Because tax compliance, reporting and planning continue to remain a high priority for companies throughout the United States, particularly with tax reform and the numerous regulation and guidance updates issued in the past few years, companies should consider how they can improve their tax efficiency through technology and innovation. Companies should also consider augmenting their tax and finance teams to include more non-accountants (business analysts, data scientists, technology associates, etc.) in order to better leverage various tools for data analytics and automation. What differentiates companies in their adoption of various tools and technology are the different stages of maturity in which companies may find themselves.
Making the Case for Transformation
Tax departments may spend many hours gathering and analyzing data required for their overall tax function. This process requires the collection of typically disparate sources of data and manual spreadsheet computations, expending critical tax resources and subjecting companies to unnecessary risks due to potential human error. This also creates an inability for departments to efficiently manage their data beyond keeping their current year records. In addition, because tax returns and rates are subject to scrutiny by taxing jurisdictions and internal stakeholders, they require detailed audit trails, as well as the flexibility to interact with tax compliance and provision software(s) while accommodating specific business/tax updates and changes. Additionally, the onset of the COVID-19 pandemic in 2020, as well as the resulting pressure to reduce costs and transition to remote teams, has amplified the need for tax departments to become more efficient in their tax function. To effectively and holistically address these issues, companies may require an automated solution that is not only affordable but also fits within their information technology (IT) infrastructure.
Tax leaders and their departments can elevate the value they bring to an organization by making their tax function more efficient in order to win back time to focus on value-added activities, i.e., less time collecting information and more time in strategic management and implementation. Technology is an enabler in reaching such a goal, with the following as a few common examples that help companies innovatively address issues with their tax efficiency:
- Cloud computing offers faster innovation and flexible resources in regard to certain computing technologies, including servers, databases, software, business intelligence and networking capabilities. Optimized cloud computing specifically lowers operating costs and helps infrastructure run more efficiently. Enterprises are rapidly evolving onto the cloud, providing tax departments access to valuable tools and technologies.
- Data warehouses store and analyze petabyte or larger file sizes to develop parallel data processing routines with simplicity, therefore optimizing security, auditing and support. Tax departments are tapping into internal finance data warehouses or utilizing third-party cloud storage to streamline tax data and create a single-source-of-truth for all tax data inputs and outputs.
- Enterprise Automation tools can allow companies to automate specific tax computations by using a centralized platform which can be stood up using a cloud computing architecture or on premises, the former getting gaining more prominence. These solutions are often less costly than traditional tax software(s). For example, automation platforms for taxable income computations can include automated consumption and storage of the trial balance structure(s), automated tax adjustments and/or uploads of manual/hybrid adjustment data, audit-ready tax workpapers and dashboards for ease in review and management reporting.
- Self-Service tools that address automation and analytics are providing users more control over running automated computations or processes. As tax functions continue to add competencies in data analysis, the opportunity to incorporate self-service tools is also increasing.
- Artificial Intelligence (AI)/Machine Learning technologies help companies to learn and gain insight from their tax data, which can lead to better business intelligence for the purpose of preparing reports and dashboards as well as identifying trends in collected data.
Dashboards and Visualization
Data visualization is often the last key milestone when determining how to turn large amounts of data into information and provide actionable insights back to the business. Visualization tools allow tax teams the ability to produce self-service analytics and create additional efficiencies without relying upon a business analyst to decipher the data, translate it and then provide relevant insights. Once data has been properly placed into a dashboard, users can extract key insights without additional assistance or intervention. For example, companies can customize dashboards to identify exceptions to source data, provide comparability to prior cycles, predict future trends based upon historical results or generate executive level summaries. Tax teams that overlay visualization tools on top of a robust tax data warehouse often have a greater ability to maximize the benefits of the resulting analytics.
Benefits of Technology and Innovation
One of the more significant benefits to utilizing technology enablers for tax innovation and efficiency is the reduced time spent on manual reporting – which provides increased time made available for strategic tax analysis. The opportunity to streamline and automate tax department activities can also eliminate duplicative and repetitive process steps and reduce reporting risk due to human errors, therefore reducing costs for audit defense. Data becomes more accessible to source multiple tax workflows, and the resulting analytics can be used to identify and fuel future tax savings. Finally, many tax teams have considered technology and innovation as a way to reduce consulting fees by bringing data manipulations in-house without a significant increase in team work hours.
How DHG Can Help
DHG’s tax transformation practice is skilled at streamlining efficiencies within departmental processes and has a suite of automated solutions designed to help companies embrace and adopt automation and analytics into their tax practice. With proper planning and implementation, as well as the best combination of technology enablers, DHG can help companies improve how they collect, store, automate and analyze data to build better business intelligence and transform their tax department to be more proactive and increase the value that the tax function provides to the business. For more information about how technology and innovation can improve your company’s tax department, reach out to us at firstname.lastname@example.org.