Two Ways to Close the Tax Transformation Gap

Founded in the late 1970s to address declining U.S. productivity, the American Productivity Center has steadily transformed over the decades. Now known as the American Productivity & Quality Center (APQC), the foundation remains one of the world’s leading authorities on business benchmarking data and performance metrics. A recent APQC survey report on the current state of the finance function suggests that many tax groups need to kick start their own transformations.

APQC publishes this research annually, and more than 300 global finance executives, directors, and managers responded to the current survey (85% of respondents work for companies with $1 billion+ in annual revenues). While this year’s results show that finance functions continue to prioritize digital transformation, data analytics, cash flow management, and risk and compliance (respectively), notable changes are evident when comparing year-over-year finance priorities. This year, finance leaders and managers plan to spend a little less time on digital transformation (still the top priority among 2026 respondents) while increasing their attention on cash flow management, data analytics, and risk and compliance.

Tax groups can make valuable contributions to each of those areas. Improvements in compliance can help protect cash reserves from unexpected outflows. Data analytics that support forecasting activities can be enhanced with tax data. Advancements throughout the indirect tax lifecycle can improve compliance accuracy and efficiency, which in turn lowers the risk of audit penalties.

That said, the APQC survey results indicate that many tax teams need to accelerate their digital transformations. When asked which areas within the finance function’s span of control have benefitted the most from digital transformation initiatives, survey respondents most frequently selected: 

1. Financial reporting: selected by 70% of participants (multiple responses were allowed)
2. Accounts receivable (AR)/accounts payable (AP): 61%
3. Forecasting: 43%
4. Treasury management: 40%
5. Auditing: 35%
6. Tax compliance: 27%

The digital transformation gap between tax compliance and financial reporting as well as AR/AP is surprising given that tax groups use the same transactional data flowing through those financial systems. Since sales and use tax and VAT compliance obligations exist downstream from AR/AP, it’s logical to extend transformation in those areas (which usually involve ERP modernization) to tax technology.

What CFOs Need to Know about Tax Transformation

If tax leaders need help convincing CFOs and CIOs of the value of tax transformation, two other data points from the survey can strengthen their case.

First, legal and regulatory risk mark a top finance priority, finishing second behind market risks in rankings of top 2026 risk concerns. Indirect tax compliance is a regulatory obligation that is complicated by the high number of federal, state, and local jurisdictions enacting tax rates and rules changes, particularly in the U.S., with growing frequency. Framing investments in indirect tax automation as a critical component of the organization’s overall enterprise risk management capability can strengthen the business case in a way that aligns with how finance executives are prioritizing risks this year.

Second, finance leaders and managers identify inadequate technology as a barrier to cash flow management improvements. Survey respondents also view investments in “technology for better financial data management and/or visualization” as a top cash flow management improvement approach. As noted above, tax compliance improvements often yield cash flow improvements. If CFOs are prioritizing investments in automation that improves financial data management, they should also understand that advanced tax technology can improve tax data management capabilities in a way that also benefits cash flow.

By connecting tax automation to the risk management and cash flow priorities that finance leaders are already acting on, tax teams can reframe their digital transformation agenda as a contribution to broader enterprise performance.