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Simplifying the complexity of tax reporting
As companies revisit their core business strategy, Tax has a critical role to play. Heightened complexity, resource constraints, cost pressures, increased reporting and transparency demands, along with new ways of working are putting pressure on businesses today and driving the need for change. As a strategic partner, Tax can help your company enhance business strategy in a tax-efficient way, proactively address change, demonstrate a commitment to earning stakeholder trust, and deliver strategic business outcomes in a transparent way. Tax can also help the business ‘see around corners’ to anticipate change and prevent tax consequences that may be costly, both financially and reputationally.
But, is your Tax function well-equipped for the job? There has never been a more challenging time to operate a Tax function and keeping up with internal and external changes can be burdensome, especially as proposed changes require continual analysis both in the US and globally. Now more than ever, Tax functions need to think and work differently to gain speed, efficiency, and strategic value. This evolution is needed to gain next-level capabilities and involves a continual weighing and balancing of priorities to achieve success – however your organization defines it.
Get started by asking yourself the following questions:
- How are you planning now for the right skills, capabilities, and labor mix you’ll need to enable your tax function to deliver quality results on time, every time?
- How are you adopting digitally-enabled solutions to help manage data, enhance process, improve quality, reduce risk, and inspire new ways of working?
- How are you leveraging analytics to help optimize performance, analyze trends, validate results, capture synergies, and deliver value throughout the process?
Anchor Tax with an efficient and scalable operating model
As you evaluate your approach, consider which execution model best supports your needs now and is scalable for future growth needs – recognizing that each operating model has its own design elements relating to data, process, technology, and people that need to be examined. Common operating models include:
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It is important to assess the needs of your Tax function and align with the broader organization’s quality and risk management objectives – along with current compliance obligations (related to both financial statement reporting and tax filing requirements), complexity around tax legislation and strategic business priorities.
Enhance your tax reporting lifecycle
Harnessing the power of data.
When becoming more efficient and effective as a result of digital transformation and automation, Tax is better equipped to gather real-time, tax-sensitized data from broader internal business platforms, team across various functional areas, and educate stakeholders on the value of tax-ready data.
A clear understanding of data requirements and data sources helps ensure completeness and accuracy as well as solve for pain-points and ‘gap’ areas. In addition, leveraging enterprise-wide initiatives (e.g., ERP enhancements) to address upstream data challenges can be a unique opportunity to affect change and lead to more sustainable efforts.
Below are examples of advancement in data acquisition and transformation efforts:
Data Acquisition: Incorporating extract, transform, load (ETL) tools to automate the data sourcing process can help enable Tax to fill the gap in existing enterprise systems and significantly enhance tax data quality and accuracy, while reducing opportunities for human error within the process. It also provides an opportunity to directly connect tax engines to major data sources for real-time analysis and results.
Data extraction technology is pushing Tax to the forefront of data acquisition and opening doors into the broader organization versus just being a downstream consumer of data.
Data Transformation: A standard data model can help provide consistent and reliable data in real-time, while enabling efficient reporting and analyses. As a result, Tax can acquire and transform the data once for use across all areas of tax. It is a basic concept but may entail considerable process changes as well as some technology changes.
Further enhance your data processing power through small automation solutions (such as ETL tools) and expanded modeling capabilities – helping to shift tax from reactive to proactive, facilitate planning, and elevate decision-making.
Lessening the burden of reporting and compliance.
Investment and time spent on the front end can help simplify your reporting process and facilitate more ‘real-time’ reporting. Leading Tax functions are adopting holistic, tech-enabled solutions supported by an integrated suite of tools, based on a common data model. And leveraging provision into compliance to help accelerate tasks and reduce rework. This approach helps bring together data, technology and process in a more automated way with less manual intervention. Tax is better equipped to meet reporting requirements, respond to change, and deliver strategic value – efficiently and effectively.
Driving value end-to-end with analytics
Analytics transcend each aspect of the tax reporting lifecycle as it offers opportunities to build efficiencies, capture synergies, and generate valuable insights throughout the process – from data acquisition to data transformation to reporting execution. Leverage analytics to:
- identify anomalies and resolve issues early in the process rather than catching them at the end when the pressure’s on to finish.
- reconcile data and identify outliers for a more targeted review process.
- enhance the reporting and review process – e.g., compare periods, effectively identify exceptions, abnormalities, or errors. Leverage dashboards for intuitive and interactive graphics, color coding, and filters.
- drive real-time insights, execute modeling of ‘what if’ scenarios, and build in ‘next level’ capabilities.
What actions should you take next?
As you begin or continue on your evolution journey, consider the methods used to help ensure long-term success and sustainability of solutions. The selection of technology solutions, process design, and operating model design can have an incredible impact on your tax operations and return on investment (ROI).
Consider the following key components for success:
- Align on target outcomes
- Focus on scalability
- Empowering change
- Prioritize proper governance
Align on target outcomes
and identify optimization opportunities
Review your current tax ecosystem (including people, data, technology, and process) and identify pressure points where integrating changes may alleviate manual efforts, reduce financial risk due to human error, and increase bandwidth for Tax team members to perform more high value tasks. Align with broader organizational goals and tailor key performance indicators (KPIs) to each functional area.
Focus on scalability
and sustainability of solutions
Solutions should be scalable to enable your organization to adapt to future technology, process, and resource needs. Establish a well-defined maintenance plan of the solution to help preserve its integrity. Continually evaluate results and adjust your strategy as needed to keep things running smoothly and avoid potential pitfalls.
Empowering change
within your organization
Managing change is a critical component of any transformation – large or small. It is a necessary process that helps companies successfully implement new strategies and effectively navigate transitions. Consider the needs of the business and your people, including upskilling and reskilling resources. Attention should also be paid to maintaining culture and building trust within the organization.
Prioritize proper governance
to help manage success
Establish governance guardrails and best practice standards on the front end. Engage key stakeholders early on to achieve ‘buy-in’ and hold them accountable for success. Adopting consistent standards and protocols early in the process can enhance your ability to pivot seamlessly and manage risk during times of change. Further, embedding tech-enabled controls can strengthen data and process.
Consider what end goals define success for your Tax function – recognizing there may be dual goals at play (C-suite versus Tax priorities). When weighing priorities, Tax should be aligned with the broader business while also considering the sustainability and scalability of solutions.
Regulatory reporting requirements don't have to feel like a burden.
An efficient and effective tax reporting process helps removes intrusion and disruption, and gives you time back. From extracting and standardizing data to analyzing and reporting, if done correctly should make it easier to complete your compliance without missing a beat.
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