|
If you are feeling the burden of a dramatic increase in workload, you are not alone.
Findings from a 2006 survey showed 80 - 90% of the respondents had recently experienced an increase in documentation requirements, auditor information requests, SOX 404 compliance, and a greater demand for a higher level of accuracy.
Another recent study revealed that corporate tax professionals spend, on average, 60-70% of their time locating, organizing, and reworking data. The cycle time associated with the myriad of processes and sub-processes performed by the corporate tax department is just too high, exacerbated in part by the requirements of SOX 404 and more recently FIN 48. A third study indicated tax executives are not satisfied with the amount of time they are able to spend on the highest value tax management activities, such as managing cash tax and ETR, and responding efficiently and effectively to the needs of the business. There’s also evidence that this extra burden of lower-value, tactical activities is creating morale issues and retention challenges.
Tax departments are being asked, as they have in the past, to do more, often with less. Given increasing burdens, we asked our experts for a list of ways technology can be used to reduce cycle time of low-value activities. Here’s what they had to say:
Challenge 1: Data resides in many different systems and locations; there’s no single view of the data.
Technology Solution: A central repository for critical tax data and associated documentation provides immediate access to the right data any time, by whoever needs it. By centralizing data, you not only eliminate the data collection nightmare, you also ensure that you’re always working with the latest versions of the data, supporting documentation and calculations.
Challenge 2: Data formats vary, and typically don’t arrive at the Tax Department in standardized format.
Technology Solution: Technology can help to standardize data formatting in a number of ways. First, Web-based, form-driven templates can be leveraged to ensure consistency of data collection and establish greater process controls. Second, if the data repository has embedded business logic, then the system can be leveraged through account mapping of rollups from external systems and sources. Eliminating reformatting and rework of data speeds the process and ensures a higher level of data quality.
Challenge 3: Spreadsheets have limited reporting capabilities, offering only a two-dimensional view. Analysis requiring multi-dimensional views must be conducted manually.
Technology Solution: Business problems are often multi-dimensional (e.g., a financing structure involving 30 legal entities operating in 15 countries and 25 states over a 7 year period) and require more than a review of two dimensions to get to the right answer. Leveraging technology with embedded business logic and reusable analytics enables rapid multi-dimensional analytics and supports complex management reporting. In addition, systematizing roll forward can significantly accelerate period-to-period reporting processes. With automated “what if” capabilities and robust reporting, it becomes possible to model business scenarios in hours versus weeks and dramatically increases visibility into the tax implications of business decisions.
Challenge 4: Frequent data changes and limited process integration require manual modifications of multiple spreadsheets.
Technology Solution: Today, change is the only constant. It’s not a matter of “if things will change.” It’s a matter of “when”, “how often,” and “how fast.” Advanced application software can play a key role in managing the impact of changes because, unlike spreadsheet calculations, you don’t have to rebuild the model every time something changes. The models are embedded, reusable, and support immediate propagation of changes across all related tax attributes.
Challenge 5: Spreadsheet formulas can be easily and inadvertently changed and thus require constant manual error-checking.
Technology Solution: According to one study, 91% of spreadsheets contain errors and finding those errors is like finding a needle in a haystack. And with large, complex calculations, it’s almost impossible to validate every formula for accuracy. With more advanced technology, the calculations are pre-defined, eliminating the need to search for potential errors. Embedded application tax business logic provides certainty in calculations and changes automatically ripple through the entire calculation model.
Challenge 6: It’s difficult keeping track of requests for information and tracking review/approval status
Technology Solution: Unautomated processes can lead to miscommunication, wasted time tracking down the data or person responsible, and can ultimately lead to missed deadlines or mistakes. Special-purpose software applications with embedded workflow capabilities can be used to organize and streamline data requests, provide organization and visibility around tax department tasks, alert responsible parties of overdue data requests, and escalate critical-path items. While efficiency gains are beneficial, even greater value can be gained by leveraging workflow to implement controlled, best-practice processes.
Challenge 7: The person who built the spreadsheet or other in-house model is no longer around and you have no idea how it was built.
Technology Solution: The workload and pressure on corporate tax departments is translating to retention challenges. Thus, the need to build and retain institutional, rather than personal, knowledge is higher than it has ever been. With the right technology, the historical knowledge and operational intelligence of the department can be embedded into a centralized software application that not only supports sharing of knowledge, but ensures that critical experience doesn’t walk out the door.
|
