The new Thomson Reuters podcast, Tax & Tech Talks explores the evolving intersection of tax and technology. Each episode explores current issues or topics, giving listeners an opportunity to gain a deeper understanding and new perspectives in tax and tech. We chat with top subject matter experts and industry leaders as we break down these top-of-mind topics.
The relentless pace of change affecting tax & finance operations today is not ebbing, and despite the cost concerns driving much decision-making, businesses cannot afford to delay optimizing these functions to move forward.
In a recent podcast, How To Optimize Your Tax & Finance Departments, host Adam Schaffner, Director of Indirect Tax Proposition at Thomson Reuters, spoke with Jill Schwieterman, Tax & Finance Operations leader for EY Americas, about what she is seeing in this area.
Schwieterman points out that EY is having significant conversations with clients about their tax operations, and there are a number of reasons why clients are welcoming these conversations now. Of course, the ongoing pandemic is forcing everyone to work differently, and many companies are facing severe financial pressures as well. “When a company is going through a finance transformation, there’s a pretty significant impact on the tax department,” Schwieterman says, noting that she is seeing a lot of companies move headquarters or change corporate leadership, or even simply upgrade their planning programs. “This causing a lot of organizations to reevaluate their tax department function.”
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How to Optimize Tax & Finance Functions
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Optimizing the tax function
All this pressure has led to industry-wide discussions about how to best optimize your organization’s tax & finance function, and what that really means. Schwieterman says the level to which you can optimize your tax function really comes down to how your tax and finance departments adapt to four main factors:
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- changing talent needs;
- data and technology;
- legislative and regulatory changes;
- and budget constraints.
Drilling down on each of those factors individually revealed more challenges and opportunities.
Evolving talent requirements
Schwieterman says that her firm is talking with corporate tax teams about how to rescale their personnel with an eye toward creating a more agile workforce. “We’re seeing a lot of focus around succession planning and being thoughtful and more open-minded about filling open and new positions,” she adds.
Indeed, evaluating the talent you have is a crucial task for tax and finance teams, and tax teams are seeking to do this by either re-skilling some of their talents to become more tech-knowledgeable. In some cases, tax departments are leveraging technology-savvy personnel from other areas of the company, and having them work for a time in the tax department to show the tax teams how tech could help build efficiencies in their own workflow, she explains.
Overall, it’s important to have this conversation around talent now to determine “how to use all the resources at your disposal and to leverage the agility of each team member,” she adds.
Data & technology footprint
The very process of optimizing your tax & finance departments by definition means that you’re seeking to improve efficiency, and as a result, there is more use of technology and data as a critical bedrock of the operations within those departments, Schwieterman says.
A key part of this optimizing process is recognizing how you treat the data you gather and how that data interacts with the technology you have. It’s vital, for example, to make sure you start with only the essential, necessary data. “It’s really all about understanding what data you’re collecting and why you’re collecting it,” she explains.
You also need to ensure that the technology you have in your department can make the best use of that data, by analyzing it, culling out what is not needed, and giving you data-driven solutions to the problems you’ve identified. Unfortunately, it’s in this part of the equation where many tax & finance departments begin to falter.
In a recent survey done by EY, almost two-thirds (65%) of executives said their company “lacks a sustainable plan for data and technology” and that the companies’ tax departments were the biggest barrier to success in this area. “Companies need to start treating their data as an essential asset,” Schwieterman says. “And that means learning to streamline the data to what is purely essential, and using it multiple times downstream.”
Changing rules
New legislation and changing regulatory priorities are impacting corporate tax departments all over the world as the crisis strains national and local economies, leaving governments scrambling to offer economic relief programs and change tax rules.
“It seems like the new norm is not normal,” Schwieterman quips. “Something’s changing every day.” Further, there’s even more potential change coming as various governments and legislative bodies are forced to grapple with their own declining revenue.
“Both the federal government and state governments are going to need to raise money,” she says, adding that means tax & finance departments are going to have to quickly become aware of any changes that could impact their organizations’ businesses.
One way of doing this is for department leaders to take advantage of the great amount of information and analysis being put out publicly to better stay atop these changes. “Too often tax departments don’t have the bandwidth to keep up on all the changing legislation,” Schwieterman advises. “So, take advantage of what’s out there in podcasts or webinars for free now.”
Tightening budgets
Finally, those tax & finance departments looking to optimize their functions need to face the reality of the constrained budgets under which they’ll operate for the foreseeable future.
In EY’s survey, almost 80% of companies reported that they were planning to reduce their tax and finance function costs over the next few years. And this was before the pandemic hit, meaning that portion is likely even higher now.
This means that leaders need to “evaluate how much time and budget” they have and how they can best “allocate that to the different needs of the organization,” Schwieterman says.
One way to do this is to assess where technology and automation could provide efficiencies that would allow departments to better manage their workflow and redeploy their resources to more value-added opportunities. “I think we all need to think about why we do what we do every day, and we need to ask ourselves, ‘Is there a better way to do this?’ and ‘Is there a way to think creatively and get the same level of effort done by automating these tasks?’”
Overall, Schwieterman says, it’s about being a good leader within your department during the ongoing crisis. “As a leader, if you are able to more closely align your tax department with the business outside of tax, it will set the department on the path to adding value to the company,” she explains. “And that’s where we see the most upside.”
For more resources to help you transform your tax department, here’s our latest:
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COVID-19 And The Digital Economy: An Opportunity For Indirect Tax Departments
Do More with More? Dissecting the Fast Pace of Digital Transformation and Its Tax Implications
