What do the new tax changes mean for companies, small, medium and large? That appears to be the question on the minds of many firms. The passing of the Tax Cuts and Jobs Act, signed into law at the end of 2017, changes the way all types of businesses, public and private, are taxed and already is having an impact on accounting methods and workloads.
Not only will graduated tax brackets be replaced by a flat 21 percent corporate tax rate, but sweeping financial reporting changes will impact companies beginning this fiscal year. The new rules are expected to affect expensing of capital expenditures, deductions, purchases, inventories, charges for foreign earnings and profits, net operating losses, year-end disclosures and more.
So, what should accounting and finance managers do to make sure they’re in compliance with the law? A new survey by Robert Half Finance & Accounting shows only about a third of companies (32 percent) consider themselves very prepared for the new demands.
“Companies need to move quickly to get the right people and teams in place, provide training and upgrade systems to ensure a smooth transition to the new tax mandates,” said Steve Saah, executive director of Robert Half Finance & Accounting. “Acting fast to make necessary hires takes on greater importance given today’s low unemployment rates and shortages of top talent.”
Here are four strategies companies are using to prepare for the tax changes:
1. Hire full-time accounting and finance staff
In some companies, Saah says, the CFO or controller may take the lead at working through the requirements and impacts of the new law. At a small- or medium-sized company, this could fall under the scope of duties of senior or staff accountants. Large companies with dedicated tax departments may hire full-time tax accountants or consultants to help map out compliance.
Regardless of size, companies will likely find themselves looking for more resources. If that takes the form of hiring accounting staff to help with the additional workload, contacting a specialized recruitment firm is your best first step in today’s ever-tightening job market.
2. Learn from subject-matter experts
Training, including in-house presentations and guest speakers, is a must for financial executives and their teams.
Teaming up with an industry group gives you a chance to share ideas with colleagues and hear from experts in your industry. Professional associations like the American Institute of CPAs (AICPA) are already featuring a wide range of training sessions dedicated to tax reform at their conferences. And CPA firms are offering webcasts, seminars and continuing professional education (CPE) courses on financial planning considerations and strategies associated with the new tax changes.
3. Bring in consultants for your staff
Another option is to look to outside consultants for tax expertise. Consultants can step in when and for as long as needed, while providing expertise not available internally. These experts can also train full-time staff on new tax laws, financial systems or internal processes.
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4. Upgrade financial systems
Are your corporate financial reporting systems capable of handling the changes? Some companies are finding their systems fall short in their ability to handle the complexities associated with compliance.
With the changes to the deductions for meals and entertainment, companies may need technical assistance to separate the two expenses in their general ledger, for example. In payroll, changes in withholding methods and calculations may require new systems as a result of the tax law.
Planning for the tax changes
As you start to feel the effects of this first major tax overhaul in decades, you’re likely asking what the changes mean for the short and long term. How should you plan for the future?
Start now by preparing your strategies for compliance, Saah advises.
“If you don’t start today or if you haven’t yet started, you are already behind. The law is going to impact every company in every industry.”
Steve Saah is the executive director for Robert Half Finance & Accounting, the world’s first and largest specialized financial recruitment service. The company has more than 300 locations worldwide. He is responsible for leading worldwide operations and is based in the Washington, D.C., metropolitan area.