Managing Compliance in a Challenging Environment

A recent study by ADP found that 81% of finance executives felt compliance was getting more complex. ADP conducted the survey in collaboration with CFO Research showing 89% of senior finance executives rank compliance as a priority, but 73% expect the complexity of new regulations to make it ever more resource-intensive to comply over the next two years.

So how did the senior execs react to the news? Despite increasing complexity, ADP reports nearly 60% of survey respondents said their compliance budget would remain stagnant or decrease in the next two years. So, they expect more and harder work but aren’t increasing the resources to do the job.

The execs apparently believe that some magical efficiency gain will occur despite 60% of the companies reporting that they incurred compliance-related penalties with some regularity. Apparently these senior finance execs would rather pay penalties than increase compliance resources. As CFO, what would you do? Here is what ADP found. 

The ADP survey tried to uncover how these companies get into this situation in the first place. It turns out that more than 60% of respondents say compliance activities are not completely centralized within their organization while more than 70% of respondents report their compliance activities rely on multiple, separate information systems, both are surefire prescriptions for inefficiency.

But again, are these senior execs going to do anything about it? According to ADP’s survey, more than 80% anticipate the number of vendors they use will either increase (19%) or remain the same (63%) over the next two years. So the majority of execs are doing nothing to mitigate an underlying source of inefficiency in compliance and some, nearly one-fifth, are actually exacerbating the problem.

For sure, compliance already is difficult and getting worse. In just one example, employment tax, a company faces 17,000 proposed rule changes across multiple employment districts in US. How much the employer is to deduct for each employee may depend on where he/she works or lives. In some cases, the employer has to determine which is greater and deduct for that. And if they do it wrong, they incur penalties.

This clearly is a problem that begs for streamlined IT systems and automation. And that is partly what the ADP found in its study. Sixty-five percent of survey respondents believe reducing the number of touch points in compliance processes could increase efficiency and productivity.

Information presents another obstacle. More than 75% of finance executives report they have no access to real-time, consolidated compliance data. And they are unlikely to change the situation as long as their companies are using different, incompatible systems from multiple vendors.

The finance execs apparently realize they are in a losing situation when they identified the top four potential benefits of improving compliance management as: 1) More effective risk management, 2) Lower cost, 3) Avoidance of penalties or fines, and 4) Shift of employee resources to higher-value activities. Whether they want to boost resources or not, something needs to be done to boost efficiency.

Along with its compliance survey, ADP introduced its ADP SmartCompliance offering. It is designed to help organizations streamline employment-related compliance activities by bringing together seven key compliance capabilities on a single, unified platform. The platform provides enhanced accessibility and visibility into compliance across the organization, effectively helping to free up time and resources and allowing the newly freed resources to focus on growth and ROI and the organization to avoid paying penalties.

The ADP SmartCompliance platform handles: 1) Employment tax, 2) Tax credits, 3) Wage payments, 4) Wag garnishments, 5) Employment verification, 6) Unemployment claims, and 7) W2 management. In the end, the managers get actionable data through comprehensive cross-service displays that produce a single, visual snapshot enabling them to quickly assess the status of multiple business areas, including the seven capabilities already noted.

A few competitors do some of this. Or a company could do it themselves, which many try. In the end, you have to determine whether your resources are best spent on managing compliance mandates or doing revenue producing work. Your call.

Author: Alan Radding -  Web: http://technologywriter.com/about-tw/