In the words of Apple’s co-founder Steve Jobs, ‘simple can be harder than complex: you have to work hard to get your thinking clean to make it simple. But it's worth it in the end because once you get there, you can move mountains.’
Whilst some may say Apple didn’t follow this approach when it came to their own group structure, at this time of year, when so many companies are going through their audit process, there is likely to be many a finance director, and perhaps a few auditors, who dream of having simpler group structures to deal with. Removing the need for complicated consolidations, multiple directors’ reports, and the like.
Unwieldy group structures are often the result of acquisitive groups, with diversified operations types or geographical locations kept in separate legal entities. In these cases, failing to rationalise the post-acquisition group has the potential to undermine planned synergies.
Alternatively, there may well have been good reasons for some of these structures, at the time they were implemented. However, once they have fulfilled their purpose they have never been unwound.
So how difficult is it to rationalise a group and what stops people doing it?
Frequently, those running businesses are too busy doing just that. It’s a Catch 22 scenario: with a simplified group structure there would be more time to undertake special projects (such as group simplification) but with the current structure it feels like there is no spare time.
While consolidating a corporate structure can need professional input from tax, restructuring, company secretarial, as well as legal advice; it needn’t be an arduous process, particularly if the professionals take on the project management role.
This type of simplification can do much more than reduce the compliance burden (reducing the time and costs for statutory accounts, audits, corporate tax returns etc). It can really improve efficiencies within an organisation and perhaps more importantly provide some clarity to management.
It might take a little effort to carry out such a simplification, but with the benefits being felt year on year, the rewards can be considerable.
For more information please comment below or get in touch with Nick Blundell.