Switching to a modern ERP software system affords many benefits, including increased efficiency, improved accuracy, and better control over your company’s finances. It is also an excellent opportunity to revisit many of the business processes that sit outside of your core ERP system. As you set out to improve your financial and operational procedures, you have an opportunity to rethink the way you perform tax planning, transfer pricing, budgeting, reporting, and analytics.
An ERP implementation offers an ideal window in which to lay out a vision for improved tax planning and management of transfer pricing policies.
Tax Technology Pays for Itself
By adding tax planning and transfer pricing management software to your overall technology vision, you can achieve greater ROI, accelerate your time to value, and extend the benefits of your ERP project to a wider stakeholder group within your organization. Perhaps most importantly, you will deliver measurable results to your company’s bottom line.
First, let’s define “tax technology.” There are several potential areas that comprise the primary pain points for most companies regarding taxation. First is tax planning and compliance. The best tax planning solutions offer corporate-wide capabilities for collecting financial data, calculating current and deferred taxes, forecasting your effective tax rate, producing tax relevant roll-forward reports, and help prepare the income tax footnote (for financial statement reporting purposes).
A second area that confounds many tax teams has to do with transfer pricing policies. Most organizations are struggling with increasing complexity in this area, as shifting trade agreements and governmental priorities are leading to rapid change. At the same time, regulatory agencies are ramping up their scrutiny, raising the specter of compliance actions against those less prepared to respond to that rapidly changing environment.
The proliferation of available data for use in transfer pricing, as well as the competition or financial talent, add further to these challenges.
By investing in tax and transfer pricing software, companies can achieve both strategic and operational benefits, gaining efficiency, increasing accuracy, and speeding compliance. Tax and transfer pricing software enables organizations to minimize their tax burden while ensuring that they stay clear of potential compliance pitfalls.
Larger multinational enterprises generally view tax and transfer pricing software as must-have assets, but small and midsize companies can achieve the same results, without the complexity and high costs of enterprise-level tools.
It’s important to build a business case if you intend to move forward. As budgets come under pressure in the coming years, tax and finance professionals need adequate ammunition to gain budgetary allocation and executive sponsorship for such projects.
Making Your Case for Tax Technology
The first step is to clearly identify the business problems that your proposed tax technology will address. As tax authorities seek greater transparency from multinational companies, and their transfer pricing activities specifically, that case is usually easy to make. Nevertheless, it’s helpful to gather as many proof points as possible specific to your organization, highlighting both costs and risks.
Some specific benefits include:
- Faster period-end closings: Tax tech automatically breaks down your P&L by jurisdiction, entity, and line of business, resulting in huge time savings.
- Better access to information: Self-service reporting frees up your tax team to seek and find information without having to turn to the IT department for custom reports or modifications.
- Increased accuracy: Automatic integration to ERP eliminates error-prone manual spreadsheets. Tax tech offers a “single source of truth” that drives tax and transfer pricing, from planning and monitoring to reporting and compliance.
- Stronger accountability: Automated workflows offer greater efficiency and speed, and also provide a complete audit trail of actions, decisions, and approvals.
Despite the tremendous benefits that tax technology offers, many may ask “why now”? Business leaders facing an imminent transition to a new ERP system might be inclined to believe that it’s best not to take on too much at one time.
In reality, this may actually be one of the best times to make the move to tax tech. Why? Because an ERP system is about re-engineering your business. It’s about modernizing your processes along with the technology that supports those processes.
Consider this analogy: If you are building a home, and you think that at some point you might want to add an in-law suite, it’s best to work that into your design up front. Not only will you save time and money, but you will also ensure that the entire home is designed to reflect your priorities.
Tax and transfer pricing are integral to the success of businesses today, especially when multiple legal entities and multiple tax jurisdictions are involved. It only makes sense to make this part of your company’s technology overhaul.
Six Easy Steps to Tax Tech Success
Start by breaking down your tax technology project into bite-sized chunks. This makes the entire process easier and can also help you to build the business case for investment in a system like Longview from insightsoftware:
Using insightsoftware’s Longview Tax Application to Elevate Tax to a Strategic Business AssetDownload Now
Step 1: Project Organization
This stage comprises project setup and planning, organization of a steering committee and meeting cadence, and establishment of an organizational and IT structure. By assembling a sample of documents and data from your organization, work with your team to identify key objectives, map out potential process changes, and outline any items that should be considered out of scope.
Step 2: System Setup
Initial system setup allows organizations to dive right in and view their own entities and account structures within Longview Tax, while also validating the values from their workpapers. Here, the team can identify any configuration changes to align the tax tech with the company’s policies and processes.
Step 3: Design
The design phase involves a deeper dive into the company’s specific requirements in preparation for fine-tuning the system to address your unique needs and objectives. This process also allows the project team to become better acquainted with the system and its capabilities.
Step 4: Configuration
The design phase results in a list of configuration settings, which can typically be implemented by the company’s tax team. It may also be helpful to include a representative from the IT department as well. At the end of the configuration phase, conduct a final review of system settings, loader files, data import and export configurations, and currency settings.
Step 5: Testing
In addition to validating the system configuration, testing helps him to build the confidence of team members in using the new tax technology. The primary goal of this step, however, is to ensure that all requirements identified in the initial design document are fully tested and perform as intended. Longview Tax includes standard test scripts prepared for areas such as year-end rollovers and return to provision.
Step 6: Final Preparation and Roll-out
Once testing is complete, the system is ready for parallel testing, signoff to confirm that the project has been finalized, and system go-live.
As you plan your new ERP implementation, consider the benefits of adding tax technology to the mix. Longview Tax and Longview Transfer Pricing offer seamless integration to over 150 different ERP software systems, providing speed, accuracy, and a single source of truth for tax and transfer pricing throughout your organization. To learn more, read How to Implement Longview Tax in Six Easy Steps.