Enhancing business intelligence using digital solutions for tax data

ARTICLE | November 03, 2022

Authored by RSM US LLP


How can digital solutions translate your tax data into business insights?

Managing data at the enterprise level and within the tax function can be daunting. However, there is great opportunity for CFOs and tax directors to uncover valuable insights, especially when combining enterprise resource planning with tax. For example, technology solutions for tax reporting and data analytics can clear the path for compliance and support decision-making.

Navigating your data journey to uncover value

Tax data provides more value to an organization when it has digital tools and employee knowledge that go beyond descriptive analytics. In the past, data showed a business what happened. Now, however, businesses are using it not only to analyze why something happened, but also forecast what will happen next—and even facilitate intelligent decision-making in the form of prescriptive analytics.

Integrating enterprise data tools with tax data tools is crucial to that maturation, said John Ihne, senior manager in RSM’s Center for Advanced Tax Technology.

“When we get to the point of having a purpose-built software, like PartnerSight, that takes the enterprise-level solution for books and records, pushes it into a software that is made for tax and applies your tax rules, now your tax data is not a one-hit wonder anymore,” Ihne said. “You can repurpose your data because it’s structured and useable.”

As Ihne said: “The data you have is only as good as the time it takes to act on it.” To that point, integrated digital solutions with artificial intelligence and machine learning capabilities can streamline tax functions that mitigate risk and provide valuable insights related to income, cash flow, costs and other variables.

To successfully go through such a digital transformation, it helps to have a strategic framework that covers:

  • The objectives of the transformation and the value to be realized
  • The enterprise and tax data that supports your objectives
  • The business and tax processes affected by the transformation
  • The technologies being implemented and their role in future state processes
  • How people will interact with technology
  • How people, process, technology and data will be controlled

Data literacy is a human component that surrounds that framework. When everyone at all levels of the organizational hierarchy has a baseline understanding of data and its strategic value, they will better support the overarching objectives, said Michael Charette, a partner in RSM Canada’s tax technology consulting practice.

“You cannot hire enough people to fill all the data skill gaps you have — you have to take ownership and say all of our people need this,” Charette said. “We have to universally upskill. We have to do this as an organization.”

Insight for the CEO: When strategizing about enterprise data systems, including tax leadership in those discussions will enable your organization to maximize the fact that your tax function is not only a primary user of data but also a provider of data that supports decision-making.

Tax technology: Your passport for navigating international tax

Multinational organizations face international tax challenges ranging from data collection and complex calculations to laws and deadlines across multiple foreign jurisdictions. Fortunately, digital tools can support tax function processes through the whole international tax cycle—from planning to provision to compliance.

“You want to be able to see how those processes are connected,” said Heather Collins, RSM partner and corporate tax practice leader. “Then ask how you can leverage data from one process to the next process and streamline things overall.”

Support from digital tools has become more valuable since the Tax Cuts and Jobs Act of 2017 introduced complexities to the international tax landscape, such as global intangible low-taxed income (GILTI). For multinationals, a change to a tax variable in one jurisdiction could alter their overall worldwide effective tax rate. Also, modifications to transfer pricing factors can have wide-ranging effects on an organization’s tax profile.

“It’s hard to capture that in Excel when you have so many different moving pieces,” said Jenny Blair, senior manager in RSM’s international tax practice. “That’s where digital tools can help you see a situation that’s going to interrupt your current structure, or help you see where the global areas are that are creating a large tax liability for you.”

A consolidated reporting tool is especially valuable. As Blair noted, sometimes the tax calculations themselves are only a secondary challenge.

“The hard part is gathering all of the information,” she said. “You may have so many people you’re reaching out to in order to pull together an entire consolidated global provision.”

For international tax compliance, having a central data repository can help to streamline calculations that depend on others, such as a GILTI calculation. There are tools in which one changed variable will flow through the entire calculation process, and then calculations are fed into forms, assisting the reporting process.

INSIGHT FOR THE CEO: Even if an organization does not have an international tax footprint, familiarity with international tax tools can strengthen decision-making processes in situations that might suddenly present international tax considerations, such as an acquisition.

Setting a roadmap for tax efficiency through your ERP system

The tax function is one of the largest consumers of financial data within a business, and that information can be maintained within the enterprise resource planning system. By gathering information at the time of a transaction, you have the ability to develop a stronger foundation for streamlined tax information now and into the future.

However, tax needs a seat at the table along with the finance organization when planning and implementing ERP solutions to ultimately help enhance compliance and risk mitigation efforts, reduce costs and complexity and help retain top talent.

“If we think about tax transformation, we need data at a much more granular level than we are getting today,” said Danielle Gonzalez, RSM partner and member of the firm’s tax technology team.

Organizations need to concentrate on bridging the communication gap between tax and other functions and enhancing operations by creating the opportunity to leverage consistent data across the business. The business still should focus on the same core processes, such as order-to-cash and procure-to-pay, but a tax lens is added to understand the impact from that perspective.

“By making the shift to ensure tax information is available during normal business processes, it will benefit the entire company,” commented Jennifer Snow, RSM senior manager. “It will allow the company to work cross-functionally. This is how you can transform not just tax, but financial reporting as a whole.”

To bring essential insights to the forefront, tax needs to be inserted in the ERP implementation approach in the initial functional business requirements. This determines where tax can be improved from the outset of the ERP project, identifying what outputs are necessary after go-live.

To set that desired foundation, the information tax requires must be captured as a part of organic business transactions in the ERP system. It also needs to be complete through the ERP platform to report cross-functionality and consistent for effective planning and ad hoc reporting.

With the right processes in place after go-live, the tax function can reduce the inputs from multiple systems and act as a true tax department instead of a data input department. Tax can become more agile, advance its approach from hindsight to foresight and contribute to the business as more of a strategic partner.

This article was written by Michael Charette, George Casey, Heather Collins , Danielle Gonzalez and originally appeared on 2022-11-03.
2022 RSM US LLP. All rights reserved.
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