Demands on tax teams have never been greater, especially when the uncertainty of the economy and the ongoing impact of the pandemic are considered. Yet somehow tax professionals need to transition from their current position, which is arguably often restricted to compliance and reporting processes, to take on a more strategic role that adds more value to the business.
Speaking at a webinar dedicated to exploring the current perception of tax teams, the barriers that exist to playing a more strategic role, and how to create an environment for strategic thinking, Jamie Eagan, VP of Product Management at insightsoftware, said there has rarely been a more challenging environment for tax professionals.
“In many cases, we are still feeling the effects of the pandemic,” he explained. “Teams are still working remotely and it’s not clear when or if we will return to the same work patterns as before. It’s likely to be later in 2021 or 2022 by the time normality reappears, and such uncertainty requires tax professionals to plan for multiple scenarios.”
At the same time, there are question marks over how domestic tax regimes will change in the US, how Brexit will impact the UK’s relationship with the European Union, and when/how BEPS 2.0 will take effect on international tax arrangements, having been deferred because of the pandemic in 2020. On top of that, there are likely to be additional tax changes and incentives relating to climate change or foreign investment.
Accept That Change Is the Norm
The only action multinational entities (MNEs) can take at this stage is to accept that change will be the norm and likely more frequent. This involves MNEs being as prepared as possible for as many eventualities as they can, then having the capabilities to pivot in line with new domestic or global tax requirements.
While the requirement for flexibility is emerging strongly for corporate entities in particular, tax teams are not always equipped to provide the support that is needed. “A sentiment that we’ve heard more than once is that, despite tax payable being one of, if not the largest line item on profit and loss account ledgers, tax professionals are undervalued,” said Eagan. “We know that this is not the case, but that tax teams need the right tools that enable them to add strategic value.”
“The problem is that this is a self-perpetuating situation, and tax professionals get stuck in a never-ending cycle,” he continued. “As long as tax teams are seen as reactive and largely involved in compliance activities, it is difficult for them to make the strongest case for investment in smart technology that will enable them to transform their roles.”
It’s not just having the most modern tools to calculate and forecast tax payments in unusual times that is the issue, however. When asked what the biggest barriers were that prevented tax professionals from changing people’s perceptions, the most common of these related to data coming into the tax team from finance, particularly in terms of the level of granularity of information or the quality/multiple incidences of forecasts.
Add to this the fact that many tax teams are continuing to struggle to complete their reports and forecasts with manual processes and static spreadsheets, and the challenge becomes even more problematic.
Process, Technology, and People
Looking beyond the immediate situation, Eagan explained that once MNEs have made the decision to invest in software such as Longview Tax from insightsoftware, they need to think about the bigger picture of process, technology, and people.
“There is no point in designing software around bad processes,” he said. “It’s important to map out the limitations of current procedures and where the roadblocks occur, seeking advice from tax partners who can help develop the best approach. Identifying data sources and communication channels that can be improved is another useful step to take.”
From here, there are a few additional factors that make tax software implementations successful. One is ensuring that the solution is owned by the tax team, so they can make changes, such as adding a new entity, new adjustments, or even reports, as and when they need to without having to wait for support from IT.
A second is ensuring that the team uses as much automation as possible within the software, so that manual processes are eliminated when possible and data accuracy can be improved. For example, one of insightsoftware’s large multinational customers has switched from spending 85 percent of the tax team’s time gathering data and 15 percent on analysis, to 30 percent data gathering and 70 percent analysis, eliminating 1,000 Excel spreadsheets in the process. The company has also reduced the number of days it takes to complete year-end close from 14 to just 5.
A third factor is to work with the rest of the organization to adopt a standard, centralized data repository that can be used for all finance functions. In this way, data are easier to share without any adaptation, helping to reduce ambiguity and anomalies.
“All of these actions serve to free up time for the tax team to uncover critical insights and provide strategic direction,” Eagan said. “. Having tools to drill into the detail, as well as present data in a graphical format, helps them and senior leaders pick up on patterns that are easy to miss when scanning through rows and columns of numbers.”
Maximize Your Investment
Finally, it’s important to help tax teams fully engage with the technology so that they get the most from it and are not tempted to carry on using the old familiar, but often inefficient, ways of getting to an end result.
On the flip side, another compelling reason to invest in software like Longview Tax is that it helps to attract, motivate, and retain the best professionals, who want to work with companies that are not in catch-up mode.
Once the advantages of automating tax calculations and reporting have been proven, it can open doors to exploring other adjacent tax solutions as well,” concluded Eagan. “Ultimately, what tax professionals need to be doing is to help their CFOs run a world class organization, especially in such challenging times.”
Find out more about how you could use Longview Tax from insightsoftware to reshape your tax function. Book a demo, or drop us a line.