Tax & Accounting Blog

Why Should I Improve My State Apportionment Process?

Best Practices, Blog, ONESOURCE, State Apportionment May 28, 2013

Over the last few years, tax departments still face the same three management objectives:

    1. Budget: Requests to do more with less, or to keep spending costs low without recognition of increased complexity and workload
    2. Risk Mitigation:  The need to get returns out the door, but we must also support provision reporting with an increased focus on speed and accuracy.
    3. Planning: The competitive business climate dictates that tax needs to look at how it can contribute to more effective tax planning ideas

Since I work in the tax technology area and state apportionment remains a very complex and labor intensive process, I’m often asked, “How can I improve the state apportionment process?”  When I hear this, my first piece of advice is to make sure that clients can also answer of the question of why they should improve the process.  If the answer doesn’t directly address management goals and objectives, I know that it’s going to be difficult to get the financial and resource commitments to make meaningful changes in the process.

Clients should understand how the current state apportionment process affects the tax department through the three lenses outlined above:

Budget:  How much of your current state tax workload is spent on non-value added work like cross checking and re-checking your excel spreadsheets?  This time could be better spent where your company places a higher value or is short staffed.

Risk: Does your current apportionment process leave you prone to spreadsheet and manual data entry errors because of the amount manual work required to collect your apportionment data?  Can you easily support your positions many years from now when the state taxing authorities ask you to substantiate your state numbers and the spreadsheets and people who created them are not so easily found?

Planning: Are your processes so cumbersome and lengthy that any state planning opportunities cannot be effectively calculated?  Do you need to spend so much time collecting data and building spreadsheets that management just “moves on” and uses stale date before you’ve had a chance to calculate the impact of legislation or change in nexus?

Once you can conclusively explain why the current state apportionment process reduces the department’s ability to respond to the three key management objectives outlined above, you’ll be ready to help explain how the new apportionment process will function and why it makes sense for the department to start looking at alternatives.  In my next blog postings, I’ll explain how automated data management solutions can improve the apportionment process and how to build an effective business case to support the investment.