From tax reform to advancements in technology, the role of the CFO is changing. At a time of great change, which top trends will become game changers for the CFOs of middle-market companies? Goldin Peiser & Peiser weighs in on five key trends.
- Blockchain Technology
Bitcoin. Cryptocurrency. Blockchain. You’re not alone if you thought these terms were a fad with a short lifespan. Not so. Just as blockchain is being used to track distribution and supplies, it has the potential to redefine the finance function. Why? As a distributed database that contains an increasing number of records, the blockchain can be used as a real-time ledger that can be shared across multiple sites and geographies.
See related blog: Blockchain and Its Impact on the Business World
CFOs current use blockchain for payments and exchanges, but watch for it to increase IT security, streamline the tracking of contracts and transactions and provide you a better method for predictive analysis and budgeting.
While the U.S., Mexico, and Canada have reached a new trade agreement, tariffs between the U.S. and China continue to put finance leaders on high alert of a full-scale trade war. Tariffs on certain items in the supply chain already are having ripple effects across industries, especially those in the consumer products sector. CFOs will need to examine pricing strategies, supplier costs, and margin management well into 2019.
- Tax Reform: Section 199A
The sweeping Tax Cuts and Jobs Act of 2017 continues to be clarified with new guidance from the IRS and other regulatory agencies, such as the 20 percent pass-through deduction, known as Section 199A. Many midsized companies are pass-through entities, and will likely benefit from the 20 percent deduction that was included under Section 199A, which effectively reduces the top tax rate of 37 percent to 29.6 percent.
CFOs will need to determine which business income qualifies for the deduction as opposed to those activities excluded as “specified services trade or business (SSTB).” Other changes in the tax overhaul appear favorable to private businesses, but rules and regulations are complex. Tax professionals can help CFOs examine rules and regulations and determine how they apply to their own circumstances.
- Post-Wayfair: Taxation of Out-of-State Sales
Speaking of tax changes, the Supreme Court’s June 21, 2018 decision in South Dakota v. Wayfair means that any business with online commerce will have to charge (or pay) sales tax for online transactions. However, the decision doesn’t just affect internet retailers. By overturning a longstanding precedent requiring businesses to have a physical presence in a state before the state could mandate sales tax be charged and collected, the ruling impacts any business selling taxable products or services across state lines, no matter how the sale is made. The decision has caused many middle-market companies to express concern about uncertainties left in the wake of the decision. CFOs will need to have accounting systems in place to fully understand their company’s out-of-state sales and any other activities in those states.
- Robots, AI and Automated Accounting
What once seemed like science fiction is here to stay. Companies all across industrial sectors are adopting Artificial intelligence (AI). Manufacturers have been quick to embrace AI to improve efficiencies in bringing products to market. Automobile factories have been using robots to help humans build cars, and robots are even performing surgery.
So what can finance leaders take from these examples to improve their own processes in the future? Going back to our blockchain example, with the adoption of automation, transactions can become seamless. At a minimum, we can expect the integration and large-scale application of automatic processing of digital invoices. Automation, AI, real-time data and cloud technology will transform the role of today’s CFO to a “digital CFO.”
Looking ahead, CFOs will need to make financial assessments about which functions to automate, such as offshore and onshore operations. Success will depend on the ability to combine the right mix of people and technology to meet the needs of customers, vendors and employees. The combination of technology and human workforces will afford finance leaders the opportunity to focus more sharply on business insights and evaluating key strategies.
Any questions? Contact Allan Peiser at 214-635-2503 or use our contact form below for further information.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.