May 19, 2020

Canadian companies cut costs for financial recovery

Air Canada
Bank of Montreal
Potash Corp
Encana Corp
Bizclik Editor
3 min
Canadian companies cut costs for financial recovery

Canada's economy is showing encouraging signs of recovery.

It recorded an annualized gain of 2.7 percent in the third quarter, which was the highest level in two years. This growth rate was nearly a full point higher than the prediction made by the Bank of Canada.

However, this did not dispel worries that the recovery may remain fragile and vulnerable to internal and external shocks.

With some economic experts predicting that economic growth will remain slow next year, businesses are generally assuming a cautious stance, and some of them are taking measures to reduce spending.

Bank of Montreal

The Bank of Montreal reduced its workforce by an equivalent of almost 1,000 positions this quarter. Most of the employees who were laid off were holding full-time equivalent positions, and they came mostly from the personal and commercial banking departments. According to chief operating officer Frank Techar, the bank cut its staff to reduce its expenses and improve the efficiency of its overall operations. Following the layoffs, the Bank of Montreal still employs more than 45,000 people across all its operations.

Air Canada

Air Canada has embarked on a cost-cutting drive as it prepares for a major international expansion. The main component of its cost-reduction strategy is its flight renewal program, which aims to acquire high-density 777s and 787s. It is estimated that the airline can reduce unit costs by about 21 percent if it replaces its existing 777s with high-density 777s, and the 787s are expected to lower maintenance and operating costs by about 30 percent. Air Canada is also trying to get approval from the government to cut the crew size for its narrow-bodied airplanes.

Read related articles on Business Review Canada

Encana Corp

Calgary-based natural gas company Encana Corp announced that it will be undergoing major restructuring to reduce costs. It is planning to cut its workforce by about 20 percent, shut down an office in the U.S. and transfer some of its Alberta assets to a separate public company. CEO of Encana Doug Suttles said that the company is trying to focus its resources on five major areas instead of funding about 30 different areas. Similar to other natural gas companies, Encana has been having trouble staying profitable because of low prices.

Potash Corp

Potash Corp of Saskatchewan is the largest producer of potash in the world in terms of capacity, but it has been struggling lately because of a decrease in demand and prices for potash. In October, it recorded its worst quarter in three years and reduced its prediction of 2013 earnings significantly. The company said that it will lay off more than 1,000 employees in Canada, US and Trinidad, about 570 of whom are permanent workers in its potash operations. Additionally, it will be stopping production at a mill in Lanigan and a mine in Penobsquis, as well as shutting down its chemical plant in Suwannee River.

Whether the economy is booming or struggling, businesses should constantly find ways to keep their costs down. An effective cost management strategy can contribute significantly to business growth and success across Canada.

 

About the author

John McMalcolm is a freelance writer who writes on a wide range of subjects, from business news to personal finance advice.

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Jun 8, 2021

Six issues at the top of tax and finance leaders’ agenda

Tax
Compliance
financeleaders
Deloitte
Kate Birch
4 min
As businesses accelerate their transformation journeys, tax leaders are under increasing pressure to add strategic value. Deloitte reveals six tax trends

New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.

According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.

And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.

Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.

Trend 1: Businesses seek more strategic counsel from tax

Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.

According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”

Trend 2: Tipping point for resourcing models

Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.

Trend 3: Digital tax administration is moving faster than expected

in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.

"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."

Trend 4: Data simplification and lower-cost resourcing are top priorities

Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.

At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”

Trend 5: Skillsets are shifting

Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.

Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact 

Trend 6: 2020 brought productivity improvements

Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.

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