The times, they are accelerating.
Digital transformation efforts throughout the organization, and especially inside the finance function, gained significant speed in 2020. And many of these changes increasingly require the tax group’s expertise and involvement.
During the intense economic uncertainty that struck early in the pandemic, most finance teams worked diligently to forecast – and repeatedly re-forecast – their company’s working capital management and liquidity positions. The efforts that produced the greatest accuracy tended to be those that were supported by advanced digital technologies. Newly remote finance teams supported by cloud-based enterprise resource planning (ERP) systems and ecosystems connected to other finance and treasury applications were able to access these tools from laptops and smartphones. Organizations whose supporting technology did not provide as much support during the shift to remote work quickly redoubled their technology optimization and digital transformation efforts.
“A positive outcome of the pandemic is the realization that we could accomplish more from home than we had imagined,” notes a recent report from PwC’s ongoing “Tax Function of the Future” research. “…There are, nevertheless, opportunities to create more effective virtual work experiences, enhancing our tax value and ability to adapt to change. Tax needs to adopt new technologies – tools to enable virtual collaboration and automation of processes to make work easier.” More than half (53%) of high-performing tax functions are currently optimizing tech-enabled tax processes.
Tax technology optimization also has important links to ERP system improvements: “a tax-focused perspective is necessary for successful and sustainable transformation efforts affecting ERP systems,” the PwC research report continues. “Tax needs to be aligned early on in process changes, particularly those affecting source financial data – ERP systems that house the general ledger data needed for tax compliance, financial statement reporting, and planning.”
In addition to responding to ERP systems cloud migrations and similar changes, tax teams should help ensure that tax technology integrates as smoothly and cost-effectively as possible with the new ERP system.
When assessing what tool and approach to use for that integration, asking the following questions can help tax, finance and IT teams select the most effective solution:
- Does it increase the time to value of the new technology adoption?
- Does it reduce our total cost of ownership?
- Does it reduce risks related to technology adoption and maintenance?
- Does it improve the efficiency of our tax processes?
Tax departments need to be involved in digital transformation efforts, specifically ERP migrations to the cloud, which my colleagues and I will continue to discuss in upcoming blogs.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information. The views and opinions expressed in Tax Matters are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.