Financial executives are eyeing tax changes expected in the Biden administration, demands for more environmental, social and governance reporting, and diversity efforts.
A new survey from OneStream Software and Hanover Research, released Tuesday, polled CFOs and other finance leaders about their plans for 2021 and found that 86% of the companies surveyed will need to change their financial forecasts in the event of a tax change by the new presidential administration. Most companies (89%) have already made plans to change hiring and staffing to accommodate potential wage increases.
The Biden administration has rolled out its American Jobs Plan, Made in America Tax Plan, and American Families Plan in recent weeks, seeking to raise the corporate tax rate, impose a minimum tax rate on companies and discourage offshore tax incentives, among other changes.
“Planning and forecasting has never been as critical to businesses as it is today,” said OneStream CEO Tom Shea in a statement. “The pandemic demonstrated the importance of enterprises being able to shift quickly via the use of widely accessible data-backed insights to meet changing needs at a moment’s notice. These findings reinforce that while the pandemic may have caused the initial acceleration in adoption of these technologies, these solutions are here to stay.”
CFOs are watching to see which proposals get passed in a narrowly divided Congress. Meanwhile, the increasing popularity of ESG funds among investors is prompting more companies to increase their use of ESG reporting in addition to reporting on their financials. The Black Lives Matter protests of the past year have also prompted many companies to improve their efforts at diversity, equity and inclusion.
The majority of financial executives surveyed are increasing, or are planning to increase, investments in ESG management and reporting systems (85%), along with DEI training (86%), according to the survey. Financial executives working in the IT (65%) and finance (77%) industries were significantly more likely to be currently investing in DEI training than other industries (52%).
Finance executives polled for the survey appear to be optimistic that recovery is on the way after the pandemic, with 73% anticipating their companies will return to normal growth by the end of this year. In addition to economic recovery, 98% of the companies polled have made budgetary plans for returning to the office. More than one-third (36%) of the financial executives surveyed plan to dedicate over 15% of their budget to office reopening. Data privacy tools are the most common (18%) priority earmarked for return-to-office budgets, with hybrid cloud technologies and office reconfiguration also being top priorities.
With all the changes and uncertainty now, forecasting has become even more essential for corporate finance leaders. A separate survey released Monday by Prophix Software and FSN Research polled more than 500 global finance executives about their forecasting abilities, but it found that 80% of respondents of the finance teams surveyed are unable to forecast beyond a year, and over 50% cannot project further than six months. Two-thirds of organizations manage to reforecast their earnings in under a week, but only 39% are able to do so within +/-5% accuracy. Only 43% are able to forecast their revenue within +/- 5%. Advanced technologies are still slow to be adopted by businesses. Only 31% of finance leaders say they have made significant changes to their planning, budgeting and forecasting processes, and only 5% have entirely transformed the process.
If you have questions about how tax changes may affect your business, please call ELO CPAs & Advisors today for more information. We are the team than can ensure your taxes are done right every time.
Michael Cohn, Editor-In-Chief, AccountingToday.Com