Urgent or Important? A Crucial Question for Tax Functions

In the 1950s, President Eisenhower delivered a speech in which he grouped his biggest problems into two categories, the urgent and the important. The challenge, he added, was two-fold: urgent problems were rarely important while important problems were not urgent.

In 2016, tax functions confront a similar problem as they struggle to differentiate between urgent tasks and the important ways in which they should support and further business goals and performance.

Tax departments have been muscling through urgent activities for years. Many functions have been so busy that they haven’t had the luxury of addressing foundational tax data management issues. If these improvements were made, it would greatly help tax fulfill its more important mission of advancing business goals.

Lately, however, the number of urgent tasks has increased as business activity becomes more digital, global, complex and dynamic. The impacts of these factors are well-known. In the past decade, the number of S&P 500 companies that remain in the index for more than two decades has decreased, the share of those companies that are profitable has also decreased, and S&P 500 turnover has increased, according to The Economist. Business is becoming volatile and more complex – and tax professionals are struggling to find the time to keep pace while meeting their fundamental compliance responsibilities.

Fulfilling these responsibilities can be accomplished with greater ease and confidence (and less scrambling) when tax functions start to examine, and improve, four fundamental areas of data management:

  1. Unification: The transactional and accounting data tax needs to fulfill its responsibilities typically is pulled from dozens, if not hundreds, of different information systems and applications and at different levels of aggregation. The volume of this data is increasing at a staggering rate. This data needs to be structured in a uniform, tax-appropriate and intuitive manner.
  2. Validation: Tax folks tend to be nearly obsessive – as they absolutely should be – in their drive to authenticate the data that they collect. Data must be exhaustively checked, and rechecked, for accuracy, completeness and other parameters before it enters into the downstream provision and compliance processes. These processes are often siloed, creating additional reconciliation challenges. Validation requirements are also dynamic, thanks to ever-changing rates, jurisdictional requirements and business structures. There is a great need to sustain a necessarily rigorous approach to validation while more effectively and efficiently addressing the growing volume and complexity of validation work.
  3. Enrichment: Data also needs to be enriched, which involves taking raw finance and accounting information and making it suitable for tax purposes. Enrichment also poses a volume problem. Enrichment means changing the “raw” financial data into tax-sensitized (i.e. usable) format. Sometimes this means converting it into legal entity structures from accounting structures, when those two are separate. It might involve adding jurisdictional identifiers, or some sort of calculation based on combining the raw data with data that tax “owns” along with some sort of calculation routine.
  4. Access: This challenge has three components: 1) feeding relevant data into compliance applications; 2) obtaining relevant data for analytics and reporting needs (e.g., business intelligence applications and decision support); and 3) storing the data so that it can be easily and confidently accessed for audit purposes.

Improvements in these areas will save tax precious time. It’s no coincidence that Eisenhower’s urgent/important comment was repurposed by 20th century time-management guru Steven Covey. Tax functions that focus on making data management improvements in the 21st Century will experience less urgency while gaining the time necessary to execute the most important aspects of tax performance.

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Jon Sappey

Director of Industry Relations

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Jon Sappey is Director of Industry Relations at Vertex, working with industry associations and other groups to maximize Vertex's support for and contribution to the advancement of the corporate tax profession. Jon came to Vertex in 1997 with a background in marketing, and he currently serves on a variety of strategy teams. He holds an MBA from Yale University and a BA from Harvard College.

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