision expert Nick Frank was around sustainability. Spreadsheets can be very difficult and time consuming to maintain. There is often spaghetti like flow of data between tabs that is difficult to follow or modify. The spreadsheets often lack a clear distinction between which items are entry fields versus calculations and there may be hard-coded numbers hiding in formulas. When you compound these issues across multiple entities and jurisdictions and the various calculations (current, deferred, uncertain tax benefits) needed for each, the complexity can become extremely difficult to manage. All of these factors make it difficult for organizations to leverage more junior staff to assist in using the spreadsheet models which compounds the risk of errors since senior professionals are often doing more of the work rather than reviewing.
Another big issue is pure technical accuracy! Beyond just understanding the flow of the data in the spreadsheet, there are often calculations that are simply performed incorrectly in many spreadsheet provision models. Among the most common themes, are issues with tax effecting things correctly, in particular, around states and foreign jurisdictions. Uncertain tax benefits are often calculated separately and aren’t integrated into the overall provision. Many spreadsheets processes lack a rigorous payable tie out that is integrated with the overall provision. Finally, rate reconciliations are often difficult to tie out to the entry and require significant effort.
Anecdotally, technology consultant Nick Frank told us they were working on an implementation of Tax Prodigy software with a relatively simple new client that has one operating entity and a couple small entities. The client is in about 10 states and has small net operating losses in the current year. The company used large global firm to prepare the income tax provision in a spreadsheet model but was looking to move the process in-house. The company’s financial statement auditors are also global accounting firm.
In just 3 hours of implementation time they had tied out all of the calculations. In that brief time, they identified several ways that the spreadsheet would be difficult to maintain on a go forward basis as the company grew. But more concerning, they found several technical errors in the provision spreadsheet. In fact, a significant portion of the implementation time was spent trying to understand the flow of information in the spreadsheet to validate why the errors were occurring.
When a company with a straight forward set of facts pays tens of thousands of dollars to a global firm to calculate its provision, the expectation is that it should be correct. But all too often, what they see are spreadsheets designed to ignore certain technical requirements that aren’t material today and may not be sustainable as the business changes.
Learn how national tax provision expert Nick Frank has taken preparing the corporate tax return to be completed in as little as three days! Nick Frank has developed tax provision software that is as easy to use as excel. Even better, while the other software companies surprise you with high implementation and support costs, you pay the least for follow up care using Tax Prodigy software. You should check it out with a tour to learn why Fortune 500 to 5000 companies are now adopting this easy to use tax provision software.
Kat Jennings, TaxConnections, CEO and Founder and Advisory Team provides three areas of services: 1) Internationally recognized, retained executive search services for multinational corporations, public accounting firms, and law firms; 2) Introductions of sellers to buyers of small and medium size accounting firms; and 3) Provide brand building and education services that support and prepare accounting firm owners to buy/sell an accounting practice. We focus on educating the journey to sell a practice and how to increase firm revenue prior to any sale. Our program ensures you start years prior to a sale by learning what is expected of you during the selling process, and introducing firm Partners to cross selling opportunities that are easy to implement and reduce your workload at the same time. We introduce you to value added connections to smartly grow revenue in your accounting practice.
Kat Jennings has been retained by organizations worldwide to locate tax professionals with highly specialized tax knowledge and expertise. She has a thorough understanding of the tax business community, with a proven record of stellar performances matching professionals with organizations. Bringing two parties together to work successfully is the art of understanding personalities, cultural fit, expectations by both parties, flexible or inflexible work environments, understanding what drives and motivates each party, and revolves around the personality and ethics of each executive team.
Kat is a widely recognized expert in high level, tax executive search, as well as connecting buyers and sellers of accounting firms. TaxConnections provides and educates small to medium size accounting firms owners and Partners how to prepare and sell their firms so they can build a succession plan for their retirement. With larger firms seeking to acquire smaller accounting practices, there is a real need to help firm owners prepare to be acquired. Most firm owners are unaware they are not ready to sell when they decide to retire. TaxConnections educates firm owners’ what they need to do years in advance of selling an accounting firm practice.
Senior tax executives expect the utmost privacy when being introduced to multinational organizations about a new tax opportunity under consideration. Having said that, companies searching for a new head of tax expecting tax executive candidates to submit their resume through a resume portal, will never see a full slate of outstanding tax executives available due to a candidates’ desire for greater privacy. This is why privacy focused Uber Tax Recruiters consistently outperform in-house recruiters on tax executive searches.
We offer our clients a Performance Retainer Agreement arrangement so their HR department can still recruit and compete with the tax candidates we present on Head of Tax searches. The client pays us a partial fee upfront, and if they find a candidate they deem better than we introduce to them, we forfeit the final fee. Most of the time, they love and prefer our private introductions to tax executive candidates better than what they source through their own resume portals.
When we represent selling/buying small to medium-sized firms, firm owners/partners also demand greater privacy when considering the sale of their practice. TaxConnections provides a safe place to discuss their business needs, elevate their practices’ online reputation, and increase revenue through new streams of business development by outsourcing work and partnering with other firms. Over three decades, we have worked tirelessly to build relationships between firm owners most organizations rarely have access to in the world of tax. There are numerous possibilities you may never have considered previously to bolster the value of your practice and service offerings.
As a globally recognized consultant to multinational organizations, accounting firms, and law firms searching for tax expertise, Kat has been retained by public accounting firms, law firms, and corporations worldwide including Apple Computer, AC Neilson, Accenture, Agilent Technologies, Allergan, Alza, American Express, American Media, Aon, Baker & McKenzie, Barclays Bank, Bechtel, Cargill, Carl Zieuss Vision, Century Aluminum, Chevron, Clorox, Citigroup, Commercials Metals, Constellation Energy, Countrywide, Del Monte, Deloitte Touche, DFS, DLA Piper, E&J Gallo Winery, Electronic Arts, Ernst &Young, Fox Entertainment, Fremont Investments, General Electric,General Motors, Herbalife, Hewlett Packard, Hyatt, Intel, Jones Lang LaSalle, Kimco Realty, KLA Tencor, Koch Industries, KPMG, Levi Strauss, Liberty Mutual, LKQ, Loews, Logitech, Lucas Film, Maersk, McKesson, Nalco, Newell Rubbermaid, Nissan, Oracle, Orbitax, Pacific Gas & Electric, PwC, QAD, SAIC, SanDisk, Sanmina, Sempra Energy, SONY, Synopsys, Ticketmaster, Trimble Navigation, Toyota, Univar, Wal-Mart, Wells Fargo, Vertex, Yahoo, Xilinx, and many more not listed here.
Contact Kat at 858,999.0053 Office/858.232.4415 Cell or kat@taxconnections.com to request a private consultation regarding the sale of your practice, adding top talent to your organization, or merging your practice with another firm owner with a book of business. The possibilities are endless; if you have a dream of a new vision for your professional life; we will scout opportunities throughout the market to make it happen.
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