Thomson Reuters ONESOURCE Indirect Tax implementation

Automating the implementation and ongoing maintenance of indirect tax technology

Choosing and implementing the right tax software is essential for tax professionals to guarantee accurate and speedy tax preparation and filing. The right software can save time, reduce manual mistakes, and make the entire tax process smoother and more efficient. For indirect tax experts, this adds up to a huge responsibility and a demanding job — but technology can lend a helping hand.

According to the March 2018 edition of Forbes, Stephen Hawking once said, “Intelligence is the ability to adapt to change.” The professionals who staff the average corporate indirect tax department must be very smart people. Indirect tax professionals, particularly those that serve an organization with a multistate or multinational footprint, must deal with frequent change. One could argue that tax departments must be better equipped to manage change than any other corporate department.

After all, tax laws change regularly — and there are a lot of tax laws.

Tax laws across the U.S., EU, AEM, and LATAM are constantly changing, creating a need for global businesses to stay up to date with the latest regulations. Furthermore, different countries have different tax regulations, making compliance a complex and challenging task. For example, in the U.S. — comprising 50 states and 20,000 incorporated municipalities, each with its tax law nuances, regulations, and rates — there is much potential for change. Indirect tax professionals must monitor for those changes in every country and jurisdiction where they do business and “quickly” incorporate those changes into departmental systems that require updated tax content to accurately calculate tax and comply. This process includes testing, deploying, and taking that data live in production.

Indirect tax teams have a really tough job

Adapting to ever-changing tax laws represents an ongoing challenge for most organizations. It’s a challenge that scales with the size of the organization’s global footprint, the number of products or services they sell and buy, the industry in which they operate, and its regulatory complexity. For example, the pharmaceutical industry is highly regulated and complex. There’s constant pressure to monitor for regulatory changes and understand any immediate or future impact they might have.

Additionally, assistance for IT to implement changes into their financial platforms or potentially spreadsheets is necessary, as well as responding accordingly to those changes. For many organizations, each update may result in downstream changes that reach beyond the tax department, such as an IT team tasked with continuously revising the code on the back-end tables used for tax-related calculations.

The never-ending pressure of conforming to continuously evolving tax regulations is likely the most significant challenge indirect tax departments face. But that challenge is just the tip of the proverbial iceberg. Many indirect tax departments struggle with a lack of visibility in identifying and correcting errors during the monthly, quarterly, and yearly reconciliation process. Many tax teams are saddled with labor-intensive review processes that run the risk of missing errors and proper oversight. In many tax departments, a lack of centralized data and process governance contributes to compliance inefficiencies that increase the risk of incurring violations.

Did you know?

  • 57% of tax department employees believe they do not have the resources they need to meet the challenges they face
  • 64% of tax departments are either reactive or chaotic

Source: Thomson Reuters “2022 state of the corporate tax department”

Is your tax department still mired in chaos?

According to the “2022 state of the corporate tax department,” published by Thomson Reuters, nearly a third of corporate tax departments are, indeed, mired in chaos. While survey respondents reported that enhancing departmental effectiveness was the highest priority for 2022, most have quite the journey ahead in utilizing technology to achieve that goal.

In classifying tax departments’ current stage of technological sophistication, 29% were ranked as chaotic: using minimal automation and relying on manual processes such as spreadsheets.

A slight improvement from chaotic, 35% were ranked at the reactive stage. Reactive tax departments use third-party software and some automation but do not maintain automated connections to enterprise data or other departments.

Only 5% of tax departments had achieved the lofty classification of optimized. These departments have successfully transformed technologically and now enjoy the benefits of analytics-driven decision making and automated tax workflows.

Technology is the answer, but there’s a catch

More than ever before, technology can bear the burden of constant change that tax professionals must manage, freeing up their time so they can focus on more fulfilling and strategic activities. A tax engine keeps tax rules and rates current, fully automates indirect tax calculation, and accurately applies tax regulations and your company-specific tax policy and configurations.

Cloud-enabled tax technology automates the reconciliation, tax return preparation, return filing, and auto-fill additional statutory filings like SAF-T and includes workflow tools to manage this critical monthly process. This tech ensures consistent accuracy of operations and eliminates errors that expose the organization to compliance violations.

Best-in-class tax engines and compliance solutions manage tax law changes, reduce staff stress, and save companies money through benefits such as:

  • Removing the burden and costs of continuous in-house tax research that may be outsourced to a third provider.
  • Improving the accuracy of tax calculations on all domestic and global sales and purchases, minimizing the chance for audits and penalties while ensuring the accuracy of tax calculations to customers, partners, and suppliers.
  • Reducing IT involvement needed to implement changes to tax rate and rule changes, improving consistent tax coding in the AP process.
  • Providing adequate real-time reporting using tax determinations that are right the first time, improving indirect tax controls at a central level, and creating a more agile tax organization due to shorter lead times and instant scalability.
  • Reducing costs for indirect tax compliance management.
  • Centralizing the management of tax policy and configuration across all systems globally.
  • Providing access and visibility into source data for reporting and analytics.

As the list to the left indicates, the range of benefits that centralized, cloud-enabled tax technology offers to indirect tax departments is revolutionary — and essential. But here’s the catch: transitioning from your current system or manual processes to a comprehensive tax solution that offers all these benefits can be quite a journey. The “2021 state of the corporate tax department” by Thomson Reuters documented the most common causes of failure in adopting new tax technologies, as reported by surveyed tax professionals. These included:

  • Lack of time or resources
  • Budget constraints or lack of ability to build a business case for return on investment (ROI)
  • Shortage of staffers with appropriate skillsets for using the technology
  • Insufficient training
  • Reluctance to move away from familiar technologies
  • Complexity
  • Reducing costs for indirect tax compliance management

Five best practices all indirect tax pros should follow

Just as common drivers of failure have derailed many tax technology implementations, common drivers of success have helped many organizations complete a smooth and successful implementation. Through years of experience in helping a range of enterprises across industries successfully implement ONESOURCE Indirect Tax (IDT) solutions, we’ve identified the five most important drivers of success.

Adhere to these best practices as you work to implement your next tax solution, and you’re virtually assured of success.

#1) Vendor selection: Be wise when picking your vendor

Which vendor offers the best indirect tax technology for your department’s needs?

That’s a broad question — and may be difficult to answer — but it’s a critically important one.

Get the answer right and your team will benefit immensely; get the answer wrong and the reverse will likely snowball into multiple challenges. When selecting a tax vendor, it is essential to consider one that offers a comprehensive end-to-end tax solution, covering all aspects of the tax lifecycle, including sales and use, GST, VAT, and direct tax.

The process of putting this into practice involves evaluating both the software solution under consideration and the company that produces it. Any software solution, after all, can only be as good as the vendor that stands behind that solution in terms of capability, reputation, and financial strength. Also, make sure the vendor you use can match your company’s IT requirements.

Given the dynamic fluidity of technology and the considerable array of available product choices, evaluating the options and matching them to your needs in determining which is best for you is quite the task. But it’s a task that’s achievable when broken down into manageable steps, and taking this approach to find your best vendor will work admirably. Let’s begin with a high-level, four-step overview of the process.

a) To thine own needs be true

Developing a comprehensive and accurate understanding of your requirements is the first — and possibly most important — step. Determining your needs should begin with a general assessment of your departmental processes and technical landscape. This assessment should include:

  • Identifying your current and near-term tax requirements, including tax types, geographies, e-invoicing mandates, tax returns, and additional statutory filings like SAF-T.
  • Documenting existing departmental processes and any impacts on non-tax teams.
  • Inventorying the systems and tools currently in use and on the horizon; for example, your organization may be migrating from a legacy, on-premises solution to a cloud-based system.
  • Identifying and documenting existing issues with the technology currently in use.
  • Reaching out to peers in other tax departments within your organization. Ask them to contrast the above bullets within their departments to identify synergies in processes and systems, along with duplications and gaps in needs coverages.
  • Conducting an indirect tax data audit looking for any possible gaps and identifying where the data is being stored and its format if you have multiple systems.
  • Capturing the possible business scenarios that trigger a taxable event. The tax department can use this information to develop future testing protocols by documenting all potential triggers.

In addition to meeting the needs you identify as part of your assessment, it’s crucial to find a vendor that can ensure little to no downtime for regular content updates, robust content to support all your company’s products and services, and flexible integrations that connect to a single source of truth. You’ll also want a vendor that can reliably calculate tax on current and future volumes of transactions without concern for latency or throughput and support all the countries your company operates in.

b) Map relationships to other business units

Modern corporations, comprising an amalgam of different departments, may operate with a degree of autonomy, but most connect to other departments in the sharing of data, systems, software, processes, or all of these. For example, as a business expands — through buying and selling companies and growing to other regions — the infrastructure technology, reporting, and lines of communication become more challenging. Tax requires taking all of these differences into consideration to ensure that:

  • Tax is aligned with any big projects, planned or underway, as you’ve pointed out
  • The technology selected is something that fits with the existing or planned technology infrastructure

This need for alignment is certainly true of most tax departments. Tax teams have connections with various departments, such as accounting, sales, purchasing, information technology, legal, and human resources. It’s important to document those relationships to enable an understanding of how your vendor selection may impact other departments. In many cases, tax teams are often brought in too late when their business may have an upcoming project or initiative — for example, ERP or e-commerce upgrade — and require their input. If that’s you, following this outline of steps to take will help you find a solution within the required time.

For companies with a global footprint, this process may be quite the task, as it’s possible that every region or even country may have its own department, which makes it all the more important.

c) Rorschach it

Is that a bat or a butterfly? Just like the Rorschach test — where people are asked to describe what they see in an inkblot — you might be faced with similar questions, in spirit, at least, when performing this step. Using the lists of tax requirements, processes, and technologies you’ve gathered in previous steps, you can now look for patterns or issues that stand out. Performance of this step, for example, often reveals a pattern of problems that stems from too much reliance on manual processes and too little training. In fact, 30% of Thomson Reuters implementations result in finding this problem.

Completion of this step further refines your needs in terms of system capabilities — needs that you’ll want to ensure are addressed in the vendor solution you ultimately select. It is also imperative to keep an eye on the future since the vendor you choose should be able to scale with you as your company grows and expands.

d) Come together

At this point, you’ve identified all stakeholders that might be impacted by your vendor selection. Engage these people. Solicit their input. Let them know what you’re thinking and which way you’re leaning. Their insights and experiences may validate your choice or cause you to rethink it — both of which are equally valuable.

You might also find that other business units undergoing a similar technological transformation — and that are further down the road of that process — might be able to offer invaluable points of guidance. Or you may discover another IT project in the works, such as an ERP upgrade or new e-commerce application, with a budget you can use. It’s also important to identify goals, risks, and potential roadblocks you can share with others who may be impacted by your decision.

Did you know?

Companies that spend more than 10% of their tax department budget on technology tend to spend less on their overall tax budget 3.

#2) Budget: Budgeting can be boring — in a good way

The word “budget” isn’t exactly the most exciting of terms. It calls to mind images of scrimping, sacrifice, restraint, austerity, and such. But when it comes to implementing and maintaining tax technology, boring is good.

Securing the necessary budget may be more difficult for some tax departments than others. Generally, investments in tax technology — tax engines in particular — come out of an IT department’s budget rather than an accounting and tax department budget. In these companies, leadership often requires that the department requesting the budget crossover demonstrates fully that all other involved departments will benefit from the investment.

Securing buy-in from leadership requires more than just a budget that provides an estimation of costs; providing an estimation of ROI is also important. Some vendors make ROI calculations easier than others, which you should consider in your evaluation. It’s important to note that budgets should include ongoing, long-term costs, such as training and maintenance, and initial implementation costs.

Nothing like a nice ROI

In 2022, Forrester determined that companies participating in a commissioned study realized an average three-year ROI of 120% after implementing ONESOURCE Indirect Tax solutions. Total ROI accrued from a range of quantified benefits, including:

  • The chance of errors is reduced to below 1%
  • 50% of time saved by compliance and indirect tax teams
  • Significantly reduced IT implementation and ongoing maintenance costs

#3) Taxologist: Having one on the team is a game changer

Are you familiar with the term “taxologist?” Whether you’ve heard the word or not, you might currently have a taxologist in your indirect tax department, or maybe you’re the one in your department. If either is true, count yourself fortunate because indirect tax departments with taxologists on board are far more likely to thrive in our age of ever-increasing automation and technical sophistication.

Thomson Reuters coined the term to describe the skill set of a modern tax professional; being a taxologist requires a blend of tax, business, and technology experience and is supported by having cloud-enabled tax technology. A taxologist is an individual that is adept at utilizing tax technology in managing increasing regulatory complexity, heightened risks, greater need for transparency, and enabling electronic audit trail requirements facing indirect tax departments worldwide.

Taxologists serve as invaluable go-betweens among indirect tax departments and IT. They are ambassadors who understand the importance of IT department goodwill and buy-in when implementing and maintaining an automated indirect tax solution. Just as important, taxologists recognize the value of collaboration with IT and are adept at knowing when to engage IT in selecting and implementing a solution.

In short, taxologists help their indirect tax departments rise above the common struggles that encumber so many departments’ efforts to establish and maintain effectiveness and efficiency in today’s dynamic tax world. If your organization doesn’t have the budget to bring on an independent taxologist, Thomson Reuters has a wide breadth of subject matter experts, system integrators, and certified implementers that can perform a similar function.

#4) Training and support: Transform the new and strange into the comfortable and familiar

The best implementation results come when tax technologies are implemented and maintained by people who invest in training. Think back to the very first time you used some piece of basic software, perhaps a spreadsheet or word processor. Remember how strange and unfamiliar it seemed? But with a little training — whether self-directed or guided by an instructor — the strange and unfamiliar soon became quite comfortable and productive. The training was vital to maximizing the benefits of the software.

The same applies to complex software solutions, such as indirect tax technology. Providing the necessary training and support for the initial setup is a critical factor in ensuring the long-term success of any indirect tax implementation. Once the solution is set up — provided it’s done properly — there shouldn’t be a need for extensive ongoing training, except for new staff.

Providing proper training and support is also helpful when facilitating change management. People tend to resist change when they don’t fully understand something — especially when that something is new technology. Ongoing training can help mitigate this resistance by familiarizing employees with new processes and minimizing the intimidation factor.

It’s also important to have access to support when new laws and regulations can affect your company’s tax policies. For example, many bread sellers in Ireland were required to reconfigure their tax determination when the Irish Supreme Court ruled that bread with a high percentage of sugar and fat was not actually bread and the standard tax rate applied, not the 0% tax rate for food. Reconfigurations may also be required when a company moves to a new state or country or even releases a new product.

This best practice of providing ongoing training and support ties in with best practice number one: carefully vetting and selecting a vendor. After all, selecting a vendor that makes it easy to provide the training and support your people require increases the prospects of a successful implementation. Plus, it also makes your life much less stressful.

ONESOURCE helps an e-commerce giant improve the speed, accuracy, and scope of its tax calculations

In 2018, Wayfair was involved in a landmark Supreme Court case that changed a tax rule affecting thousands of e-commerce businesses. Due to the ruling from that case — Wayfair vs. South Dakota — e-commerce companies were suddenly required to collect and remit state and local taxes. This was a problem for Wayfair, as its homegrown tax solution was built when the company was still a startup and couldn’t handle the challenge. In need of support, Wayfair commissioned consultants from KPMG to help guide the selection of a new system. Wayfair ultimately chose ONESOURCE Determination for its global capabilities and content extract, giving them the accuracy and speed they needed.

ONESOURCE enabled Wayfair to smoothly transition into handling the new responsibilities the court had mandated for e-commerce companies. In fact, Wayfair now boasts one of the most accurate and efficient tax systems in the world of e-commerce. ONESOURCE has enhanced the speed and accuracy of tax calculations while simultaneously slashing time spent by 30% on compliance activities and audit defenses. Read the complete Wayfair case study.

#5) Normalizing change: Getting your teams excited about transformation

When implementing end-to-end tax technology, excitement and enthusiasm need to extend to other departments such as finance and IT. People are resistant to change; it’s simply human nature. With the increase in companies adopting tax technology, it’s essential not just to get your team’s buy-in but to help them see the transformation as an exciting opportunity.

One opportunity for staff to engage with the new technology is to include end users in the testing process. By including these individuals, not only can they identify issues or discrepancies in the results early on, which allows for quick resolution and prevents delays, but they will also have a better understanding of the tax engine functionality. This early engagement fosters a sense of ownership and buy-in to the solution, which can increase user adoption.

Education represents another approach to hurtling roadblocks of change resistance. After all, if the right technology solution is selected, it’s likely that virtually everyone’s job will become easier and less stressful. Make certain to educate your people so they understand this is true and convey to them the specific benefits that will accrue to them personally because of the new technology. It’s also helpful to involve your teams in the transition as early as possible. Including them in the software evaluation process — allowing them to see demos and ask questions, for example — can go a long way toward nurturing their enthusiasm.

While upper management must show support and excitement for the technology transition, it’s equally important to have passionate change agents championing the cause on the ground. Whether you create a centralized project team or task individuals with leading the charge, ensure the cheerleaders you choose are highly credible; otherwise, people may not trust that they have their best interests in mind. It’s also important to allow the proper resources and choose people who have the time to make evangelizing their top priority.

While automation provided by the new technology will ultimately reduce the burden on the department, some team members may find that their workload increases briefly during the transition period. These people may be asked to continue their normal routines for a brief period while simultaneously assisting with the implementation. Be sure to proactively smooth the waters by providing a heads-up to those team members and using a consulting partner if necessary to ease the burden during implementation.

Ultimately, tax technology is dynamic, not static. Growth will happen and modifications will occur. Change should be normalized as an ongoing process that must be managed throughout the technology's life, not just during the implementation period.

Successful tax technology implementations are as much about planning as performance

As we’ve outlined in this e-book, proper planning is essential for the smooth implementation of new tax technology. With all the planning that is, or should be, involved with an implementation, vendor selection — best practice number one — is the most important. Because if you get that one right, the vendor you select will assist you in getting all the other best practices right. If you get that one wrong, the other best practices probably won’t help that much.

The following are examples of successful implementations thanks to vendor selection done right — let these stories be your guide to capturing the benefits of tax technology.

  • Adobe struggled with three disparate tax systems. Adobe was using spreadsheets with millions of line items; one mistake in one spreadsheet could cause a chain reaction of errors. Sales tax returns took almost two weeks to complete, and the deadline loomed large for the European Union’s mandate to apply local VAT rates in each of the 28 European countries. Adobe’s tax department needed help.

    Brian Gardner, Adobe’s Director of Global Indirect Tax, decided to use this perfect storm of problems as an impetus to drive transformation, resulting in the selection of ONESOURCE Determination. It turned out to be the right move — read the complete Adobe case study.
  • Lenovo had to scale cross-border capabilities quickly. Global businesses face many significant challenges, including maintaining compliance with cross-border tax requirements and calculating sales, use, goods, and services taxes across seemingly countless jurisdictions. Lenovo suddenly became a global business when it acquired IBM’s personal computing division in 2005, and the tax team had to scale capabilities quickly.

Lenovo’s tax team selected ONESOURCE Determination. ONESOURCE was integrated with SAP, which Lenovo already used for its ERP. “We wanted to use a simple system, a single set of rules that the tax department could control — not IT and not the end user — to make sure that our tax liability was accurate,” says Dennis Culin, Director of Business Transformation. As a result, the Lenovo team has configured ONESOURCE so that transaction tax processes are very well defined, enabling a cookie-cutter approach in deploying the solution to each country where they do business. Read the entire Lenovo case study.

These companies each did their due diligence in completing best practice number one. Ultimately, the care they each put into the vendor selection process paid great dividends.

Don’t let analysis paralysis prevent your transition to tax technology

According to the “2022 state of the corporate tax department” mentioned above, the current top three strategic priorities for corporate tax departments are:

  1. Improving departmental effectiveness.
  2. Safeguarding risk, such as keeping up with tax reform and regulatory changes.
  3. Finding efficiencies through new technology, automation, streaming workflows, and other emerging options.

Technology is the key to fully and successfully achieving each of these imperatives — but only if the right technology is selected and only if it’s successfully implemented. As best practice number one states: choosing the right vendor for your needs is vital to a successful implementation.

Is ONESOURCE Indirect Tax the best choice for you?

We are eager to guide you to find the best solution for your needs.
For more information about ONESOURCE Indirect Tax, download the free Forrester study that analyzes and quantifies real-world ROI.

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