January 17, 2012 TEI - Nebraska Chapter Meeting Effective Process Improvement

Process Improvement John Fiore Director Chicago, IL Anne Giffels Senior Project Manager Chicago, IL

Determining Your Starting Point Where should you focus your time and budget?

AttributeExamples High Level of IntegrationCompliance and provision technology configuration is matched Tax Sensitized Source DataHigh percentage (>50%) of book-tax differences are automated Very little manipulation of data after it is received Company RecognitionTax is included in M&A due diligence Focus on Effective RateMateriality and a risk-based approach to preparation and review Continuous ImprovementOngoing process improvement workplan that is updated every year What are Best Practices?

Short-term –Immediate results –Build momentum –Foundational Long-term –Two to five years –Strategically focused –Company supported Establish a Vision

Approaching the Process Review

Questions for the Audience How are you currently scheduling and communicating process improvement initiatives? Which tax department attributes are you focused on improving in your one-year and five-year plans? What steps are you taking to maintain the energy for continuous process improvement?

Marketplace Observations You want to be here.

Starting with the Data – Start with the Data

– Understand the Process

Provide Visibility

Key Considerations Evaluate Your Technology – Improve or Replace –Compliance –Provision –Document Management –Calendar Automate Book-Tax Differences –Provision –Return

Technology Evaluation Define Your Requirements –What You Need vs. What the Current Software Provides Rank the Requirements –Must Have –Should Have –Would Like to Have Evaluate Your Technology Against Your Requirements –Identify Gaps –Identify Matches Next Steps –Evaluate Other Software? –Request Additional Modules and/or Improvements?

Book-Tax Difference Automation Prepare a List of Your Book-Tax Differences –Brief Description of the Calculation –Data Sources Separate Into Groups –Reversal of Book Expense – Full or Partial –Change in Balance Sheet Balance –Change in Balance Sheet +/- Payments –Scheduled –Other Weighted vs. Unweighted Map Into Matrix –Simple or Complex Calculation –Simple or Complex Data Source(s)

Book-Tax Difference Visibility Chart

Examples of Improvements to Undertake Book-Tax Difference Visibility Book-Tax Difference Automation Debrief – Provision, Compliance, Data Collection, Audit Closing Technology Evaluation – Provision, Compliance, Workflow, Tax Data Warehouse Technology Training Implement/Improve Compliance Technology Implement/Improve Provision Technology Document Retention Evaluation Document Retention Improvements

Planning for Improvement – When? Jan Feb March April May June July Aug Sept Oct Nov Dec 2 nd Q Estimated Payments 1 st Q Estimated Payments Return Extensions YE Provision Q1 Provision Q2 Provision 3 rd Q Estimated Payments Begin Returns Q3 Provision Federal Returns Due State Returns Due 4 th Q Estimated Payments Process Improvements Project List Book-Tax Difference Visibility Book-Tax Difference Automation Provision Debrief Data Collection Debrief Compliance Debrief Provision Technology Evaluation Compliance Technology Evaluation Technology Training Implement/Improve Compliance Technology Implement/Improve Provision Technology Document Retention Evaluation Document Retention Improvements

Normal Activities – Year-End Provision To Do List – Provision Debrief  What worked well?  What needs to improve? January Jan Feb March April May June July Aug Sept Oct Nov Dec YE Provision

Normal Activities –Data Collection for Tax Returns –Prepare for Compliance –File Extensions To Do List –Complete Compliance Implementation/ Improvement February/March Jan Feb March April May June July Aug Sept Oct Nov Dec Return Extensions

Normal Activities –Begin Tax Return –Q1 Provision –Q1 Estimated Payments To Do List –Evaluate Provision Software April Jan Feb March April May June July Aug Sept Oct Nov Dec Q1 Estimated Payments Q1 Provision Begin Returns

Normal Activities –Continue Preparation of Tax Returns –Q2 Estimated Payments –Q2 Provision To Do List –Implement Provision Software May/June/July/August Jan Feb March April May June July Aug Sept Oct Nov Dec Continue Returns Q2 Estimated Payments Q2 Provision

Normal Activities –Complete Federal Return –Q3 Estimated Tax Payments To Do List –Implement/Improve Federal Tax Packages –Federal Compliance Debrief September Federal Returns Due Q3 Estimated Payments

Normal Activities –State Returns Due –Q3 Provision To Do List –Evaluate Tax Compliance Technology –State Compliance Debrief –Plan for Year End –Implement/Improve State Tax Packages October Q3 Provision State Returns Due

Normal Activities –Q4 Estimated Payments To Do List –Implement Changes for Year End –Automate Book-Tax Differences –Implement Compliance Software November/December Q4 Estimated Payments

How Much Time Do You Need? Process Improvement InitiativeDurationEffort Provision/Compliance Debrief1 Week1 Day Technology Selection 3 – 4 Weeks 5 Days System Implementation3–4 Months3–4 Weeks Book-Tax Visibility2 Weeks2–3 Days Book-Tax Automation4 Weeks10 Days

Resources People –Within Tax –Outside Tax  IT – Utilize Their Project Management Expertise  Accounting/Finance  Internal Audit Process –Workplan –Measurement – What Gets Measured Gets Done –Budget – $ and Time Technology –Project Management Tools

Questions for the Audience What observations do you have about your current process improvement plans? How do they fit into the bigger picture of creating a more efficient tax department? Are there any process improvement experiences, good or bad, that you would like to share? How do you set priorities among a list of process improvement initiatives, and how do you build process improvement into the calendar?

Keys to Successful Redesign Identify the Root Cause of the Problem, Not the Symptom Reconnect the Tax Department to the Organization Shift Resources From Compliance to Value-added Activities Outsource Appropriate Processes

Process Improvement is a Process The World Series isn't won or lost on Opening Day Don’t Try to do Everything at Once Workplan to Stay Focused Strive for Continuous Improvement Start with Smaller Projects to Build Momentum Know the Stakeholders and Make Sure They’re Involved

Unrealistic Deadlines –Aggressive Timelines –Flexible Planning Scope Changes –Poorly Defined –Badly Managed Risks Not Managed –Identify and Assess –Mitigation Common Mistakes Poor Communication and Collaboration –Competing Priorities –Silos Stakeholders Not Engaged –Not Properly Identified –Excluded Undefined Goals and Objectives –Share the Vision –Repeat Often

Trust the Team –Include the Team to Set Timelines and Scope –Bottom-Up, Not Top-Down Face Your Fears –Don’t Focus on the Benefits at the Expense of Identifying the Problems –Prepare Mitigation Plans Communicate, Communicate, Communicate –Weekly or Bi-Weekly Status Reports –Regular Steering Committee Meetings How to Avoid the Mistakes

Where Do You Want to Start?

Meaningful and Lasting Improvements Employ a dynamic combination of approach, expertise, experience and style that positions us to deliver sustainable results Provide an integrated and total solution to the tax process needs of our clients Recognize there is no single element, no simple formula, for achieving successful change and that each solution is as unique as each client Demonstrate that capability and knowledge transfer are key, so that tax processes can continually improve after the project is complete Engage professionals throughout the process to manage change and build ownership and support for lasting results Focus on results that bring meaningful change to your organization

Questions?

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