IMGCAP(1)] While technology is increasingly vital in corporate tax departments and for the accounting specialists who serve those organizations, most companies are swamped with tax-related data flowing from growing global trade, as well as from mobile, Internet and other ubiquitous sources of commerce transactions.
To drive efficiencies and cost savings – and to improve transactional tax compliance and business performance – companies of all kinds are looking for better ways to capture, manage and use that data. For many CPAs and accountants, serving clients through this confluence of tax and technology can be a challenge, but also an opportunity.
Too Little, Too Much
There was a time when large and small companies alike were starving for information. Thirty years ago, organizations struggled to capture or maintain the data needed to handle reporting and filings related to sales, use and value added taxes.
Today, companies face the opposite problem: many are virtually drowning in data. Huge volumes of information are flowing in from greatly expanded enterprise resource planning (ERP) systems, global supply chains and the massive growth in mobile- and Internet-based commerce.
So, instead of hunting for information, tax departments are struggling to capture, manage and gain meaningful insights from rivers of data. Since data come from disparate systems, data consolidation and reconciliation are increasingly important. Most tax departments now spend huge amounts of time and effort condensing the data, ensuring that it is accurate and complete, and putting it into some electronic form for filings. Digesting and “crunching” that data to derive meaningful insights means that analytics and electronic reporting have also become essential components to tax data management.
Tax and Technology
Tax professionals have traditionally focused their expertise and limited technology tools on the reporting function. Today, as clients seek tax guidance across the entire record-to-report (R2R) environment, forward-looking accountants are broadening their scope of services by leveraging technology used for tax-related issues of compliance, advice and audits.
Compliance
As sales and business data proliferates, tax authorities are changing their view of reporting and compliance. Very few countries now accept paper reports or returns; in fact, most require electronic submissions in specific formats through designated portals. To meet those requirements, tax departments must have real-time processes, robust data management systems and advanced analytic capabilities.
Audits
Modern day audits increasingly leverage data and analytical tools to find and address tax-related issues, which require tax professionals and tax advisors to understand and use these technologies proficiently and proactively. If a company processes a certain type of transaction correctly 99 percent of the time, for example, the 1 percent error rate can translate into millions of dollars in exposure over a period of a year or years. Conversely, when accountants have robust data management capabilities, they can identify problems and recommend solutions before an official audit.
Advice
Organizations typically seek tax advice when they know they have an issue, but the majority of tax-related exposures often arise from things they don’t know about. As the volume and importance of data have grown, accountants are leveraging IT resources to analyze and understand the operational side of the tax environment. That may involve issues such as how to allow field salespeople to enter a web-based order, or how to ensure the appropriate exemption certificate or VAT registration number is on file for a particular customer.
A Data-Oriented Future
Being a tax specialist is no longer sufficient. CPAs and accountants are required to use technology to meet these data-driven challenges. This involves three key steps:
1. Tax professionals do not need to know software code or the intricacies of SAP, Oracle or other business systems. Instead, they need to understand how various accounting systems manage and process data, and how to use the outputs of these systems to better assist clients.
2. Awareness and knowledge of today’s more advanced tools and automated solutions are essential, specifically how to manage end-to-end data flows, where financial data is stored and how to analyze that information in order to meet critical financial and compliance objectives.
3. Look to trusted technology partners who can bridge the gap between tax expertise and data technology for your practice and for your clients.
Thanks to the data revolution, instead of looking for a needle in a haystack, tax specialists are expected to find a needle in a field of haystacks. To do that, they must understand and leverage today’s new generation of data management and analytic technology.
Mehrdad Talaifar is vice president of EMEA Professional Services and Global Strategic Value Management Program for Avalara. Contact him at mehrdad.talaifar@avalara.com.
