Tax teams have a lot on their plate these days. As the critical link between their organisation and global tax authorities, they have always needed to quickly process and respond to relevant changes originating from either party. But what happens when commercial strategies and tax regimes drastically change at the same time?
This is exactly what is happening now, and many tax teams are struggling to keep up. However, a review of the underlying software of their operations could help to set them on the path to a solution.
The onslaught of change in tax policies and corporate strategies includes BEPS pillar two, the challenges of which were addressed in a free webinar on October 17 2023 hosted by ITR and insightsoftware, “Clearing the hurdles of pillar two: your questions answered”. Kathryn Abate, senior product manager at insightsoftware, and Susie Cooke, global tax transformation leader at KPMG in Canada, gave an update on pillar two and responded to related compliance and reporting questions.
The webinar explained the benefits of implementing software that can standardise and automatically consolidate tax teams’ global data. This alleviates many of the manual burdens that get in the way of what tax teams should be doing: elevating their function to that of a strategic partner within their businesses.
Several enterprise tax solutions exist on the market, so it is important to assess the options based on operational and strategic considerations. Here are the nine key factors to take into account.
Operational factors
1. How much time will be saved on reporting and forecasting?
Tax teams are frequently subjected to impossible demands in which they are under pressure to close the books but still waiting for finance data to come through. This often happens when an organisation’s entities operate with disparate ERPs, and the result is often a scramble to:
Source the data;
Enter it into diverse spreadsheets; and
Manually consolidate the results.
The process is tedious and often introduces errors into the calculations, thereby requiring even more time to be spent in checking and rechecking the reporting logic.
Quality enterprise tax software should be purpose-built to break down these data silos across an organisation’s subsidiaries so that data is normalised and can be pulled and consolidated in real time. Furthermore, this should allow for more detailed reporting, including immediate and automated breakdowns by jurisdiction, entity, and even line of business. When this happens, tax teams no longer need to chase after the finance data or apply their business rules and calculations manually.
Insightsoftware’s Longview suite enables everything to happen in real time; by the time you finish your inputs, they’ve already hit your TARF [tax account roll forward], debit, and credit, so that you already have your full tax account roll-forward, including account-type items that are booked by non-tax groups, like OCI [other comprehensive income] and equity. Rockwell Automation [a client of BDO’s, with BDO the implementation partner on its Longview project] didn’t have this speed or visibility before insightsoftware.
2. Can the data be automatically pulled on a scheduled basis?
Tax solutions have different ways of processing data. Some have fast computational engines capable of working through enormous data volumes but may require manual batch calculations with system downtimes as they process those data sets.
This may not be an issue for some tax teams, but there is an alternative that is more process-friendly, which in turn protects the integrity of the data.
The best tax solutions perform dynamic calculations and consolidations, so that everyone knows they are automatically looking at the most updated numbers. Manually run batch calculations and consolidations can cause delays in the ability to jump into an analysis or provide an updated report in a timely manner, and can also restrict other workflows that depend on tax data. Automatically scheduling them leaves one fewer item to worry about, and means there is no wasted time in waiting for the completion of the consolidations.
3. How much reliance will there be on IT?
Whether an organisation is considering building custom tax software internally or purchasing a solution from a dedicated vendor, many solutions require heavy involvement from the IT department or outside consultants for upkeep or to address new requirements. When this is the case, tax teams are unable to operate autonomously, often finding themselves waiting on urgent updates or competing with other departments for attention from IT.
A software solution should require minimal IT intervention. Tax teams should feel completely empowered to generate new reports, dig deeper into their calculations, and even update their entity structure based on organisational changes such as new acquisitions. This self-service freedom puts tax teams in control of their own destiny and ensures they can act in a timely manner, regardless of what is happening outside the tax department.
4. How easy is it to use the software?
Even though modern tax professionals are increasingly technically literate as they prepare to cope with future career demands and opportunities, not everyone needs to be a ‘tech wiz’ to provide serious value to the tax function. This needs to be considered when selecting enterprise tax software.
Failure to consider the ease of use and learning curve associated with a new software investment can lead to some team members resisting using the solution, improperly using it, or both. Furthermore, it is not only the core tax team that needs to work with the new system, but the larger network of controllers and anybody who handles or submits important supplementary tax-adjacent data, such as pension plan performance.
This means it is important to adopt a solution that is visually intuitive and easy to use. Tax professionals are accustomed to using slick consumer apps on a daily basis, so trying to replicate that same easy experience for them is extremely important to ensure total adoption. When evaluating tax solutions, this should be kept in mind in testing the products.
Longview exceeded our expectations. We went from a 10-day tax provision to 1–1/2 days. We had this financial statement consolidation in the tax software that we didn’t even have on the accounting side. I was just amazed.
5. What if certain workflows need to remain in spreadsheets?
Spreadsheets and workbooks with static data create numerous problems for tax teams, which is why many solutions attempt to eliminate them from their workflows. While this is well intentioned, it is also unrealistic. The reality is that some calculations may not be addressed by the software, or other departments simply find that spreadsheets suit their needs best.
Without the ability to easily ingest this data into a new tax system, it is likely there will be an incomplete view of the organisation’s true tax position. Having a tool that can connect and submit this data in real time is critical to an organisation’s success and can often provide a path to a quicker and an easier implementation of a tax solution.
This means it is just as important to think about the workflows and processes of the teams involved across the larger organisation to capture tax data, rather than simply focusing on the tax department’s core workflows. One way to address this is by requiring that the tax solution provides an Excel add-in that can connect the larger organisation to the tax system for easy integration. This add-in should be explored, and a demonstration of the workflow requested, when evaluating tax solutions.
Strategic factors
6. Is an early view of the group position and effective tax rate possible?
Expediting data aggregation, processing, and reporting should lead to strategic pay-offs. The sooner that the overall group position and actual tax exposure can be seen, the earlier that coordinated action can be taken if required. Organisations that rely on spreadsheets for their tax reporting are unable to gain this type of visibility soon enough to respond if things are off track.
By automating manual processes, enterprise tax software saves time, freeing up tax professionals to focus more on critical analysis. The best software supports these analytic processes by providing clear and actionable reports that allow for collaborative discussion so that teams can determine what to do next.
However, many solutions lack effective, integrated report-building capabilities, and instead require users to export tax data into a third-party business information tool. This introduces an extra step into the process that takes up unnecessary time and breaks the link to the source data.
As the options are evaluated, the reporting capabilities available should be carefully scrutinised to ensure each vendor provides the level of integrated reporting required by the tax team.
You not only see year-over-year reporting, but also hard close versus year end and a nice summary at the jurisdictional level of what’s jumping out and driving changes. Presenting this succinctly to our CFO allows him to more easily bring his own knowledge and analysis to the table so the tax team can investigate further.
7. How can the solution promote a smoother relationship with external auditors?
Robust self-service reporting combined with automated, scheduled report delivery are boons for organisations looking to improve their relationships with auditors. If a tax team is able to work with auditors to develop a report that provides all the granular detail they require, then the automated report delivery turns this into an almost set-it-and-forget-it process, guaranteeing that the audit team always has access to the data it needs, which puts fewer demands on the tax team to answer questions and provide data.
Only when the auditor flags an issue or requests additional information would the two parties need to talk. Even then, the tax software should provide clarity into the business rules and calculations to ease the burden of addressing supplemental questions.
8. How does the solution promote more insightful cross-border analysis?
Individual jurisdictions or other rate drivers can have an outsized impact on the overall group position. It is not always easy to find such outliers and take steps to mitigate the effects, but one of the best ways to do so is through comparative reporting. Running comparisons between different jurisdictions, entities, and time periods is extremely helpful for tax teams to gain a better understanding of their unique influence on the overall group position.
To do this, it is crucial to work with standardised data that is reported at the same level, in the same timeframes, with the same rounding logic, and with numerous other factors accounted for. Having data available at the same level of granularity in these reports is also critical so that it is possible to slice the data in different ways to find those outliers. The best tax reporting software makes this possible through its direct data feeds to all the organisation’s ERPs, automatic consolidation capabilities, and comprehensive reporting.
9. Will the solution keep up with tax regulatory changes?
Agility is a key factor for success in today’s global economy. Dedicated tax accounting software and transfer pricing (TP) software that integrates with financial software, including ERP systems, is the best line of defence against changes with BEPS. For example, insightsoftware’s Longview Tax can integrate with multiple ERP systems, even if different software is being used in each subsidiary.
These systems:
Accurately collect and organise TP data;
Model various tax scenarios;
Identify gaps in targeted profitability; and
Enable corrections to be made before closing the books.
That way, the time saved can be used to take a step back to consider the wider picture.
New regulations such as BEPS clearly constitute a significant change, but such challenges also present an opportunity for corporate tax teams to step into a more strategic role within their organisation.
How tax teams can elevate their role
Forward-thinking organisations are already looking to technology as a solution to alleviate the manual burdens associated with tax reporting and provisioning. The savviest tax teams avoid rushing to implement any particular solution, though, because they are careful to assess which option meets not only their departmental needs, but those of their wider organisation.
Integrating with multiple systems, automating consolidations, and providing insightful reports may be the main sought-after features in enterprise tax software, but these must be supported by additional capabilities to provide maximum value. For example, comprehensive, intuitive tax solutions such as Longview Tax reduce technical reliance on IT, removing the barrier to entry for non-technical users and promoting a more collaborative tax process. Having all these supporting features is important when choosing a solution.
Whereas most enterprise tax software focuses on operational efficiencies, tax teams should identify and assess the resulting strategic impacts. Processes will undoubtedly shift in response to the efficiencies gained from any software implementation, but tax teams should take care to ensure that the new processes are able to support deeper strategic analysis and action.
When implemented correctly, tax teams can leverage their software to support greatly enhanced capabilities, elevating their role to that of a strategic partner within their organisations.
About insightsoftware
Insightsoftware is a leading provider of reporting, analytics, and performance management solutions. Over 32,000 organisations worldwide rely on the firm to support business needs in the areas of accounting, finance, operations, supply chain, tax, budgeting, planning, HR, and disclosure management. It enables the office of the CFO to connect to, and make sense of, their data in real time so they can proactively drive greater financial intelligence across their organisation. Insightsoftware’s best-in class solutions provide customers with increased productivity, visibility, accuracy, and compliance.
Learn more at insightsoftware.com.
