It’s that time of year again where business owners look back on the past 12 months, take an assessment of where they are and what they should prepare for the 12 months that are yet to come. While 2014 had a lot to do with compliance, given the heightened regulatory climate, that theme will continue in 2015.
This past year, nearly two-thirds of capital markets firms increased their investment in compliance management, based on a poll done by management consulting firm Accenture in the first quarter of 2014. Additionally 6 in 10 said that they needed to develop a stronger compliance culture.
Compliance initiatives haven’t come easily. In a separate survey done by Robert Half Management Resources, approximately 20 percent of chief financial officers polled said they’ve found it more challenging to manage their firm’s compliance-related action plans. Of these, 59 percent of respondents said that they’ve addressed this by providing additional training resources to existing staff members, 25 percent hired new workers and 1 in 4 hired a consultant to better explain things.
Those who have adjusted to the compliance climate did themselves well because 2015 will be a year where fiscal compliance is a dominant trend.
One need only look at what systems are already in place throughout much of Latin America to see that this is the case. For example, SPED has been active now for going on seven years and electronic invoicing mandates have been in effect for several years as well. Yet despite this heightened regulatory climate, the vast majority of business owners are in what is tantamount to a lethargic stupor, vastly unprepared for the crackdown enforced by tax officials.
Much of this stems from the Compliance Audit or Tax Compliance Act. This initiative was implemented by authorities to ensure that all sending of data to tax authorities is done by the book and within the law. But the proper ordering of tax information is a matter of first necessity for all organizations who fall under the reporting mandates.
Implementing a successful tax reporting scheme requires a multi-pronged approach. The first is to establish a risk matrix. This is something that has to be monitored in order to ensure that tax laws are adhered to. This should also serve new business operations or functions that may have been added to a company’s profile in the past few years. An effective risk matrix should also have a sound defense that is capable of withstanding audit checks.
None of this is possible without capable hands, which is to say employees. People are the basis of the risk management and compliance process, as they’re the ones who can ensure the best application of resources, as they relate to a company’s macro objectives. A company’s staff has the knowledge and understanding of products and services that a business provides and how they relate to the laws that govern them. But the only way they’ll be aware of this is through clear communication and integration.
Then there’s the process. The relationship between taxes, finances, sales are in an almost constant state of flux and evolution. The tax risks associated with them stem from a complex melange of business regulations and law factors that require proactive management to avoid future losses. Thus, when sending information to tax authorities, it’s important to take note of changes to the reporting system. By not recording these changes, it can lead to data inconsistencies.
Finally there’s the technological component. The implementation of SPED has required a new reporting rubric. To some extent, tax authorities have made validator programs available, but it’s limited in its ability. For example, it’s main function is to outline possible data inconsistencies. But there are other tools that need to be implemented to be clearer of how the reporting process works. The best way of going about this is by seeking out products and services that are constantly incorporating updated legislation.
By adopting these practices, business owners should be more confident in their decision-making processes and reporting systems during a year that promises to be a very eventful one.
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