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What is Global Compliance and Reporting?

Modernization and technology has changed lot many things but most importantly it has changed the definition of success for a business. Gone are the days when businesses use to operate within one boundary and be successful in the same. In today’s scenario, it is important for a business to not only explore different markets and territories but also be successful, however succeeding in a global economy means having the agility to explore and pursue available opportunities in the targeted market and while it is easy to expand globally, catch is to match up with the compliance and reporting demands because wrong and inaccurate reporting and inconsistent oversight not only expose your business to potential risks but can also make you suffer certain unexpected financial penalties. It is important for the companies and the businesses to be aware of the compliance and reporting demands because as mentioned, missed global fillings can not only translate into substantial fines but can also halt entire business operations in the potential and important global growth markets.

Also Read: Business Growth System

Compliance, much contrary to its common notion, may be a routine function and if have got the right nerve of it, it has the potential to add tremendous value to your business. However, if done wrong, it can destroy a company. Notwithstanding its potential, not many have reached the stage of optimum global compliance efficiency and are still a greenhorn in the field of global compliance and reporting.

If to talk in general terms, compliance means conforming to a rule such as specification, policy, standard or law and regulatory compliance describes the goal that organizations aspire to achieve in their efforts to ensure that they are aware of. UK regulatory framework demands that a fair global compliance and reporting process to be followed by the companies listed or registered in the country and last 20 years have been increasingly challenging and complex legislative landscape governing accounting and regulatory compliance has only added to the woes of not only for those organizations having an international footprint but also for those businesses who are taking their first steps into new global markets. With the advent of technology and cloud platforms, the need and demand for real-time reporting has increased multi-fold with an exponential increase to the cyber threats and cyber security challenges and thus it has become important to give a closer look to global compliance and reporting for three main reasons:

  1. Business models have evolved.
  2. Transforming finance functions.
  3. Increasingly complex regulatory landscape.
Global Compliance and Reporting

Global GCR model

As per a recent study, it has been reported that there almost 80% of the companies have changed their finance models i.e. they either have recently completed or in the process of completing a finance transformation in the next 2 years and while global compliance and reporting being an indispensable part of such transformation, most of such companies have either overlooked many essential sub-processes such as the flow of financial data to global compliance and reporting or have not taken cognizance of it at all. When an organization or a business undergoes a financial transformation, it isn’t just reorganizing but is rather going through a comprehensive evaluation of its finance model and its mission in order to determine its optimal utilization and while the driving force every company might differ, for example, may be for one business it is largely cost focused whereas for another it is more performance; global compliance and reporting is going to be impacted in a way or the other and every company must consider it with sincerity. Need to give a serious thought to global compliance and reporting comes at a time when there are changes happening in the regulations where the focus is being more intently on the collection of tax revenues and sharing tax information globally and because of the same, companies are more focused on expanding market and customer reach, which in turn is making changes in the existing financial models an obvious one.

Also Read: Business Start-up Services

Financial transformations often involve the following:
  1. Adoption of new sourcing models
  2. Evolution in information systems
  3. Implementation of standard global processes
  4. Reduction of in-country resources
  5. Deployment of shared services centres (SSCs) and centers of excellence (CoEs)

The companies who have done an overhaul of their financial model and have capitalized on the opportunity to transform Global Compliance and Reporting (GCR) processes in conjunction with their broader transformation have already reaping the benefits of the same, such as enhanced operational agility, greater cost-effectiveness and improved decision-making and the companies who haven’t included GCR as an integral part of their financial transformation, will very soon feel an increasing need to do the same, because when a company decides to exclude GCR from their finance transformation, they are bound to face a significant risk of increased costs, mainly due to incorrect filings and other risks such as:

  1. Incomplete or inaccurate data
  2. Additional cost of compliance and reporting
  3. Missing deadlines/incurring penalties related to compliance and reporting
  4. Increased tax burden
There are top 5 insights to the Global Compliance and Reporting, mentioned as below:
  • Global Compliance and Reporting must be pulled into change initiatives: Gone are the days when historical business models were sufficient to support the needs of the new business environment and it has become need of the hour to include GCR into the change initiatives especially those related to finance model and the design and implementation of a new GCR model should become an integral part of the design of the broader finance and tax operating model.
  • Changes in financial model act as a catalyst for improved Global Compliance and Reporting: It is the change in focus on standardization business processes that acts as a catalyst in creating an efficient GCR processes. High- performing companies are working in the direction of finding relevant opportunities for integration, standardization and more efficient use of data. They are also including GCR in their information and systems architecture plans, which includes extending or making better use of existing systems as well as actively pursuing additional technologies that enables the core GCR processes themselves.
  • Local expertise makes for a successful Global Compliance and Reporting model: While everyone agree to have an effective global compliance and reporting mechanism in place, they also indicate that local-country resources are important to successful compliance with tax and regulatory requirements. Also the prevailing trend towards more aggressive tax enforcement increase the need for skilled local expertise and thus it is essential that GCR functions have access to the right local expertise in such a manner that it supports both quality and efficiency.
  • Leading companies blend the use of internal and external providers to optimize Global Compliance and Reporting: Most of the companies in UK are outsourcing GCR processes and are of the opinion that external providers have enabled access to a needed level of local expertise. Companies in UK are taking a strategic view of their operating and financial models and GCR requirements so that they can do an optimal mix of internal and external resources, where internal resources can focus on highest-value activities. Also blending of internal and external providers has enabled access to expertise and methodologies which has enhanced their processes and also given much needed flexibility and scalability.
  • Effective Global Compliance and Reporting models require a strong governance structure: As per one study, it is mainly the lack of governance because of which companies do not have an effective GCR model in place and thus indicates need for a greater level of control, visibility and accountability within GCR. Also by increasing the accountability and ownership and reducing the number of departments responsible for the CGR process, companies should be able to improve effectiveness, enhance visibility and avoid costly and time consuming surprises across the GCR spectrum worldwide. In order to include GCR as a daily routine, it is important to develop and implement a governance framework to manage GCR globally. Doing so will ensure control and stakeholder confidence and set a foundation for sustainable cost advantages through standardization, automation and centralization.

Implementing a global GCR model

Companies in UK are taking help of experts who are helping the companies with the development and implementation of GCR model by putting forward the framework to focus on four main components of GCR, such as:

  • The operational elements of efficiency, control and value that are often out of synchronization but needs to put together and balanced to achieve an effective GCR model.
  • The elements of compliance and reporting such as statutory accounting and reporting, tax accounting and provisions, income tax compliance, indirect tax compliance and governance and control.
  • An improved GCR model enables certain business outcomes such as market reach, operational agility, cost effectiveness and tax value.
  • The transitional stages where it is important to understand the company’s ever changing GCR requirements and gives a new definition to the operating model and adopting proper processes and systems.

In order to improve or work on the GCR, it is important for the businesses or the companies to first assess where they are with GCR today in terms of efficiency, control and value and then work as per the core operational elements of GCR as mentioned above.

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