Building your bench: Why modern entity management needs legal to partner with tax & finance
Modern legal entity management has finally transcended its traditional confines in the general counsel’s office, and not a moment too soon. In fact, we see this happening more frequently, with legal departments increasingly involving compliance (48%), governance (38%), finance (35%) and tax (25%) business units in entity management activities.
By no longer limiting itself to a small team of legal colleagues, the corporate record can finally be used for strategic decision-making. However, even with more business units participating in entity management, is there room to make this an even more powerful partnership? The answer lies with your colleagues in Finance & Tax.
Finance: Follow the money
Formally engaging the finance department can help more senior executives beyond the general counsel’s office understand entity management as an important business priority. Finance departments are often profit centers (as opposed to the legal department, which is often viewed as a cost center).
And for finance teams, entity data is increasingly important to their strategic planning processes. This year, the volatile markets and increased financing costs have pushed companies and funds to act more cautiously than in years past, with a higher priority on entity restructuring (and spinoffs), smaller M&A deals, and looking at past opportunities with fresh eyes. However, these short-term activities are only setting up for a bigger potential play in 2023; with high rates of undeployed capital — or dry powder — in the capital markets, 80% of Deloitte’s survey respondents believed that may be an opportunity to catch the wave and invest their cash as targets rise in value.
These opportunities, both short and long term, require a comprehensive understanding of entity data and a strong compliance track record to be competitive. Yet, 49% of companies still report using Excel to manage their entity data and a quarter reported at least one entity out of good standing in the last 24 months.
It is in the finance department’s best interest to find and invest in solutions that ensure the meticulous execution of entity management processes and empowers them to stay competitive for whatever opportunity arises.
Tax: Fighting complexity with collaboration
The Head of Tax seeks out opportunities that minimize costs and drive efficiency. Yet global complexity has hampered their agility in a trend that only seems to increase: in 2023, 45% of TMF Group’s accounting and tax experts anticipated compliance to grow over the next five years, which demonstrates the operational strain these business units are increasingly facing.
However, there’s acute awareness that with access to the right data at the right time, these heads of tax can ward off complexity. Focusing on global tax provisioning and integrating tax data company-wide are the top two priority for tax professionals in 2023, of which entity data is interlinked. By using technology to create a holistic view of the organization's tax burden, this alignment with the legal team breeds efficiency, reduces redundancies and maximizes the potential for growth.
Entity technology: The path to partnership
In a world where collaboration reigns supreme, technology’s importance in connecting disparate business units cannot be underestimated. By creating a single source of truth for your entity data stored in a self-service database, tax, finance and legal teams can finally strategize from a collective playbook. This playbook can unlock the potential for growth, risk mitigation, and efficient decision-making. The era of entity management as a cross-functional responsibility has arrived, transforming it from an individual effort into the team sport it was always meant to be.
Diligent Entities can help
Diligent Entities is the world’s leading purpose-driven entity management technology solution. With solutions across governance, risk, compliance, audit and ESG, Diligent empowers more than 1 million users and 700,000 board members and leaders to make better decisions, faster. No matter the challenge.
Now that you know the value of partnering with tax and finance teams, take a closer look at how entity management technology can help you solidify that partnership and practice more efficient entity management.
