Deja Vu? Facing Nagging Year-End Issues Again? A Profile Case Study: Solving Year-End Residency & Earnings Reporting
Year end is a hectic time for all bank systems folks. For some institutions, it means renewed frustration and a lot of extra work as they once again face many of the same nagging systems or application issues they've encountered in previous years. And while some bank techs have more colorful descriptions to describe those recurring year-end challenges, we call it "bad deja vu." Profile institutions are not immune, but this case study is about a particular Profile client bank that finally grabbed the bull by horns and put an end to the annual madness.
As institutions worldwide approach their year ends, we are reminded of the many processing and reporting requirements institutions must fulfill to meet their regulatory and fiduciary responsibilities. Depending on the overall capabilities of an institution’s back-office systems, the tasks associated with meeting those obligations can be cumbersome, expensive (human, system and financial resources), and deliver partial or poor results that often require manual remediation.
There is also no single, out-of-the-box solution that can satisfy the year-end requirements of every institution and government. And though Profile is not a catchall solution for every year-end requirement, by design, it does have an inherent flexibility that can be developed to solve almost every data collection and reporting issue.
As we all approach year-end, we would like to share one of our Profile client engagements that demonstrates one institution’s commitment to solve a nagging year-end issue with a Profile-developed solution and the ingenuity of Mozaic Group Partners (MGP).
For several years, a large North American online bank struggled with its year-end federal reporting. Similar to other institutions around the globe, part of its year-end tax reporting process included tracking and reporting a customer’s earnings based on the country and locale in which the customer resided. The reporting was required on both federal and local state/provincial levels.
Specific non-resident reporting requirements necessitated tracking earnings based on the customer’s residence at the time earnings occurred. To make this determination, the process collated through history data from every customer and from the history on every account associated with that customer for the full tax year. The process consumed system resources and took more than 20 hours to run. And it didn’t end there. Excessive maintenance and extensive use of bank resources were required after the fact to handle the corrections on tax forms that resulted from the process. The entire process was cumbersome and disproportionally costly in terms of the system resources and human involvement it consumed. A comprehensive automated solution was needed. Could Profile be extended to provide the customized answer, and further, could Mozaic Group Partners provide the development expertise to make it happen?
The process was clearly in need of an overhaul, but there was a daunting list of items that would need to be addressed and managed throughout the development cycle or the result would not remedy the frustration.
- The federal tax reporting rules were complex and required a mastery understanding. This meant MGP would need to expand its subject matter expertise in the area and work closely with bank compliance.
- The existing process required regular maintenance to revise processes due to ever-changing business conditions and regulatory rules, which notoriously derailed the process every year. The new solution would have to allow annual changes to be made without disruption.
- Specific non-resident reporting requirements necessitated tracking earnings based upon the customer’s residence at the time earnings occur. For the tax year, the existing process needed to collate through every customer and the history for every account associated with that customer to determine the period of time, if any, the customer was a non-resident and then what the earnings were during the timeframe.
- In addition to all federal requirements, diverse state/provincial reporting requirements needed to be considered on an equal basis.
- The old process took approximately 20 hours to run, which was unacceptable when you consider at the run’s completion there was additional manual intervention required.
After completing the required research and compliance requirements, MGP then rewrote the entire year-end tracking and reporting process for earnings and residency. We developed the new solution to include the following:
- Provided a custom runtime compiled sort procedure that determined, at an aggregate level, the customer and account records that met and those that did not meet the requirements for year-end reporting on a form-by-form basis. This development item provided a full audit trail, which separated those customers that were exempt from reporting from those that were not.
- Provided a facility to use Data-Qwik queries to determine how an account or customer is considered for a particular tax form. These queries are compiled into the sort procedure, thereby allowing non-technical resources to modify the form selection process.
- Introduced a residency journal that tracked customers’ residency changes. We took this approach after analysis determined that only 0.06 percent of all transactions were for non-resident accounts. The prior process reviewed 100 percent of all transactions, which consumed system-processing resources.
- Created tables for rules that considered reportable amounts on a per form basis.
- Rewrote all processes to use multi-threaded Data-Qwik batch definitions.
- Created a function that gave bank resources the capability to review changes to tax forms in an “anticipated mode.”
- Reduced the runtime for producing all tax forms from approximately 20 hours to 3 hours and 17 minutes – 83 percent decrease.
- Decreased the number of hours required of bank resources to manually support tax form correction errors by more than 1,000 hours.
- Eliminated more than 250 Data-Qwik elements (procedures, screens, reports, etc.), thereby simplifying code management and support.
Eliminate Your Deju Vu Year-End Frustration
Year-end processes don’t get solved at year-end. They get solved with prior planning and as development projects during the year. This particular Profile client institution took action to rid itself of a recurring nuisance after several years of costly frustration. Mozaic Group Partners was there to provide the guidance, planning and development expertise. If you have a question or would like to talk about how we can help remove a nagging year-end issue from your list in the coming year, contact us. We are happy to help.
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