6 Corporate Initiatives That Impact Your Business’s Tax Planning Strategy

Taxes are incredibly complicated for businesses big and small which is why a tax planning strategy is essential. Every company has to be concerned about income taxes, employment taxes, sales taxes, local taxes, and more. As you scale and move into new states—and particularly new countries—the tax situation becomes even more complex, with more and more jurisdictions expecting you to write them checks.

Being profitable and delivering the most value to shareholders starts with having a robust tax planning strategy that enables you to keep more of your hard-earned money while ensuring compliance with every tax district—and keeping your reputation intact.

Unfortunately, when it comes to tax strategy, there are many moving parts to consider. Tax policy leaders have outlined how organizations need to think about taxes. Concerns now extend well beyond achieving financial targets to include managing reputational risk, weathering increased scrutiny from media and activist organizations, and addressing the impact of tax on everything from business models to investor communications.

Additional concerns include the fact that stakeholder interest in tax matters is heightened. And at the same time, government tax policies are changing at a rapid clip.

Add it all up, and tax planning strategies are perhaps more important than ever before for profit- and reputation-conscious organizations—and those that operate on a global scale, in particular. The good news is that by taking a proactive stance toward your tax planning strategy and aligning it with your corporate initiatives, you can optimize your organization’s approach to taxes, increasing profitability while maintaining a sterling reputation and keeping investors and other stakeholders happy.

With that in mind, let’s take a look at six corporate initiatives that impact your tax planning strategy, and what you can do to improve your organization’s financial and reputational well-being.

1. Digital Tax Transformation

Although many nimble startups have been born in the digital age, well-established organizations across all industries are still relying on legacy systems and paper-based processes. To increase their effectiveness and become more efficient, these companies are, by and large, accelerating their digital transformation efforts. By doing so, they are able to reduce error-prone data entry.

Believe it or not, companies that process tax documents by hand may experience an error rate as high as 20 percent. With a digital corporate tax solution in place, all of these errors can be eliminated—giving you the peace of mind that comes with knowing your numbers are accurate.

What’s more, because they put all tax information at your fingertips, corporate tax solutions enable you to transform into a data-driven organization. Instead of basing them on hunches, you can let the data guide each of your decisions.

2. Collaboration

Organizations are increasingly realizing that Aristotle was on to something: The whole is greater than the sum of the parts. To this end, more enterprises are making investments in collaboration to facilitate open lines of communication and integrate the tax function deeper into the office of the CFO.

At the same time, this enables CFOs to enjoy deeper insight into the organization’s taxes, keeping their fingers on the pulse of various scenarios in real time. By making smart investments in collaboration, you can keep everyone on the same page with respect to your tax planning strategy, helping your organization optimize the tax function along the way.

3. Risk Mitigation and Corporate Social Responsibility

In recent years, conversations about tax avoidance have taken place across the world. Just because an organization might be able to shift its tax liabilities to a different country to keep more money doesn’t necessarily mean it’s the ethical thing to do—particularly in a world where wealth inequality is becoming more pronounced.

An aggressive tax avoidance policy can draw ire from the media, politicians, activists, and consumers. As such, your organization’s response to tax planning can have a significant impact on your reputation and goodwill.

By ensuring that your organization is paying its fair share of taxes in all jurisdictions, you can mitigate potential reputational risks while moving your corporate social responsibility (CSR) programs forward.

4. Maximizing Profitability

At the core level, all organizations are focused on boosting profitability. By investing in digital transformation, collaboration, and CSR initiatives, you can expand your margins and deliver more value to shareholders.

By investing in corporate tax software, you can supercharge your organization by accelerating your tax timelines. You’ll also gain access to robust analytics and reporting features that enable you to find the signal in the noise.

With easy-to-consume data on hand, you can really drill down into the nitty-gritty and find the information you need to continuously improve your approach to taxes.

5. Mergers, Acquisitions, and Tax

Merger and acquisition activity is expected to continue at a rapid pace this year, with companies gobbling one another up or joining forces to achieve economies of scale and unlock more value from their assets and intellectual property.

As M&A deals get finalized, there are tremendous opportunities for organizations to set up more efficient tax functions. This, of course, is much easier with corporate tax software in place.

Such software enables you to quickly incorporate acquisitions into your consolidated structure and allows for effective pre- and post-acquisition reporting.

6. Restructuring Tax

The ever-changing financial environment has placed an enormous burden on many companies. Some organizations have had to struggle with significant reductions in revenue, whereas others have had to rapidly adapt to the new normal of remote work.

To stay profitable during these turbulent times, many organizations have been forced to restructure their operations. Corporate tax software can help here, too. With the right solution in place, you can easily accommodate changes in your corporate structure—whether it’s through legal reorganization, disposition, or leveraging alternative hierarchies with management reporting.

Gain More Control over Your Organization’s Tax Planning Strategy with Corporate Tax Software

Creating a tax planning strategy that helps your organization meet its goals while keeping tax authorities, activists, and media companies satisfied is a complicated balancing act that gets more difficult as your company grows. With so many things to consider, it’s virtually impossible to devise the perfect strategy without the right tools in place.

This is why today’s leading organizations use corporate tax software to optimize their tax strategies and deliver the best results to their stakeholders. From reducing errors and gaining more visibility into your tax situation to improving your forecasting capabilities and developing a deep understanding of multiple tax scenarios, the benefits of corporate tax software speak for themselves.

But not all tax software is the same.

When it comes time to determine which corporate tax software solution makes the most sense for your organization, you’ll first have to figure out whether to build it internally or invest in a solution built by a reputable third party. But there’s no one-size-fits-all answer to this question. Every organization is different. Whereas some might be better off building their own custom solution—assuming they have the time and resources needed to do so—others would be better off investing in a proven tool.

Check out our free guide, Corporate Tax Software: To Build or Not to Build, to learn more about how much building software costs versus how much it costs to purchase it, how much time it takes to create a proprietary solution, and the risks associated with creating your own tool versus using a third-party vendor’s solution instead.