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How tax and finance are evolving to support business and talent
In this episode of The Better Finance podcast, Victor Casalino from Microsoft and Dave Helmer from Ernst & Young LLP discuss the changes that are impacting tax and finance today.
Results from the EY 2022 Tax and Finance Operations Survey indicate that, of the 1,700 companies across 45 countries that responded, 85% are scrutinizing their existing finance and tax operating models for issues that can potentially weaken their future impact. Many are finding it necessary to make dramatic adjustments in some key operational areas to keep pace with our evolving post-pandemic workplace.
Talent: Businesses are experiencing a short supply of finance and tax talent internally, particularly those with transformational skills in technology — e.g., AI, machine learning, data modeling — all of which can help drive speed and quality.
Legislative and regulatory changes: Dramatic changes globally sent companies scurrying to find skilled resources to identify and interpret myriad changes and make required adjustments within their company.
Sustainable plans for data and technology: 50% of survey respondents cited the absence of formal, viable data and technology plans as the number one reason they could fail to achieve their mission and vision.
Budget pressures and cost reduction: 74% of respondents said they had to institute cost reduction strategies due to the pandemic and economic downturn.
To help address these and other functional and operational challenges, many large companies are exploring co-sourcing more strategic and value-add activities in their finance and tax functions and partnering with teams outside their organization with deep knowledge and commitment to certain areas of the business. Successful co-sourcing enables companies to streamline and develop consistent processes, automate when possible, and optimize technology to drive value and speed.
Key takeaways:
Companies are retooling their finance and tax operating models and discovering that co-sourcing with the right partner can help them fill post-pandemic talent gaps, maximize technology, streamline processes, gain scale, and ultimately strengthen their impact.
Technology is a key driver. So much can be learned about business practices and behaviors via AI, machine learning and data modeling.
Co-sourcing can help companies reallocate in-house resources and responsibilities and take advantage of partners' skilled teams and technologies.
For your convenience, full text transcript of this podcast is also available.
“Leverage technology to the max, wherever you can. Technology has enabled a deeper appreciation for the challenges that we have in the field across the world, but also allowed us to gain scale faster.”
Myles Corson
That was Victor Casalino, Microsoft’s Head of Finance in the Americas, letting us into some of the many transformations that have been happening at Microsoft recently.
I’m Myles Corson from Ernst & Young, host of the Better Finance podcast, a series that explores the changing dynamics of the business world and what it means to the finance leaders of today and tomorrow.
In a fascinating and informed conversation with Victor, and Dave Helmer - who leads the Global Tax and Finance Operate Business at EY - we explored the many changes that are impacting finance today – the need for partnership, artificial intelligence (AI) and machine learning, common data models, data lakes and data reuse, and many other transformations that are making finance an ever more important role at Microsoft, and companies everywhere.
Dave unpacks the findings of the 2022 EY Tax and Finance Operations Survey and talks about what that means for talent, regulatory changes, sustainability and budget cuts. Dave explains that the vast majority of companies are now looking for co-sourcing arrangements and partnering with external providers to enable data reuse and provide tremendous speed, efficiency, and also higher quality.
The conversation also touched on many other fascinating areas. What talent should you look for in this new world? How do you use technology to separate the strategic and automated aspects of data use? And why do you need courage and the ability to tell stories in this new world?
There’s a lot in here. I got a lot out of this conversation, and I hope you will too.
Corson
Victor and David, thanks very much for joining us.
Dave Helmer
Thank you Myles; it’s terrific to be with you.
Victor Casalino
Likewise, thank you very much, Myles.
Corson
So, perhaps as we get started, Victor, I could ask you first of all, to introduce yourself and provide a little bit of your personal background, and your current role and your career journey to get to that point.
Casalino
Thank you very much, Myles. I’m currently the Head of Finance for the commercial business in the Americas regions for Microsoft. That means, that I oversee our commercial engagement in Canada, Latin America and the United States. I’ve been 25 years with the company, and my career has been mainly focused on the commercial business, with some stints in the engineering and finance here at Microsoft.
Corson
Fantastic. Dave, perhaps I can ask you to provide a bit of an intro and background on your career journey.
Helmer
I started with EY back in 1987. So I’ve been with the firm going on 36 years now. I’ve worked in Chicago, Washington DC, and London, I’ve led our Americas in Global Planning and Compliance Practices, and for the last five years, I’ve led our Global Tax and Finance Operate Business, meeting with companies all around the world.
Corson
Let’s use that as a jumping-off point, Dave. I know as part of your role, you’re responsible for the EY Tax and Finance Operations Survey. So perhaps you can level-set us with some of the insights coming out of that 2022 report.
Helmer
We interviewed 1,700 companies across all sectors, across, 45 countries, and really found some terrific insights.
First, we found 85% of these companies were re-examining their operating models now for tax and finance and looking at new ways of working. With that, we also found that 96% of these companies were more likely than not to explore co-sourcing for some of their data-driven, rules-based, and routine activities. And part of that trend around examining operating models, and looking at co-sourcing, were the challenges that these companies were facing.
Four big challenges. First was around talent. Companies indicated they were really struggling to find people for these technical roles around the globe, develop them and then retain them in transforming their skills around data and technology.
The companies also felt pressure from all the legislative and regulatory change, and we know governments spent over US$30 trillion – and that’s with a T–US$30 trillion dollars of incentives during the COVID-19 crisis. And now they’re having to fund all of that spend[ing]. So, there’s dramatic changes happening around the globe. And for companies to identify those changes, interpret them, and then adjust for it within the company has been a real big challenge.
The third big area was having a sustainable plan for data and technology. In fact, the companies said, 50% of them said that that was the number one reason that they could fail to achieve their mission and vision was having a sustainable plan for data and technology.
And then, really, the straw that breaks the camel’s back is budget pressures and cost reduction. So, having to deal with all the challenges around talent and legislation and data and technology, 74% of the companies said they also had to go through cost reductions on top of that. A lot of pressure there and a lot of change happening in tax and finance.
Corson
That’s a great start to the conversation. So, Victor, interested in how that resonates with you, particularly comments around talent challenges and technological transformation and how they’re impacting corporate tax and finance functions.
So, you can maybe just share how it’s impacting your own organization internally with Microsoft, but also potentially how Microsoft is helping address some of those challenges for your customers.
Casalino
There are a couple of areas that I can share. There are two key tenets of how we’ve approached finance operations excellence in execution from our side.
The first one is, of course leverage technology to the max wherever you can. Technology has enabled a deeper appreciation for the challenges that we have in the field across the world, but also allowed us to gain scale faster.
The second one is how we think about our execution in terms of allowing our teams to verticalize and to go deeper as much as they can. By that, I mean long time ago we made a decision about going fully vertical in some key finance functions: accounting, treasury, and tax. Those are global functions for Microsoft.
We all say create and collections. And what it does is it allows you to gain scale, to develop expertise, and to have consistent processes and ways of operating around the world.
Another aspect connected to this one is the relationships that we develop with certain partners in order, again, to gain scale. Our goal is to go, as a final function, is to go upstream in value-creation. Technology is a key driver. There are a number of things that you can do now with machine learning, with data democratization, with the ability to gather data, but also understand it, analyze it, add scale in a way that makes sense and drives business behavior. But also, on the side of these relationships that I mentioned with key partners, it allows you to develop strength, and consistency on processes probably that are more repetitive, but they need to be excellent.
You need to be outstanding in how you do your accounting, and how you calculate and present taxes globally.
Helmer
And Victor, great example pointing out where you talked about how powerful data and technology is today in partnering. You look at a value-added tax return, today the capability to extract accounts payable, account receivable, get it into a common data model, connect it with state-of-the-art reporting engines, and generate a value-added tax return without even having the human involvement, right? It would just be a review. So, your point about the capability of having that data model and the technology, what can be done today, is so powerful.
Casalino
The example that you mention is one of the things that we, from a finance stance, when I have the chance to talk to CFOs, customers of ours, across the region, that’s one of the key examples that we bring together. That’s on taxes. But there are other aspects as well. When you think about compliance, for example, understanding how you are driving and closing deals at scale around the world, it’s almost impossible to try to go and check for compliance aspects in every single deal and transaction. This is where artificial intelligence and machine learning have come into play. And in our systems allowed us to flag proactively things that we need to be looking for. And so, yes, that’s been fantastic.
Helmer
And it drives speed and quality; that example, I highlighted earlier with the value-added tax, we apply nearly 200 analytical tests on the data, checking for country codes, repeat information, etc. The checks that a perfect human would do you could automate and build all that in and never miss a beat. So, even that automation, driving the great efficiency, can even drive higher quality because you’re able to check the data and really make sure that it’s been perfected.
Corson
Victor, I did want to get back to a couple of comments you made, particularly around data democratization and the use of machine learning. It would be really helpful for the audience if you could share some examples about how you’ve applied that and how you use it within Microsoft’s finance organization.
Casalino
I would say in terms of data democratization, what we find ourselves now is that a lot of the metrics that we use to run the business are not necessarily only financial. Of course, your enterprise resource planning (ERP) of choice would produce certain kinds of information that is critical for you to understand past performance. Perhaps even forecasting. But there are a number of known financial metrics that need to be reflected, and they need to be scaled and produced, and reported in ways that the company can make the best use of them.
Without getting too technical, I think we have now processes, data lakes, they call them, that allow for the intake of structuring and structure data that will allow you to bring both worlds, you know, business metrics, qualitative metrics, and financials in order to make a better use of them.
How you distribute this information also matters. And there are a number of tools and systems. Our company has been at the forefront in that area that allows information to get with speed, with the right levels of security and privacy to the different users around the company.
Corson
And machine learning?
Casalino
Machine learning? That’s a great source of impact and progress for us over the past few years. We use machine learning to have a better view on how we forecast at scale.
You can use it for a number of things, from cost of goods sold, for casting calls, but also on the revenue front. If you think about it, an organization like ours, the way that forecasts are produced from the field, from the commercial organizations, it’s a rollout process coming from different geographies or locations.
And so that process inherently is complicated, and there’s a little bit of political negotiation that clouds the view from what truly is the business stance. And I think machine learning has allowed us to put benchmarks on the ground, to understand whether we were close or not through performance. And what you will find is over time, those models they tend to be very accurate. And so, if you’re going to be far away from whatever these tools are providing, you’d better have a very good reason or a very good explanation. So that has allowed our forecasting processes to become more predictable, more accurate, and less political, if you will.
Corson
And you also talked very eloquently about your use of partners as part of how you run the function. Can you talk a little bit more about … within the retained organization, what are those kinds of more strategic value-add activities, and you obviously gave some examples of compliance and some of the tax reporting as a way you would work with partners.
Casalino
Yes.
Corson
How do you evaluate those relationships and what you do versus what you partner on?
Casalino
As a finance function, we haven’t really grown as much as the business has grown, both in terms of absolute dollars, but also complexity. We are clearly a more sophisticated business now than we were 10 years ago, five years ago. What is important to us as a finance function again is to go upstream in value-creation, in how we partner with the business, and the impact that we drive at scale. And so, we hire that sort of talent.
We want to have talent that gravitates toward business engagement, that are great at storytelling, in that they can frame, understand the business model, understand the business, the opportunity, the challenges, and they’re able to frame them correctly with our business partners.
To be able to do that, we need to have a very strong foundation on key parts of our function. Right? You need to be excellent on accounting, excellent on controls and compliance into a stat(?) and tax reporting, and you cannot have chinks in the armor, if you will, on those fronts. And what we found is that we need to partner with people who have deep expertise and commitment to certain areas of the business, like the ones I mentioned. And we’ve been very successful that way, I would also say. We have a long-standing partnership with a strong global BPO on our accounting functions at scale, and so that has delivered for us. Consistent reporting, and consistent ways of doing our accounting across all of our different subsidiaries. And we have also partnerships as well on the tax front. It has allowed us to streamline our reporting, to be consistent, to use technology in a consistent way, in develop market case, in emerging economies, to comply with something that is super important to us so that we can be allowed to partner at a higher level with the business.
Corson
With that sort of higher partnering and business skillset coming to the fore, how’s that changed how you think about recruitment and where you identify talent from?
Casalino
To be honest, I don’t know that it has changed a lot. We have always recruited and hired for potential and for values. And I think great people will always find ways to automate what is possible, to standardize and to solidify processes so that they can go out and have the opportunity to add value at scale.
The world has changed in recent times. We’re just kind of truly emerging from the pandemic that lasted a couple of years. The hybrid world has changed how we think about recruiting.
I mean, quite frankly, we used to think of Redmond, that’s where I’m based in Seattle, as the center of the world for Microsoft, and if you wanted to have a career, hey, you better come to Seattle and to Redmond. And I don’t know that that’s entirely the case in all cases. The fact that we’re having this conversation online is a testament to that. But also how we work.
It was a little bit of, I don’t know, a small miracle,when we started to close books at the earliest stages of the pandemic, submitting tax reports, doing all your filings, your forecasting, your planning, when everyone working from home, and if anything has been proven is that it’s possible, and in some cases, more productive to work in a distributed manner.
Corson
That’s great. I think your example of how finance organizations adapted with real agility during the pandemic and showed that they could move with speed and innovate ways of working was fantastic. And that sort of again raises a difficult question.
So, it’s not about recruiting, as it is about evolving the mindsets and skillsets of your people, and how have you seen that sort of transform over the last few years?
Casalino
My sense is that over the last couple of years, people walked into the unknown. And they’ve come up out of it stronger.
On a personal level I think there are elements that have changed us, I would say, in a durable way. The way we work is changed fundamentally, I think. But the inherent qualities, the sort of talent that we require, that we want to have at Microsoft, I don’t think it has fundamentally changed. I mean, we want people who are creative, that share of our values, that are willing to take risks. And that they care actually for the society that we’re working on.
Corson
Dave, perhaps I can bring you back in at this point and get your perspectives on how you’ve seen the operation model evolve, particularly for the tax function, where you’re focused.
Helmer
What I see many companies doing, from an operating model standpoint, is separating the high value in really strategic matters, things like tax planning, controversy, governance, from the data-driven, rules-based, compliance activity. Say doing a corporate income tax return.
And then what the companies are doing with these data-driven, rules-based activities is one of two things.
They’re either investing in a data management platform, a common data model, and linking to state-of-the-art reporting engines, so they can automate end-to-end all their compliance activities. Or they’re working with a service provider who has built a data management platform, common data model, and has those state-of-the-art reporting engines to automate and deliver those compliance services in an efficient way.
The big takeaway from that is with the power of data and tech - as Victor said earlier - those routine compliance matters that should be done with automation today.
What that then does is frees up companies’ budgets and people to work on those real high-value, strategic activities, and be a real value-added partner to the business.
Corson
How are you seeing that translate into the way EY is supporting clients? Have you seen that evolving?
Helmer
Yes, it’s really a perfect storm right now in that almost every week a new big company is coming in to explore that co-sourcing relationship. Many find it very expensive and risky to build all of those capabilities internally, and then to be able to maintain it, if you have tech changes, or tax law changes, it could be outdated pretty quickly.
I see a lot of companies actually now looking externally to get help in co-sourcing those routine activities. In fact, I noted earlier in the survey, 96% of the respondents said they were exploring co-sourcing as a way to solve these challenges. We’ve been investing billions in technology and working with Microsoft to build out that data management platform, and to have that common data model, so we can help clients on that journey and really be able to drive high-scale automation.
One last point, kind of adding on to some of Victor’s comments around data and the reuse of data. If you think of tax, the data that you use to prepare your statutory accounts, it’s much of the same data that is used in your income tax provision. And much of the same data then is used for your corporate income tax return. And that’s where the power of a common data model in data reuse and that automation and linking all that up can provide tremendous speed, efficiency, and also higher quality.
Corson
Victor, we touched on data and machine learning and some of these technologies earlier. But obviously, one of the constants is change, and I’m sure it will continue to evolve and have a vision for where the future of its finance organization is going.
So, just interested in anything else you can share around the role of technology and data or any other challenges and opportunities you see in terms of the next wave of transformation.
Casalino
For me, technology is a scale driver. It just gives you the ability to drive impact faster and deeper into the organization. That’s probably one of the things that [have] impacted the business world in recent years.
I think the past five to 10 years; it’s been just that constant acceleration on how we obtain business intelligence. We can make better decisions, [be] more predictable, more consistently at scale. It’s about how you democratize access to that information, and how you make it more ubiquitous, easily accessible, in a consistent manner.
There is a bit of work that needs to go in there to make sure that you have consistency on some key definitions. But once you're there, I think, the organization itself just accelerates in its impact.
Corson
And on that point, Victor, and you mentioned business partnering early on, I think one of the big opportunities in finance is to engage cross-functionally and be more active in supporting analysis, business decision-making, and clearly the data, the democratization is an important element of that. Have you seen a change of behavior, a change in ways, that your team is engaging with other parts of the Microsoft organization?
Casalino
Definitely, especially in the business that I’m in. Our role is to partner with our sales force to drive success in Microsoft. To engage with customers, help them succeed because their success is actually how we drive consumption and [how] we drive progress in the company.
So, the stronger we are at the core, the stronger we are foundationally where we need to be; the more time we have to engage in business discussions and conversations with our business partners. That clearly has been the case. I think it has been a constant north star for our teams.
And the pacing, how you can achieve that, has probably accelerated in recent years.
I don’t want to paint either a very rosy picture. I mean, there is a lot of work that we do that we need to do in the future. But if you compare where we were now with 10, 15 years ago, it’s just incredible.
We’re shifting from a world where looking in the rear-view mirror, looking at past performance, trying to explain what happens, toward more what is it that we need to do, where is the signal. And not just financial signal, but also other metrics are non-financial. To understand performance, to understand where is it that we need to lean in with resources. Where do we need to invest? Where do we need to de-invest, which is equally as important, so that we can accelerate progress and drive success with customers?
At the end of the day, finance leaders are all about resource allocation. That is the most strategic thing that we get to do. And to be able to do that, you need to have, the most current, the most updated, the most relevant information with you.
And of course, you need to have the courage, you need to have the ability to do storytelling and engage with business partners. And that is what we’re seeking in the people who work with us, in the team, in the finance organization. You can only get to do that when you’re strong, strong, strong at the core.
Corson
That’s a great, positive, uplifting message to end on. In wrapping up, I could ask each of you to maybe give one sort of key recommendation or action to our listeners. Dave, I’ll start with you.
Helmer
Probably the key thing is for companies to continue to re-examine their operating models and make sure that they’re focused on the valuable and high-risk activities for the organization. And that they’re driving automation or working with a provider who can provide that high-scale automation for the data-driven compliance activities. I think that’s probably my big takeaway.
And as Victor said, data and technology continue to be enhanced and provide more capabilities of machine learning and artificial intelligence. It’s a journey, right? And more things are coming available. Great way to drive efficiency and higher quality.
Corson
Victor, final thought from you?
Casalino
I would say that by now, every company probably has realized the impact and the potential of technology in how we run our business and how we succeed in the marketplace. And in a way, we are all in a digital transformation. I know that these are buzzwords, but you know we are all, all, all of us are in the digital transformation. Some are a little bit ahead, but we’re all in the same journey. And I think it’s super important. It’s key to understand how to leverage technology to allow our teams to scale.
Scale also comes from having clarity in how we approach processes. And some of the key decisions that we get to make, allowing our teams to gain expertise in allowing them to go up in the value chain, and have this impact. It’s been a pleasure David, Myles, sharing this time with both of you.
Corson
Thank you both for sharing your insights.
(MUSIC)
Corson
Many thanks again to Victor and David for taking the time to share their experiences about the accelerating transformation of the role of finance in business today.
If you’ve enjoyed this or any of the other episodes, please remember to subscribe to the series or leave a rating or review, and if you’d like to find out more about this topic, we’ll post related links at ey.com/betterfinance.
And as always, thank you to you, our listeners, for supporting the podcast. I look forward to speaking with you on the next episode of the Better Finance podcast.
