We’ve covered quite a few organizational damnations to date. (Nine to be exact.) But, as with the other damnation categories, we’ve saved the best for last. Marketing was bad. Sales was often worse. Legal is a nightmare. But Finance. Finance controls the four horseman of the apocalypse. War, Famine, Pestilence, and Death — and they all fear the CFO. Because if he dies, then Death will forever have to listen to plans to increase productivity, decrease cost and profit from the dead. (Trust me, give former CFOs the opportunity and they’ll try.)

Finance brings War to the party.

Finance is not only the gatekeeper between the CEO and the various department heads but also the mediator between them, especially when there are budgetary disputes or strategic disputes in terms of corporate direction. That’s because money talks and Finance signs the checks. And if they decide that they don’t want to play mediator and problem solver and they want the department heads and/or CXOs to work it out, they can incite all out war, sit back, and see where the mortars fall. In the interim, Procurement is getting caught in the crossfire as every department makes contradictory requests and expects to get them fulfilled by Procurement.

Finance brings Pestilence to the party.

Finance has the ear of the CEO. As a result, they are always getting whispers from the COO, CMO, Chief Council, the VP of Sales, the VP of HR, and anyone else who runs a department. If any of them are making the CFO promises in terms of increased success, increased status, increased bonus, or, and yes this happens, lining in the pockets (direct or indirect kickbacks), your requests might fall on deaf ears. Marketing promises free trips to all of the global launch events. You promise an extra 10%, which may or may not materialize in the eyes of Finance, unlike those tickets to San Francisco, London, and Shanghai which can be in the CFOs hands as “guest speaker” tomorrow.

Finance brings Famine to the party.

Finance controls the budget. They determine how much money you get for talent, software, and services. Without enough money, you can’t get the talent; the talent in place can’t get the tools they need; and they definitely can’t get augmentation services or training, which they desperately need to do the job they are tasked to do. If Finance wants to bring Famine, they cut the budget, and your department starves. Famine is just one budget cut away.

Finance brings Death the party.

Not only can they starve you, cut you out, and subject you to contradictory requirements that you will be expected to unreasonably fulfill, but they can bring Death upon you. Unreasonable cost saving expectations. Unreachable metrics in terms of automated invoice processing or Spend Under Management in a mere 12 months. Impossible results from the supplier innovation program you are expected to launch. Followed by a pink slip when you don’t deliver (under the new mandatory right-sizing policy that cuts everyone who does not make their annual goals).

If the CFO doesn’t like the CPO or care for the Procurement department, the damnation that he can reign can exceed the damnation caused by all of the other departments combined.

Yet another damnation you’ve been waiting for. In our modern world, at least if you believe the futurists who think that cybernetics will eventually allow us to preserve our mind and live forever, it’s the only certainty left. Even if the government falls, a new order will rise up, and like every order that has come before — in some way, shape, or form — it will tax you. And taxation is not just a damnation for Finance, it’s a damnation for Procurement too.

Taxation Makes it Nearly Impossible to Answer the Ultimate Sourcing Question.

The pinnacle of strategic sourcing is to alway select the option with the best total value. When sourcing according to total value management you are sourcing to maximize the value to cost ratio. This requires a good grip on the value (total expected revenue for goods for resale, efficiency gain for products and services to support work efforts, knowledge or capability improvement for services, etc.) and the total (lifecycle) cost. Guess what a big component of that cost is. Export duty. Import tariff. Federal sales or value added tax if the good is purchased in the same country or union. State or municipal tax on specific products or services. Taxes on the fuel used by the trucks to transport the goods. Tax, tax, tax.

And it’s not just as easy as asking the seller what the applicable taxes are. On import, and sometimes even export (depending on when your organization officially takes possession of the goods), it’s up to your organization to know what the right tax rate is, file the tax forms, and pay it. But we all know how easy it is to interpret global H(T)S codes – where there are eight entries for the same item and it’s sometimes a matter of interpretation whether the 50% leather glove falls under leather gloves with synthetic materials, synthetic gloves with cow-hide leather, or leather and synthetic products and each has a different tax rate. If the customs inspector doesn’t agree with you, not only can you be subjected to a higher tax rate, but a large fine as well, increasing the expected total cost of the purchase even more!

Documentary Requirements make it onerous, if not unrealistic, to reclaim taxes the organization is owed.

Many of the taxes that your organization will have to pay will be taxes that your organization is not legally subject to and that can be reclaimed, if your organization can demonstrate it was not legally subject to those taxes. For example, in the EU, if the sale is a distance sale, then if the amount exceeds €100,000, the exporter should be charging VAT at the rate of the importing state. So, if you are buying from a locale where VAT is 25% but importing to a locale where VAT is 15% for sale, and the organization was charged 25% VAT, it is eligible to claim a refund of %10 VAT. In Canada, any business with revenue (or the expectation thereof) that exceeds $30,000 must collect HST on all sales, but businesses are exempt from HST on goods and services required for their operation. Typically, since it is expected HST from sales will exceed HST paid, the organization will be making an annual, quarterly, or monthly HST payment (depending on revenue size), but if the sole purpose of the Canadian operation is to manufacture goods for export to US consumers with no effective Canadian presence, its HST paid will (far) exceed its HST collected and it will be eligible for a refund. There are a number of other situations around the globe. But, of course, these refunds are not automatic. They must be filed for, the documentation required, in some cases, is extensive and must be complete, reviews can take 3 months to a year (or more), and if a detailed audit is requested, sometimes the cost of the internal effort exceeds the amount to be reclaimed. This makes it difficult to compute the total cost of ownership when there are a myriad of taxes that may be refundable, but each of which has a refund cost. (Do you discount the refund you expect to receive by X% or a fixed cost for manpower, do you discount it using a net present value calculation designed to estimate the loss in the value of the money owed to you as it is held in the taxation authority’s hands for an expected amount of time, etc.)

Trying to optimize the tax for value-added products and services is a nightmare and essentially impossible without strategic sourcing decision optimization.

Not only can there be multiple H(T)S codes that a single product can ultimately qualify for with different rates, but if the product is actually a bundle of individual products, which may or may not contain a “value-add” service component, there can be different tax rates as well. For example, there’s a reason that many printers come shipped with the cartridge separate — if the cartridge is pre-installed, in some locales, the importer has to pay a higher tax rate. Plus, in some locales, state or municipal service taxes are not always reclaimable while federal taxes are. It’s a complex sourcing model just to capture the taxes, the reclaimable portions, the (expected) costs associated with the reclamation, and the value loss based upon net present value when the organization knows it will be 6 months to a year before that money is back in the coffers.

Not only is taxation one of the few damnation that every organization in the world is sure to experience on a daily basis, it’s also one of the most complex and horrific.