Managing finance system localisation projects: a practical guide
The global finance system market, also known as enterprise resource planning (ERP), continues to grow as companies strive to consolidate and simplify their accounting and tax (A&T) processes across multiple jurisdictions. Along with global business ambitions, finance system localisation is driven by increasing international expansion, the shift to tax administration 3.0 and continuously evolving A&T requirements.
Despite this market growth, research by Gartner predicts that more than 70% of recently implemented finance system localisation (or ERP localisation) projects will fail to meet their objectives by 2027. As many as 25% will fail completely. With finance system localisation being an essential part of company growth, how do companies ensure their efforts are successful and can deliver the desired benefits in every jurisdiction?
Preparation is key
Global finance systems are, by nature, large and complex with many moving parts. Accounting and tax localisation further complicates matters. To overcome these challenges, companies must invest time and preparation ahead of implementation so their projects can run smoothly and efficiently. There are four phases of preparation that companies should consider for their finance localisation projects.
1. Gather the correct information
It is essential to collect accurate and up-to-date information about the local requirements for data handling, tools/APIs for accounting and tax, invoicing and other reporting processes, as they vary from one jurisdiction to the next. Companies should also be aware of jurisdictions that require specific approvals from local tax authorities.
2. Identify the gaps
Once a company has confirmed the local requirements, it’s important that they identify any gaps in the system that could prevent compliance. Companies should have a clear vision for their finance or ERP system. If there are functions that the system cannot handle, what is the process for managing them?
A thorough analysis of the finance system will help identify any technology and knowledge gaps, such as the need for new tools, interfaces or functionalities. Team leaders should also consider the in-house knowledge, expertise and capacity for managing the project.
3. Identify solutions
Finance systems must be configured to meet both IT standards and accounting & tax requirements. Team leaders should look for opportunities to simplify the system, thereby reducing the administration burden. For example, what should current and future processes look like, and what are the roles and responsibilities?
Finance systems must be properly aligned with local A&T policy and data requirements and be adaptable to policy changes and updates. When integrating, consolidating and upgrading these systems, it’s important to continuously look for opportunities to reshape and improve processes.
4. Make clear decisions
Managers should be clear on when the finance system localisation project should go live. Too often, these deadlines are soft, and there is the temptation to keep extending them. Before the project gets underway, companies should decide who will lead it, who will handle the administration, any training that might be required and how costs will be measured and controlled. There is also the question of whether the project will need to be outsourced.
TMF Group’s framework for success
At TMF Group, we have worked with many clients on ERP projects over the years, so we understand the most common pitfalls and how to avoid them. To support successful multi-country finance system localisation, we have developed a project framework that covers five key pillars.
1. Finance system requirements
It is vital to map clear objectives and desired outcomes at the beginning of a localisation project. Companies should define what they want the system to do and understand what is required to achieve this goal.
These requirements must be communicated to the internal team, the IT implementation partner and external localisation consultants, especially when the project extends across a global scale with variations in local requirements and obligations.
2. Local data regulations
There are two types of data to consider in a finance system localisation project: local regulations around accounting, tax and invoicing, and the existing financial data residing in legacy systems. Local regulations vary widely and must be reflected properly in the finance system. For example, the HMRC’s Making Tax Digital (MTD) initiative in the UK requires VAT-registered businesses to maintain digital records, use API-enabled software for VAT returns and establish links between software packages to prevent manual, fallible data transfer.
Companies moving from a legacy system to a new finance system will have to migrate large amounts of data, particularly in the case of mergers and acquisitions. This is the perfect time to perform a data assessment, cleansing and verification to ensure that only the required data is transferred into the new or updated finance system.
The data mapping and transfer process should be as smooth and efficient as possible. Companies should allocate sufficient time to complete this process properly.
3. Processes
As with data, it is important to fully evaluate processes before the new system is implemented. A process review will ensure all current processes are captured correctly, as well as what will change in the new finance system as part of localisation.
It is also important to identify which processes should be manual and which should be automated, as well as how the processes will be affected by the practical application of local regulations. Mapping out and documenting business processes, roles and responsibilities requires a lot of up-front effort, but it pays off in the long run.
Different finance or ERP systems have different functionalities for accounting and tax reporting, so companies must understand the impact of processes on these functionalities and dedicate enough time to this discovery to avoid delays.
4. People
It is important to identify the key stakeholders in the project, from internal accounting and tax experts to external localisation experts, IT deployment partners and end users of the system. All parties should be involved in the project planning and execution.
Finance system localisation experts play a key role. They bring essential knowledge of both local and international regulations and best-in-class process solutions and can find workaround solutions where necessary. They can translate tax and accounting rules into instructions for IT vendors and act as end-to-end project managers for the project.
5. Testing
Testing is a key element that is a frequent point of failure because companies underestimate the necessity and the time it takes to implement. Before going live, the system must be tested for all functionalities, configurations and reporting (including transactional level testing).
Companies must set aside enough time for validation scenarios, security testing and access rights testing. This allows any configuration or security access issues to be identified and corrected before the go-live date.
Finance system localisation has become an integral part of accounting and tax compliance for multi-jurisdictional companies. Early preparation and process analysis not only help to ensure efficient progress of the project, but also the system’s long-term ability to adapt to continuously changing rules and regulations.
Talk to us
Are you looking to set up a new finance system localisation project? Watch the recording of our webinar “Common challenges and practical tips in ERP localisation projects” and find out how our global accounting and tax consultancy team can guide your company through the process.
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