The COVID-19 pandemic has forced numerous industries to adjust how they work, how they use their internal technology, and how they engage with clients. Indeed, some of that has been good — moving industries forward by leaps rather than by incremental steps.
This has become quite apparent among corporate tax departments, many of which now are compelled to embrace new technology and innovate processes just to keep going. There is one thorny issue with this, however, in that tax departments, like many industries, often see their technology as an all-purpose salve — one that miraculously is going to eradicate all the department’s problems.
In the recently published 2020 Corporate Tax Departments Survey: New Technology Demands New Skills & New Attitudes, published by Thomson Reuters and Acritas (now part of Thomson Reuters), those tax department leaders surveyed demonstrated this disconnect in their responses. While a large majority acknowledged the importance of new technology solutions, many of these solutions failed to meet leaders’ expectations and resolving this failure has been a key challenge for tax teams even before the pandemic.
Once the crisis hit and utilizing new technology was viewed by many as a necessary component of working through the pandemic, the survey found “there is a strong risk that technology initiatives get placed on the backburner just at a time when the need for them is more pressing.” Further, 30% of tax department leaders cited integrating and optimizing new technology and automation processes as a key challenge once the pandemic began.
In an upcoming webinar, Beyond the Software: How Your Tax Department Will Benefit from Strategic Planning and a Continuous Improvement Approach to Tax Processes and Technology, Lauren Kovar, Senior Director in Professional Services for Thomson Reuters, leads a discussion of how tax departments can move beyond just implementing technology tools and toward a department that understands the role technology plays in its operations, knows how to plan technology to fit with the business strategy and maintains a cycle of continuous improvement moving forward.
You can download a copy of the recently published 2020 Corporate Tax Departments Survey: New Technology Demands New Skills & New Attitudes, published by Thomson Reuters and Acritas
“A critical success factor for any tax department is the ability of leadership to understand and continuously evolve the department’s technology ecosystem to ensure it is aligned to the business needs and is serving the business well. This must be done deliberately and proactively,” says Kovar.
Too many times, tax departments view their technology as something they buy, and that’s it, she explains, instead of including it in strategic planning and utilizing a continuous improvement model to keep it optimized.
And the stakes are high. The Corporate Tax Survey showed that the average (median) spend on technology was 10% of the total budget for corporate tax departments; yet those that allocated more than 10% toward technology tended to spend less, relative to revenue — a clear testament to the direct benefits of investing in technology.
Yet, Kovar cautions, the process has to be done right.
Picking the right technology is just the start
For too many tax departments, the relationship with technology starts and ends with the selection and purchase of the product, Kovar says., adding that this is often done without first gaining an understanding of what the department really needs and why. It is a recipe for failure, Kovar notes, adding that this process goes beyond simply adding new software to your technology portfolio. “You have to recognize that the technology is just an enabler to deliver the department’s objectives,” she adds. “Without a complete understanding of those objectives and a technology strategy, odds are the solution will not meet your needs.”
“Beyond picking the right solutions, departments need to ensure there is buy-in and a commitment from management toward training and regular reviews of business processes as the product changes over time, “Kovar states. “Otherwise, the effectiveness of the tool may decline, and business processes will become less efficient.” Further, tax departments should understand their people’s skills, how they interact with technology, and how they tolerate and respond to change. “You have to understand your company’s culture,” Kovar says.
As the webinar makes clear, optimization is all about things and how you use them — using the functionality of the tools you have and using them most effectively. Indeed, the more sophisticated the tool, and the less training and investment the department makes upfront, the less likely that tool will be effective, especially over time, as the business changes.
“I can’t emphasize enough how important it is to plan ahead,” she says. “To be effective and successful, tax department leaders need to know where their department is at, where they want their department to be, and how to get them there.”
It’s also important to remember that “where you want to be” can change — and your department needs to change with it, Kovar explains. “If you have everything planned and aligned prior to an unexpected change, like the current pandemic, it is much easier to pivot and adapt moving forward.
To learn more about how to be a robust tax department, watch our webinar, “A missed opportunity? Understanding the technological skills gap and how technology can help tax departments do more with less.”