The dual opportunity

When implementing an ERP cloud migration and new tax engine, it’s essential to coordinate and execute these plans with open and transparent communication, allowing the tax department to discuss and address their needs and concerns. Incorporate tax leaders right away rather than treating them as a separate concern. Companies that exclude their tax department at the start of their technological transformation risk creating a system that short-changes the tax function and, consequently, the entire organization. Ignoring tax considerations could also lead to costly and time-consuming reconfigurations later.

If a company migrates its ERP from a legacy system to the cloud, it's crucial to transfer financial and operational data in a way that serves the tax department in two fundamental ways. First, ensure the data transfer allows tax operations, reporting, and compliance to continue without interruption until the new system is fully operational, allowing the old system to be retired. Second, organize data feeds to serve the future goals and capabilities of a cloud-empowered tax department. The ERP migration team can only achieve this if they have a thorough understanding of the data needs of the tax team, including sources, formats, and access methods.

Include the tax department in every step of the planning conversation to ensure their needs are understood and addressed. Their input can help reduce costs, mitigate risks, and identify workflow efficiencies other departments may overlook.

A company transitioning from its legacy on-premise systems to a cloud-based ERP is also undertaking a project that will inevitably impact its workflows, processes, and culture. The goal is to improve these areas, but that won’t happen without a detailed project plan. A proper plan requires the organization to conduct a comprehensive needs assessment.

A needs assessment can identify and evaluate a long list of challenges, gaps, roadblocks, bottlenecks, opportunities, and objectives. This method ensures that the new ERP and tax architecture supports the organization’s operational goals and business requirements. The process involves several core elements, including:

• Stakeholders. Allow all departments impacted by the transition — including tax, finance, operations, IT, and sales — to present their needs and voice any concerns about the transition.
• Infrastructure. Assess the strengths and weaknesses of the company's current IT infrastructure — like hardware, software, data storage, and network configuration — to determine its readiness for delivering cloud-based services.
• Business processes and workflows. Chart current workflows and processes to determine how they will change with a cloud-based ERP and identify inefficient processes the new system will likely make obsolete.
• Systems analysis. Map and analyze the company's current business systems to understand their interactions, how data flows between them, and what will change with the shift to a cloud-based system.
• Data security. Although cloud-based systems are generally more secure than legacy systems, evaluate the company's security profile to identify potential gaps and ensure compliance.
• Skills gaps. Identify areas where employees will need training to become proficient in cloud-based workflows and processes.
• ERP and tax integration. Determine the protocols necessary to ensure tax data flows smoothly between the ERP and tax engine, securing accurate and timely tax reporting and compliance.

Selecting a vendor is a tiring process that requires thorough assessments of their reputation and experience. It also involves analyzing their product’s flexibility, scalability, security, and capability to support the organization’s overall operational goals and framework.

When both an ERP migration and the addition of a tax engine are involved, a company will likely work with at least two separate vendors — possibly more if other business systems are involved. These arrangements are often organized under a single systems integration project that combines the ERP and its associated partner products into a single delivery program.

Vendors such as SAP and Oracle, both recognized for their collaborations with Thomson Reuters, have established protocols for integrating their products and can explain the typical process. Each vendor performs a thorough needs assessment and, alongside the company, develops a detailed migration and implementation plan.

Once vendors are selected, focus on establishing a close collaborative relationship. Vendors possess extensive knowledge about their products and the implementation process and offer valuable expertise. Experienced vendors can share best practices and help troubleshoot any issues that may arise. As the relationship develops, a quality vendor can also become a trusted business partner, helping guide decision-making and identifying alternative ways the new integrated system can benefit the organization and deliver the expected ROI.

Data quality is extremely important for a reliable ERP system and tax solution.

Ensure accuracy and consistency by cleaning and validating data before migrating it from existing business systems to the new ERP and tax system. Data errors can result in costly regulatory filing mistakes. Conduct a comprehensive data audit prior to migration to identify quality issues, correct errors, and address any other problems that may hinder the data migration process.

Simplify the eventual data integration process by ensuring your chosen vendor follows “clean core” data principles. These principles prioritize streamlined code without unnecessary complications, making the system easier to integrate and maintain.

SAP has tested Thomson Reuters products to make sure they meet its security and performance standards. As a result, Thomson Reuters ONESOURCE provides SAP-certified solutions that address global tax and financial challenges. ONESOURCE tax solutions adhere to SAP’s clean core approach as much as possible. Three of these solutions have earned SAP’s "endorsed apps" designation, ensuring high-quality data, easy integration, and simplified management of all processes and operations. Both solutions have already demonstrated their ability to work seamlessly together.

Take extra care to ensure all tax data flows through the correct channels and that data needed for reporting and compliance is properly formatted and accessible from designated sources when integrating a new ERP and tax engine simultaneously.

Although an ERP serves as a company’s new central nervous system, you must still configure the accompanying tax engine to meet the organization’s specific tax requirements. This process may involve setting up tax codes and rates, adhering to country-specific tax regulations, and making sure all taxes are reported in the appropriate format.

Keep tax data properly configured and flowing through the correct channels with critical factors, such as:

• Review existing tax codes and product classifications for accuracy
• Include any new regulatory updates or jurisdictional changes
• Add any business or industry-specific tax requirements
• Map and configure the flows of tax data for the new system
• Run several test scenarios using sample tax data before migrating master data
• Verify that test results are accurate and repeatable

Expect the tax engine vendor to have a more extensive list of factors to consider. Once configured, some vendors provide additional support through automatic updates to changing tax codes and regulations, reducing the tax department’s need to constantly monitor global tax regimes. Some vendors also offer all-in-one tax solutions that include the indirect tax engine and additional modules that meet specific tax needs like global trade management, direct taxes, and statutory reporting. This all-in-one approach helps minimize the number of vendors involved in the ERP migration, ensuring alignment and simplifying communication.

Switching from a legacy computer network to a cloud-based ERP inevitably changes the way people work. New systems require new skills, and some employees will resist change — even if it benefits them in the long run.

The shift to cloud-based business systems also affects a company’s culture, so it’s beneficial to consider the human element. While focusing on technical details, you should develop a change-management strategy to help employees adjust to the new system.

Ensure everyone is prepared by first clearly communicating the scope of the ERP and tax project, the rollout strategy, and the implementation schedule. It’s essential to explain the reasons for the change, how the new system will benefit the organization and its employees, and what changes to their daily workflow they can expect. Winning hearts and minds is essential at this stage, so provide a forum for feedback and open communication to build trust in the organization’s decision-making and motivate employees to embrace the coming changes.

Every organization is unique, so leaders must understand exactly how a new ERP and tax framework will impact their employees. Conduct a thorough impact assessment study to identify potential challenges and pain points. Then, develop comprehensive training to address these issues and familiarize users with the system’s full capabilities.

Keep in mind that a new ERP and tax system isn’t magical — it will only reach its full potential if employees are taught how to maximize the latest features and capabilities available to them.

While it is vital to familiarize users with the various capabilities of a cloud-based ERP, it’s equally important to train tax teams and others handling tax-related data to effectively use the reporting, compliance, and analysis tools that a state-of-the-art tax solution provides.

Tax teams should use these tools and the robust data from an automated tax engine to transform the tax function into a more strategic, forward-thinking department. This approach not only helps compute taxes but also adds value to the enterprise and offers unique leadership insights. Training tax teams to fully utilize the engine's capabilities is essential to ensure the company's investment in this new technology achieves the expected ROI.

Tax practitioners need training on both the ERP and tax software, and they must learn to use these systems together. The true power of a cloud-based ERP and tax system resides in its ability to gather, organize, and process higher-quality data at speeds unmatched by legacy systems. Therefore, training tailored for tax teams should provide a holistic understanding of how the ERP and tax engine communicate and the resulting tax data sources and locations. It should also encompass how teams can use that data for tasks like scenario modeling, supply-chain analysis, and tax reclamation with the powerful new tools at their disposal.

Ensuring compliance often requires updating tax engines so relevant tax rules and regulations are correctly calculated. Manually updating a tax engine can be extremely difficult and time-consuming, especially as tax rules, regulations, product codes, and categories constantly change. With the ongoing digitalization of global tax regimes, innovations like real-time reporting and e-invoicing are now mandatory. Companies that fail to keep up — particularly on an international level — risk fines, penalties, reputational damage, and brand harm.

Updating a tax engine can be difficult and time-consuming, so finding a tax solution that manages updates for you is a better option. At Thomson Reuters, for example, teams of tax experts and engineers monitor global tax schemas and promptly update the tax engine as needed. Once updated, the tax engine automatically incorporates changes into its calculations, relieving any concerns about missing regulatory changes.

ERP cloud migrations provide an opportunity to evaluate other system intersections that may be carried over. A new ERP can often support more powerful and robust alternatives the previous system couldn’t accommodate. For instance, an automated system that combines sales tax calculations, e-invoicing, and compliance reporting requires ERP integration. Consequently, companies with an existing automated tax engine should consider their ERP upgrade a golden opportunity to evaluate whether their current tax engine is performing adequately and will continue to meet their needs after the upgrade.

Some tax solutions effectively manage sales taxes and VAT compliance but may not perform as well with direct taxes and global trade compliance. While certain solutions can function in a cloud environment, they might lack cloud-native capabilities that allow companies to fully benefit from the flexibility, scalability, and superior performance of entirely cloud-based services. A tax engine not specifically designed for cloud operation may also require additional maintenance, leading to extra costs and downtime that cloud-based tax applications can avoid.

There is no better time to introduce a more expansive and capable tax engine than during a system-wide ERP upgrade to the cloud.

To ensure a seamless transition to the new ERP or tax solution, recognize that no system is perfect from the start. Be prepared for a period of refinement as the solution becomes operational. Monitor system performance during the initial weeks and months and prioritize collecting user feedback to guide necessary changes and improvements.

User feedback is instrumental because every company operates differently. To determine how effectively a new ERP or tax solution functions within your organization, actively engage users to share their experiences, highlighting what works well and areas that need attention. Involving users in this process gives a sense of ownership and control over the new technology, boosts morale, encourages buy-in, and enhances overall performance.

Promote a culture of continuous improvement among employees. Encourage them to seek opportunities for enhancing processes and systems. Building a culture of attentive cooperation is essential, as a fully engaged workforce is paramount to maximizing the transformational power of cloud-based technology and creating an efficient and effective technological ecosystem.

Learn more about our integrations with vendors such as SAP and Oracle to help your organization’s tax transformation and ERP cloud migration succeed.