Statutory accounting and tax rule differences in Europe might cause a real challenge to companies during their ERP (Enterprise Resource Planning) system implementation and localization projects.
When an international company extends its business abroad and decides to outsource the accounting and tax compliance functions to an external BPO (Business Process Outsourcing) provider like BPiON) the first significant decision is whether to use the Client company’s ERP system -if any- or to let the external service providers use their local compliant accounting software.
There are several pros and cons.
FULL OUTSOURCING – ACCOUNTING SERVICES AND SOFTWARE
Using the outsourcing partner’s local accounting software secures 100% local statutory accounting and tax compliance.
Furthermore:
+ It is the accounting service provider’s obligation to have the system licensed and maintain the system upgrades.
+ The IT security and IT infrastructural questions are managed by the service provider as well.
+The implementation of an accounting outsourcing service model can be more standardized and needs less time than an ERP localization and data migration project.
The disadvantage of the full outsourced model from ERP point of view, that we can’t decide which ERP to use and will always have limited access to data and control over procedures. It’s also a question whether the Client has internal resources to maintain control over data and procedures at all.
COOPERATION IN A HYBRID ACCOUNTING OUTSOURCING MODEL – ONLY ACCOUNTING SERVICES
There are hybrid outsourcing structures when the accounting service provider and the client share the obligations; the ERP system is provided by the Client and the parties collaborate in the same platform. In such a hybrid model the professional activities (accounting tasks, preparation and submission of tax returns, financial administration etc.) are outsourced but the ERP system is held by the Client. In this case, the service provider needs to get access to the Client’s system and the parties need to define the levels of access rights.
Reasons for choosing a hybrid outsourcing model:
+ One reason could be a global company policy declaring the preferred system for each subsidiary of the group, which is usually the case when global complex consolidation system is in place.
+ Another reason for the hybrid approach is the industrial business complexity which requires a composite functionality and integrity as well as a workflow backing.
WHAT ARE THE SUCCESS FACTORS OF THE HYBRID ACCOUNTING OUTSOURCING AND WHERE SHOULD WE FOCUS?
This kind of cooperation works very effectively. BPiON accounting professionals – in Hungary and Poland – currently have extensive system knowledge in 13 different ERP systems – Korab, SAP, Eurofib, Yardi, Coda (UNIT4), Axapta – Microsoft Dynamics, Octopus, iScala, SunSystem, Oracle, ENOVA, Microsoft Navision, Exact, Kulcssoft -, but if necessary, in addition to providing proper training, we perform accounting tasks in any system.
When only the service is outsourced, BPiON rather focuses on defining the reporting needs of the Client and having proper mapping between the local and group trial balance, Balance Sheet and P&L. Although the accounting and tax reporting is managed through our local accounting system, we use adjustments to generate numbers according to Client’s group accounting policies. The trial balance mapping helps us to deliver the management information in the required structure and content to the C-level decision-makers.
Working in a hybrid accounting outsourcing structure makes it possible for our Clients to get real-time accounting information and real-time financial reports. The accounting process becomes trackable and transparent. KPI’s are easily measurable and the integrity of different system modules is assured. To consolidate accounting data and to have a holistic picture about the company group’s overall result, an ERP system is a good solution. If the accounting data of the subsidiaries are available in different systems in different countries, first we must collect the information, harmonize the structure of reports and consolidate data. Consolidating is always time-consuming and needs to involve more parties or to set up other satellite systems.
The complex nature of ERP implementation needs circumspect planning and professional knowledge about the regulations of the target country where the system is to be implemented.
In the upcoming parts of my blog post series, I would like to share some practical guidance about ERP system localization in the CEE and the Hungarian taxation aspects of such a project.
In the meantime, check out the article by Tamás Kovács regarding the smart use of data: Do I have to change my ERP?
Contact:
