The Role of CFOs in Driving Corporate Tax Strategy

The role of chief financial officer (CFO) is crucial in all corporate strategic plans as they are responsible for the financial health and strategic decision-making processes of an organisation.   

Their expertise doesn’t end in financial management. They also do other responsibilities such as tax, planning, risk management, and capital allocation - all of which contribute to overall organisational success. 

For this article, we'll focus on the role of a CFO in driving an organisation's corporate tax strategy. 

Related: 7 Reasons Why Outsourcing Your Tax Preparation Is a Smart Decision 

The Role of CFO in Corporate Tax Strategy 

A CFO oversees and implements multiple strategies to minimise the company's tax liabilities and maximise its revenue. 

Here are some of the roles of CFOs in tax planning. 

Strategic Planning 

CFOs craft and implement tax strategies that fit with the company’s broader financial objectives. This involves planning for the long term to ensure the firm gets the most out of tax strategies. 

Compliance and Reporting 

CFOs also ensure that the company complies with all tax laws and regulations by overseeing accurate and timely tax filings and reports. 

Deductions and Credits  

The finance chief also actively identifies and maximises available tax deductions and credits, collaborating closely with tax advisors to ensure the firm fully capitalises on these benefits. 

Capital Gains Management 

The finance chief strategises on when to sell assets to optimise capital gains taxes and losses, always aligning these decisions with the overall financial game plan of the company. 

Charitable Contributions 

The CFO reviews and handles charitable contributions to make sure they fit with the tax planning strategies and goals of the firm for corporate social responsibility (CSR). 

Business Expenses 

The finance chief also makes sure to claim all legitimate business expenses, which helps lower taxable income and strengthens the financial standing of the firm. 

Coordinate with Tax Professionals 

They also work closely with external tax advisors and consultants to stay updated on tax laws and find new ways to save on taxes. 

The Importance of Aligning Tax Strategy with Corporate Strategy

Having an effective corporate strategy in the firm is not just about minimising tax liabilities but also about aligning the tax-related decisions with the organisation's overall business objectives, as mentioned above. 

The CFO plays an important role in working with key stakeholders to develop a tax strategy that supports the organisation's long-term growth 

By understanding the company's direction, the CFO can find smart ways to fund new projects, expand into new markets, or pursue mergers and acquisitions. In addition, the CFO can help identify tax benefits that support the organisation's sustainability and environmental, social, and governance (ESG) initiatives. 

Read: What are the CFO Roles in Business Growth? 

Other Key Responsibilities of the CFO in Corporate Strategy 

Aside from the CFO's role in developing corporate tax strategies, they also have other important roles within an organisation such as: 

Financial Planning and Analysis  

CFOs take care of budgeting, forecasting, and financial modeling. These activities are key to strategic planning since they can provide their expertise into the company's current and future finances. 

With the use of effective financial planning and analysis, they may find growth possibilities, distribute resources effectively, and set realistic financial objectives for the firm. 

Risk Management 

Managing risk is the ultimate responsibility of CFOs. They need to know, evaluate and control the potential credit risk, operational risk, and market volatility.  

This involves developing strong frameworks and business continuity plans to protect the firm from potential dangers such as financial losses and ensure that there’s the right cash reserve for the continuity of the firm’s operations. 

Capital Allocation 

The CFO also sees to it that the business’s capital will be of good use. This means figuring out how to effectively use financial resources, like paying dividends, repurchasing shares, or reinvesting earnings back into the firm 

When the capital allocation is meticulously planned, the corporation improves its shareholder value, promotes growth, and advances its strategic goals. 

Read Next:  The Role of a Chief Financial Officer in Good Cash Flow Management 

Mergers and Acquisitions 

CFOs are the ones who assess possible targets, carry out investigational work, create a transaction plan and close deals. CFOs also work with the acquired firms to incorporate them and integrate post-merger systems and processes after the acquisition is completed. If these tasks are performed effectively, CFOs can provide better guidance on accelerating the company’s development and growth. 

The Strategic Influence of Chief Financial Officer 

Here’s how a CFO’s strategic influence helps create a long-term approach for the organisation: 

Keeping Everyone on Track 

Finance chiefs ensure that every department sticks to their budget and aligns with the company's main goals. Doing this prevents overspending and helps the organiszation to work on the same page. 

Enhancing the Operational Efficiency 

The CFO deeply analyszes the finances to identify areas for improvement and find ways to cut unnecessary spending. Having this within the firm can help its bottom line. 

The Bottom Line 

If your organisation is aiming to enhance its corporate strategy, then giving your CFO enough professional support is important, especially when it comes to dealing with the nuances of tax and any financial processes. 

However, if your organisation does not have the current resources to build a well-staffed accounting department, then it's worth considering pairing up with an outsourced CFO support service provider.   

These service providers can bridge the gap effectively while offering valuable financial expertise from qualified professional accountants. To know more about the comprehensive side of outsourced CFO support services, you may check out this article. 

Are you seeking expertise in aligning your corporate tax strategy with your business objectives? 

Consider D&V Philippines. We are a business process outsourcing company specialising in finance and accounting solutions that offers comprehensive CFO support services.  

You may talk directly to our expert today and let us lend you a helping hand to your task. You may also download our “Premium CFO Solutions” whitepaper today and learn how our Finance and accounting professionals can help you in your tasks.