Avoid Overlooking These Tax Technology Business Case Considerations

Tax automation can help indirect tax groups in global manufacturing companies mitigate common compliance challenges. Getting new indirect tax software in place requires an informed selection and a convincing business case.

To strengthen their selection process, tax leaders can ask the following questions:  

• What is the breadth and depth of the organization’s indirect tax compliance requirements?
• How much time and effort does our current compliance approach consume?
• Do we use automation to file returns?
• Do we maintain centralized control of our tax data?
• To what degree is our reporting centralized?
• How quickly and easily does our tax technology scale in response to business growth?
• Do we have the capacity and structure to accurately and timely sustain tax content in our transactional, finance and billing systems?

Answers to those questions help the tax team create a list of features and functionalities to prioritize when investing in a new system. The most effective tax engines provide frequent and automated tax content updates; centralized control and reporting; automated filings; convenient scalability; and a range of optional functionalities, including exemption certificate management and tax data analytics.

When it comes to getting their CFOs and CIOs to greenlight the tax automation investment, tax groups should quantify all costs and benefits, including those related to compliance risks, technology maintenance, upgrades and manual workarounds. While those calculations are a necessary component of the business case, they might not be sufficient.

We find that tax leaders whose tax automation investments receive swift approval tend to view the business case as an opportunity to underscore the far-reaching effects of indirect tax compliance. They do so by making sure that their tax automation business cases also address: 

• Customer satisfaction: An efficient, highly automated order-to-cash cycle helps reduce customer billing questions (including those related to tax calculations and estimates), lower day sales outstanding, enhance the customer experience, improve cash flow, and increase customer lifetime value. Tax compliance is correlated with customer satisfaction, and a strong business case establishes that link.
• Tax-relevant business processes: Indirect tax processes affect risk management, procurement, accounts payable, revenue assurance and customer experience management. The role indirect tax compliance plays in supporting these and other processes should be identified in the business case.
• The value of a “charter”: A business case quantifies a potential investment’s costs and benefits. A charter defines an institution’s – or, in this case, a business group’s – formal purpose and objectives. A business case supported by a tax department charter reminds CFOs, CIOs and other business leaders of the indirect tax group’s mission, as well as how its objectives support and drive the achievement of corporate goals. When finance and IT leaders view the tax automation business case in the context of the company’s strategic objectives, they are more likely to approve the investment.

By framing their business cases broadly, indirect tax leaders can establish more compelling arguments for advanced tax technology.

For related thinking on how manufacturers can up their tax automation game, read this white paper.