In order to perform tax work more efficiently, corporate tax departments must become a more streamlined and efficient version of themselves — a modern tax department for the future
A modern tax department can be defined by the work it is required to do — collect and analyze data across the enterprise, conduct wider-ranging risk assessments, provide strategic intelligence, participate in business planning and finding new ways to extract value for the corporation, according to the Thomson Reuters Institute’s 2022 State of the Corporate Tax Department report.
At the recent ACT Annual Conference, which took place last month, panelists opened the conference exploring this very topic — what it means to be modern corporate tax department and what department leaders need to do to get their team there. According to panelists, a modern corporate tax department can simply be characterized by how efficient it is, how well it adapts. and most importantly, how it integrates technology and strategy.
That means, that one of the hallmark attributes of a modern corporate tax department at its foundation is having the right technologies. And that can start with automizing tasks that are highly repeatable, freeing up human resources from manual time-consuming work. Next, modernization means being able to access and analysis data with greater speed and accuracy. And having the kind of technology that standardizes how data is retrieved not only helps with tax compliance, but also creates opportunities for the department to reduce risk and work in a more proactive way.
At its core, the modern tax department will no longer just be in the role of company tax-preparer, but instead can help form a strategic focus, providing input to the company on business structure, mergers & acquisitions, expansion, divestitures, and more. In this strategic role, tax department leaders can work more intentionally by cross-collaborating with other department leaders across the business, which can allow for better alignment of tax strategies with the company’s overall business goals by, among other benefits, leveraging the expertise of colleagues in areas like finance, operations, and IT.
Thus, it is a clear necessity for a modern corporate tax department to have a tax technology team.
The art of start: How to build a tax technology team?
Like with many long journeys or marathon endeavors, the first step is to take a single step. And while this is true in building a tax technology team, for corporate tax department the steps may be more nuanced. The following are some plain steps that can help build a tax technology team.
To start, assess what the department’s current processes involve. This may require an honest look at where the bottlenecks and inefficiencies reside in the department and where workflow is impinged. Then, consider whether a technological solution could resolve some of these issues, and if so, how? In doing this simple exercise, it will also help define the specific skills that may be lacking on the current team.
Identifying needed skills and the roles that the team may need to fill is a crucial early step, because in order to build a tax technology team, corporate tax departments first must identify the right roles — uncovering hidden internal talent or hiring talented individuals — even before developing an effective strategy.
One of the hallmark attributes of a modern corporate tax department at its foundation is having the right technologies.
Defining the roles of each member of the tax technology team is crucial. The final tally of talent ideally should be a blend of tax professionals who understand technology or an IT professional that understands tax — and don’t forget a project manager. On the rare occasion that resources are available, corporate tax tech teams should consider the following roles: i) a tax technology manager to manage the team and design the strategic tech direction; ii) a tax analyst to work with the data, including interpreting it and providing quick and necessary information for tax planning and compliance work; iii) an IT specialist to handle the technical side of issues, like software development and data management; and iv) a project manager to supervise the implementation of tax technology initiatives and ensure they are completed on time and on budget.
If a tax department is unable to implement or recruit for the above roles, department leaders should undertake an assessment of current talent with an eye toward filling some of these roles filled with individuals who may have some these skills or have an interest in developing them.
Next, department leaders, working with the team, should develop a strategic plan for what technologies and tools are needed, based on what the department has determined its needs to be. For example, first determine if the current crop of technologies and tools currently used by the tax team can be further maximized; if not, are there technologies currently being used by other parts of the business that might be leveraged by the tax team? Working with the company’s IT department can help the newly minted tax technology team determine what technology solutions might help solve their needs without having to incur steep costs.
Finally, to keep track and measure progress, the team will need to document its processes. By documenting processes, team members can ensure that their work tasks are being done consistently and efficiently. Incidentally, this is also the best way to spot an inefficiency and identify where in the process it may occur. During the ACT Conference, Al Bradley, Director of U.S. Tax Operations at Airgas, advised attendees to create a process-design document to help them better manage their processes.
Other ACT Conference panelists outlined the crucial areas on which a tax technology team should focus, including:
- tax operations;
- process efficiencies;
- data management;
- tax system management, both technical and functional;
- automation and analytics; and
- enterprise resource planning (ERP) integrations and data reporting.
Having a modern tax department is not an option or nice to have in today’s competitive environment — it is a requirement. A corporate tax tech team can become a strategic partner that uses technology and data analytics to add value to the business and further validate the tax function to management.
Indeed, in order to become a modern tax department, a tax technology team is needed and critical component that will offer substantial improvements in accuracy and efficiency, reduce risk, and ultimately free up staff to concentrate on more strategic work.