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How to evolve the tax department for the digital age

Oct 16, 2023

You know the quote: Nothing is certain but death and taxes.

When it comes to the tax department, there’s some truth to the adage. Despite the huge amount of data that feed their processes, tax departments have largely held onto “the way it’s always been.” Manual processes are abundant, and bespoke projects are executed with low-tech means and tools.

It’s time for the tax department to catch up.

Tax departments need tighter integration with the systems that influence tax-related outcomes. They need to move into the digital age.

Assess your tax technology needs

How do you start a digital transformation in the tax department? Begin by assessing three areas: people, processes and existing technology.

People

New software affects people before it influences your filings. If you roll out a new system, will people adopt it? Do staff have the right skills (and mindset) to make the investment worthwhile? Many organizations need to hire or train staff to get optimal use from digital tools.

Look outside the tax department, too. Do you have IT support to build and maintain a solution — or is outsourcing a smarter way to manage your resources? Before you buy into a solution, consider the impact it will have on all stakeholders.

Processes

Not every tax function needs to transform — and certainly not all at once. Examine your current processes and decide which functions are core to your businesses. Which processes would deliver better tax results if you performed them better? Isolate processes that have a material impact on the business.

Technology

Before you get excited about shiny new tools, look at your existing tech. Are you using everything you own to its greatest potential? Even Excel? Most tax departments already have some business intelligence tools and robotic process automation in place. Start using what you have.

Likewise, tune in to other digital transformation efforts. Most data used by the tax department is generated elsewhere in the organization (which can add complexity and risk). Get plugged into companywide projects so you’re aligned on data strategies — and gain access to data, straight from the source.

Best practices for tax transformations

Technology is only as good as the underlying data. Before you invest time, money or human resources into upgrades, make sure you have ways to collect, validate and govern data from multiple sources.

You need a simple way to see data from different books (e.g., GAAP, STAT, IRFS), and the ability to adjust and use data that’s not sitting in any book or ledger. Best practice is to organize all your data in one place, so all your tax functions are grounded in a single instance of the truth.

Once you have good, clean data, you can improve tax processes. Aim to make them automated, flexible and scalable.

  • Automation: Connect systems and tools so data flows into tax programs automatically, without any fingers on a keyboard. Tighten coordination across the organization to take human error and human hours out of work.
  • Flexibility: CEOs are coming to the tax department to ask “what if” questions about inflation, tax rates, valuation allowances, M&A (and the list goes on). Tax departments need to adjust minute assumptions and return accurate models and forecasts. The C-suite needs answers in minutes or hours, not days or weeks.
  • Scalability: Leaders need streamlined data flows to plan for uncertain global tax scenarios. To become scalable, tax departments need a core data set they can leverage in different planning and forecasting models. Data needs to be accurate, accessible, detailed and in sync (not to mention tailored to regulatory standards).

Of course, you can improve non-core processes, too. But consider whether they could be optimized outside the organization so you can hone in on higher-value efforts.

How Wipfli can help

Ready to bring your tax department into the digital age? Wipfli can help you design solutions to match your company’s tax strategies. We offer the best of both worlds: certified tax accounts with real-world experience, plus cutting-edge digital specialists. Our perspective can elevate your tax function and turn it into a business advantage. Contact us today to learn more or keep reading:

Author(s)

Gregory J. Domareki
Principal
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