National hotel chain finds value in outsourced fixed assets solution
Efficiency, improved processes and millions in tax savings
CASE STUDY |
A national hotel chain made a strategic decision to tighten their focus on key business issues by outsourcing a variety of accounting, tax and other functions, including tracking and reporting for the chain’s massive inventory of fixed assets. The company sought to improve processes and minimize costs, and knew that to do so would require additional tax process capabilities, effective project management and a greater familiarity with the details of the tax code than their current approach supported.
The hotel chain sought a seamless, outsourced fixed assets solution that would minimize demands on its staff, provide accurate monthly reviews, and deliver timely and accurate quarterly and annual reporting for federal and state tax purposes.
RSM started by working with the client to understand their current state. We conducted a detailed review of their fixed asset processes, tools and data. As with many large organizations, the client had a large volume of data and transactions, much of which was still managed manually. While the process worked, and detected errors were fixed in timely manner, the internal costs were too high.
RSM worked quickly to:
- Assemble a team with proven fixed asset experience to ensure the client had sufficient resources and would be served by the same professionals throughout the year
- Refine and streamline existing processes
- Develop and deploy more advanced data management tools to speed up the review and analytical process
- Establish clear processes and communication protocols to ensure the smooth flow of information to the client and other key parties, including their tax compliance provider
- Facilitate a transparent and timely view of our work throughout the year
In addition to establishing a more efficient process going forward, the RSM team conducted a review of existing fixed assets to ensure proper categorization. This analysis found that the company had implemented numerous leasehold improvements to its headquarters, hotels and administrative offices that should have been assigned a 15-year asset depreciation stream due to a 2004 tax law change. Most of these improvements were being depreciated as building costs using the 39-year rate.
As a result of these efforts, we smoothly transitioned the hotel chain’s fixed asset program to an outsourced solution. By automating key functions, we ensured a more consistent and timely approach to handling data, improving both the timeliness and accuracy of monthly asset review reporting and tax preparation. By properly categorizing leasehold improvements for 15-year depreciation, and continuing the company’s preference to forgo eligible bonus depreciation in lieu of accelerating refundable alternative minimum tax (AMT) credits, we were able to help the client realize more than $10 million in tax savings.
RSM delivered the required efficiencies plus additional tax savings while meeting the client’s overall goal of reducing expenses, delivering the project and subsequent annual fees at almost 50 percent below the company’s initial estimated budget. We continue to provide fixed asset compliance outsourcing services along with several additional tax consulting services for this client.