How to Close the Finance-Tax-IT Alignment Gap

Gaps are a problem for business leaders. Profitability gaps expose the difference between optimal and actual earnings. Competitive gaps reveal the distance between a company’s performance and the performance level of market leaders. Knowledge, skills, innovation, and service gaps also require swift remediation when they arise.

So, too, does the Compliance Confidence Gap™, which Vertex Chief Marketing Officer Allison Cerra describes as “the measurable distance between the revenue an enterprise could book with defensible confidence and the revenue it conservatively reports because it cannot prove every determination.”

What Widens the Gap

Several compounding factors give rise to the Compliance Confidence Gap™, including the data governance, data quality, and technology integration problems that materialize when finance, tax, and IT teams fail to work together effectively.

Only 12% of organizations have achieved full end-to-end integration across their tax and finance systems, according to Vertex research. Additionally, only 37% of the 1,050 senior IT, finance and tax leaders who responded to the survey report high confidence in the quality of their master data.

Three Steps Toward Stronger Alignment

I’ve discussed how IT leaders can improve tax’s positioning in system design. Here, I want to highlight three collaborative steps that finance, tax, and IT leaders can take to strengthen their alignment:

• Treat business value as a unifying metric: Finance, tax, and IT leaders necessarily pursue different goals. While tax counts compliance and risk reduction as top objectives, IT focuses on leveraging technology to enable strategic outcomes. At the highest level, however, all tax and IT performance objectives contribute to the protection, creation, and acceleration of business value – which is the CFO’s primary mandate. Framing different functional objectives in business value terms helps finance, tax, and IT teams establish common ground.
• Connect on the data layer: Tax needs data to manage its compliance and planning obligations. IT teams generally manage the systems that contain this data. Tax should let IT know what data it needs, and IT should ensure that tax understands how the data layer changes over time. By establishing a common understanding of data definitions, formats, and volumes, both functions can collaborate effectively without needing to master each other's domain expertise.
• Look for shared improvement opportunities: Every organizational group wants to improve its efficiency and agility while generating value for the business. The same holds for finance, tax, and IT teams, which have a prime opportunity to do so by modernizing tax compliance.

In her blog, Allison cites a Vertex-Censuswide survey in which one in three US enterprises estimate that conservative indirect tax treatments translate to $1 million in opportunity costs each year. By working together on data governance, data quality and systems integration, finance, tax, and IT leaders can ensure that every tax decision connects to the data, governance and evidence required to support it. That confidence will help close bottom-line gaps.