How to accelerate digital transformation is currently front-of-mind for many businesses. Our experience tells us that where finance and tax teams are concerned, the starting-point tends to be introducing automation. By automating tasks, logic and visualisation, businesses can minimise manual intervention, increase the quality of data for tax, and ultimately enable better and faster decisions.
Many of the major Enterprise Resource Planning (ERP) providers are investing in tax - recognising the overarching business need to get tax data and associated reporting directly from source. All this edges us ever closer to a single source of truth for tax nirvana. But what happens when the ERP team leaves town and the tax function is left to fend for itself? How do businesses ensure the rules, tests and reports evolve and adapt to internal and external changes? This article covers life after ERP deployment, advising how to best leverage the sunk investment to make lasting and sustainable change for tax.
It's fair to say that most organisations are, to some degree, looking at ways to accelerate their digital transformation. There is a digital application to almost every function in a business, and at each layer in the organisation. From a finance and tax perspective, this means looking at data management and strategy, enhancing processes and identifying opportunities for automation.
The digital transformation agenda is being driven by an increasing need for data, information and insights. Key drivers for this include - external stakeholders such as the tax authorities, with the increasing move to real-time reporting, digital filings, as well as supplementary data information exchange between tax authorities in different jurisdictions.
Speaking to over 300 senior decision makers recently, the main drivers of tax technology investment within their organisation are; to improve data management and governance, strengthen risk management controls, increase compliance automation and improve data analytics/reporting.
Data driven decision making is generally considered to be the most effective. Hard facts overlaid with broader knowledge, experience and intuition provides leaders with what they need to focus on ie. the right areas at the right time in order to release maximum value for the organisation. For example, a number of clients struggle with ETR monitoring and are therefore faced with year end surprises that can be stressful for the team but also require external market messaging correction. This time could have been better spent understanding the drivers for the diversion from plan and addressing this directly. It also helps bring the stress levels down and increases employee satisfaction - reducing attrition which is another key benefit of digitisation in the current war for talent.
The starting-point for many tax and finance functions focuses on getting the basics right and that means starting with core technology - their ERP system. ERP capabilities have fundamentally evolved in recent years, and have the ability to advance the business into new ways of thinking, operating and working. Alongside the technology, the additional foundational components required to fully drive a transformation include - the right organisational model and process to kick-start the change.
Where does that leave businesses?
As the business goes through the transformation and ERP implementation journey, it will be assessing changes required in its operational and organisational model to support the program. Once the ERP implementation goes live and transitions into business as usual, it is essential to have in place an operational support system that meets related business needs. This is more true for tax than for any other finance function due to ever evolving requirements, changing rates and rules and the dependency for tax on the data elements that impacts the determination of tax (e.g. place of delivery or Customer VAT registration number) - its absolutely essential that these key components of Master Data remains accurate and complete or the underlying logic won’t work. The reality is though that even where organisations have been successful in obtaining the headcount challenge for an internal support team - actually getting that in place is quite another story.
From our experience, only a handful of organisations have been truly successful in setting-up, and running global tax technology teams charged with maintaining the ERP system and responding to internal and external changes. The challenge faced by these organisations is that such resources are in scarce supply, the associated costs in recruiting and retaining these team members is skyrocketing, keeping these uniquely skilled resources happy is another matter - and quite frankly there aren’t enough qualified individuals to go around.
Tax Application Managed Services is a new way of putting this support in place. PwC has established a Global Services team that is flexible enough to augment your organisation where support is most needed. It’s also agile enough to develop and evolve as the needs of your organisation change. Put simply - it is an extension of an organisation’s tax team, whose raison d'etre is to ensure that the ERP system continues to work well for tax.
Below are the primary characteristics of a Tax Application Managed Services
- Modular and flexible
- Keeping up to date with rates and rules
- Resource and skills
- PAYG
- Facilitates adoption of the new technology
Modular and flexible
Depending on where the business is in the transformation and/or ERP implementation journey, different support requirements will arise. A Tax Application Managed Service model provides the flexibility to scale-up and scale-down and also provides support to meet different needs, driving value and continual improvement.
Keeping up to date with rates and rules
External changes such as WHT or VAT rate changes need to be reflected in the ERP system - and need to be implemented and tested on a timely basis to ensure business continuity.
Resource and skills
An effective Tax Application Managed Service model can enable access to multi-skilled teams - at all levels. This means activities included can range from data entry and troubleshooting. right through to senior governance representation.
PAYG
With the business already having made significant investments into ERP transformation plans, Tax Application Managed Services provides a way for businesses to access ongoing support, without being forced to make upfront investments to support.
Facilitates adoption of the new technology
The implementation of new systems and change created requires a period of learning for business users. This model provides support to business teams as they upskill and adjust to new ways of working.
Taking a forward look
As tax authorities and other stakeholders continue to adopt technology and analytics on business data gathered, businesses need to keep pace. What is clear is that this will be a journey of ongoing and continual change. The future is not just addressing the regulations in a compliant manner, but being able to address the ongoing digital requirements and integrating with the business for wider considerations arising around them.
If you would like to discuss your tax and finance transformation agenda or look to explore support models, please get in touch.
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Partner, Tax ERP and Data Leader UK, PwC United Kingdom
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