Costs associated with compliance functions have remained steady the past few years. But finance executives expect that to change in the next three years.
More than two-thirds of US finance executives, and 60% of them in Canada, predict compliance costs to rise, according to an annual benchmarking report by Robert Half and the Financial Executives Research Foundation. The report examines responses of more than 1,700 finance executives at public and private companies in North America’s two largest countries.
Compliance related to regulatory requirements and changes isn’t a new problem for finance leaders, and it’s getting more complex. Most CPA decision-makers see the level of general business complexity getting moderately to significantly more complex in the next three years. Regulatory requirements and changes ranked as the most-cited challenge of US CPA decision-makers in an AICPA survey in 12 of the past 13 quarters. Regulatory issues were cited by many CFOs as a top challenge in a recent CFO Alliance survey, and it was the top challenge of banking CFOs.
Finance chiefs feel barraged by new compliance mandates, said Nick Araco, CEO of the CFO Alliance. They must add new employees to deal with compliance or train existing ones, he said. Another option is hiring consultants.
“If they don’t have the budget in place, they have to find the dollars,” Araco said. “If they can’t add headcount, they have to spend the time and money to develop existing employees. What choice do they have?
“They are saying, ‘I can’t not comply, but doing so is burdensome.’ ”
Some companies are choosing not to comply, according to a survey by the Global Trade Academy at management firm Amber Road. Fifty-six per cent of respondents from more than 300 US-based multinationals said their company was not investing in training related to trade compliance, even though 28% of those companies had been fined or warned for noncompliance by government agencies. Additionally, 33% do not have a budget for trade compliance training.
Other findings in the benchmarking report:
- Tax (43%) and payroll (39%) remain the two most commonly outsourced functions among US companies. The numbers for Canadian companies are similar (44% and 37%, respectively).
- 52% of US companies reconcile accounts manually, compared with 65% who did so in 2013.
- The use of cloud-based data storage is more prevalent in the US than in Canada. Sixty-two per cent of US companies say they’re using the cloud or plan to in the future, compared with 47% of companies in Canada.
—Neil Amato (firstname.lastname@example.org) is a CGMA Magazine senior editor.