THE CONTROLLER´S REPORT
Tax Services Costs Then PwC compared a company’s self-
Continued from page 9
company’s tax strategy and its effective
tax rate. Details: In this survey, PwC asked
participants to evaluate how actively they
managed their tax profile, using a scale
of 1 (not managed) to 10 (high levels
of active planning). The breakdown: 3
rating, 5 percent of sample; 4 rating, 5
percent of sample; 5 rating, 15 percent;
7 rating, 20 percent; 8 rating, 35 percent;
9 rating, 10 percent; and 10 rating, 15
percent.
Analysis: Most companies believed they
managed their tax obligations fairly actively,
with an average rating of 7.4. Further, 80
percent of respondents rated themselves 7
or higher in their self-appraisal.
ERP Savings
Best-in-Class Companies Reduce IT Operating Costs 17 Percent With ERP
ERP in the Midmarket: 2009, a new study
from the Aberdeen Group, quantifies the
saving that best-in-class companies achieve
with their enterprise resource planning
(ERP) systems. Background: In its research,
Aberdeen breaks its respondents into three
groups: best-in-class (top 20 percent of a
survey’s “aggregate performance scorers”),
average (middle 50 percent), and laggard
(bottom 30 percent). Aberdeen says that
the effects of ERP implementation in these
three groups are:
l Best-in-class:
17 percent reduction in
IT operating costs, 6 percent reduction in
IT administrative costs, reduced (or rede-
ployed) head count by 13, and 3.9 days to
close a month.
l Average: 7 percent reduction in IT op-
erating costs, 17 percent reduction in IT ad-
ministrative costs, reduced (or redeployed)
12 www.ioma.com/fin
evaluation of its tax planning with its effective
tax rate. It observed:
l “There is a strong correlation between
higher active tax management and a lower
effective tax rate. This simply demonstrates
what all tax directors know—there are
plenty of opportunities in most companies
to manage the tax charge.”
l “There also appears to be a correlation
between lower effective tax rates and com-
panies where nontax members of finance
are evaluated on the tax results. It seems that
if the CFO and his team are appraised on
post-tax results, they are more incentivized
to ensure that the tax charge is effectively
managed.”
(Sources: FEI, PricewaterhouseCoopers)
head count by 3, and 4.7 days to close a
month.
l Laggard: 2 percent increase in IT
operating costs, 3 percent increase in IT
administrative costs, increased head count
by 1, and 9.3 days to close a month.
Importantly, the primary reason midmar-
ket companies—those from $50 million to
$1 billion in revenue—now implement ERP
or upgrade their systems is cost. Proof: In
this survey, Aberdeen asked respondents
to identify the “top two drivers affecting
ERP strategies. At midsize companies, the
three leading drivers are must reduce cost,
47 percent; interoperability issues across
locations, 31 percent; and need to improve
customer experience, 28 percent.
Key point: At midmarket companies, the
two leading cost drivers—costs and interop-
erability problems across locations—are
December 2009
 THE CONTROLLER´S REPORT

closely linked. Explanation: In the mid-
market, IT costs rise with revenues and
the average number of operating locations
that ERP supports. In this survey, these are
revenues from $50 million to $100 million,
3.8 locations; $100 million to $250 mil-
lion, 5.6 locations; $250 million to $500
million, 7.4 locations; and $500 million to
$1 billion, 7.5 locations.
Upshot: ERP implementations enable
companies to save money because they
improve back-office efficiency by stan-
dardizing, streamlining, and accelerating
business processes. In this way, they lower
IT operating costs, reduce administrative
costs, modify head counts, and accelerate
the monthly close. Importantly, these sav-
ings are magnified at companies that have
more locations where they can establish
uniform procedures.
Even so, most controllers at midsize
companies now use ERP systems that are
long in the tooth. Proof: Across the 300
midsize respondents in this survey, the aver-
age age of the ERP system was 6.9 years.
Caveat: The age of an ERP implementation
is neither good nor bad. What counts is
the version of the system, with those sev-
eral versions behind the current release
generally relying on outdated technology,
which reduces the efficiency of the ERP
system. Background: This Aberdeen survey
shows 14 percent of respondents currently
implementing ERP, 28 percent using the
latest release, 31 percent one release
behind, 13 percent two releases behind,
and 13 percent three or more releases
behind.
(Source: The Aberdeen Group)

Workers’ Compensation
Workers’ Compensation Costs at $1.58 Per $100 in Payroll at $200M Companies

Many controllers deem Casualty Cost of pensation according to both payroll and cost
Risk, a study that Marsh undertakes annu- of risk for both 2007 and 2006. Here:
ally, to be a leading source of cost
benchmarks for workers’ compen-
sation coverage. Reason: Besides Average Retentions in Loss-Sensitive Workers’ Compensation
Programs in Millions (by Revenue Size)
tracking the cost of this coverage
per $1,000 in revenues—a standard $0 to $0.35
approach for property and casualty $200 million $0.39 2007
$201 million to $0.44 2006
insurance—this study quantifies
$500 million $0.41
workers’ compensation costs per $501 million to $0.44
$100 of payroll. Advantage: This $1 billion $0.72
approach reflects the usual pric- $1.001 billion to $0.61
$5 billion $0.63
ing mechanism in this market,
$5.001 billion to $1.01
where the vast majority of premi- $10 billion $0.98
ums are calculated per $100 of More than $2.22
payroll. $10 billion $2.11
All $0.72
Note that the current (2008) edi- $0.75
tion of this Marsh report provides $0.00 $0.50 $1.00 $1.50 $2.00 $2.50
cost benchmarks for workers’ com- (Source: Marsh)

December 2009 www.ioma.com/fin 13