Advanced data visualization – Why you wish to avoid being the dinosaur and being ahead of the curve helps.
In today’s global business landscape, multinational corporations engage in increasingly complex cross-border transactions, a practice that has put transfer pricing into the spotlight.
Data serves as the foundation for determining the arm’s length prices of intercompany transactions. It includes sales figures, cost data, profit margins, and other financial metrics that help establish a fair price for intercompany transactions. The data spans across various geographic locations and diverse currencies, adding to the complexity of transfer pricing analysis.
The benefits of advanced data analysis and being ahead of the curve helps in four categories:
- Reducing (audit) risks.
- Saving time and improving compliance.
- Reducing cash out and tax costs by improved insights.
- Being ready for what is to come.
In addition, it makes work more fun for those involved as they can focus on value-added work and improvements instead of repetitive hard labor.
In more detail, the impact likely relates to:
Reducing (audit) risks:
- Being able to present in a clear and transparent manner.
- Identifying potential issues or discrepancies timely, thereby reducing the risk of non-compliance.
- Being in control of data that is shared with tax authorities (e.g. in CbCr) and which analysis are likely made by tax authorities on this data and pro-active storytelling.
- Support during audits. Tax authorities often pose detailed questions. Advanced data visualization tools enable companies to respond to these inquiries quickly and effectively by providing a clear and logical narrative through historical data, ensuring a smoother audit process.
Saving time and improving compliance:
- Reducing the time spent on collecting and organizing data. Advanced data visualization allows tax professionals to focus on their core responsibilities and expertise.
- Simplifying the process of assessing financial and TP information and optimizing policies and performance.
- Streamlining the management of intercompany agreements.
- Streamlining the documentation process. Where numerous factual details need to be included, advanced data visualization systems can streamline this process by centralizing relevant information and incorporating it into the required documents automatically.
Reducing cash out and tax costs by improved insights:
- Support in evaluating factors like interest deduction limitations, identifying which entities are subject to non-deductible interest timely. This enables organizations to proactively adjust their financing structures and strategies, thereby reducing tax costs.
- Enhancing the process of setting and optimizing transfer prices. By using advanced visualization techniques, companies can gain deeper insights into their transactional data. They can identify trends, cost structures, and profit margins that might not be immediately apparent with traditional data analysis methods. Enhanced price setting leads to:
- better business insights on local profitability and better business decisions;
- improved price setting for customs, potentially reducing custom duties.
Being ready for what is to come:
- Transfer pricing regulations continue to evolve, data visualization tools can help organizations stay ahead of the curve. They can adapt to changing requirements, such as the introduction of new transfer pricing regulations or the need for more detailed reporting. Advanced data visualization can streamline the process of creating and maintaining the necessary documentation, ensuring ongoing compliance with the latest regulations.
- Gaining advantage of the latest technological developments. The integration of artificial intelligence and machine learning into data visualization tools can bring about even more powerful insights. These technologies can analyze data more deeply, identify complex patterns, and make proactive suggestions for, for example optimizing transfer pricing risk areas.
In conclusion, the importance of advanced data visualization in modern transfer pricing cannot be overstated. It’s not just a tool for compliance, risk management, and decision-making; it’s a strategic asset that empowers organizations to set competitive and compliant transfer prices, adapt to evolving regulations, and harness the full potential of their financial and transactional data. Embracing advanced data visualization is essential for multinational enterprises looking to thrive in today’s global business landscape. Alternatively, not acting now in this field would likely mean that you keep being or will become a firefighter and spend more budget and resources on the long-term with worse results while feeling unsatisfied.
How can we help?
Coperitas has various advanced data visualization options that can be set-up in a flexible way according to your needs. This is set-up with amongst others:
- Monitoring of Transfer Pricing margins, deadlines and developments within the company (e.g. large increase in R&D staff in country X)
- Visualize (legal/business) structure
- The powerful visualization technique draws the company’s legal tree based on raw data from ERP-systems.
- Flexible similar visualizations can be made based on labels.
- Visualize IC transactions and whether this deviates X amount from the set TP policy
- Overview of relevant docs per entity/transaction/label
This is technically supported with:
- User rights management
- Cloud-based
- Central data storage
- Label management
- Flexible label management enables to obtain a better insight into the company when it relates to business units, fiscal unities, and value chain.
- Questionnaire
- This takes away the hassle of local information gathering and provides a streamlined information gathering process.
- CSV upload
- Enables you to automatically upload financial data to the Coperitas database without having to link directly to your ERP.
Don’t want to miss out? You may already explore Coperitas via: https://www.coperitas.com/explanation-videos/