Tax and accounting professionals can use new digital tools to automate processes that reduce man-hours spent gathering data and manual work, freeing up time for value-added activities, according to Baker Tilly Partner – Tax Technology Practice Leader Michele Donohue.
Donohue told Checkpoint in an interview December 7 that the need for technology advancements in tax practice stems from modern challenges with gathering and manipulating unstructured data into a manageable space.
“Data is coming from a variety of different sources, so we’re always up against this mix of data and how it’s come in to us,” said Donohue on the task that firms, especially larger practices, face. “From a tax professional standpoint, we’re always trying to shoehorn that data into some system … there’s always an input that’s required in a certain format.” She continued that there is “so much opportunity for automating natural processes” that streamline tax return preparation or other services.
Donohue explained that there is a variety of automation solutions that range on a scale of complexity and scope. Such tools include robotic process automation (RPA), artificial intelligence bots, and software solutions. Small extract, transform, and load tools are “easy to license, easy to learn” for tax professionals, and can pull documents and execute certain workflows automatically, she said. In contrast, building bots and customizing RPA “take a lot more effort, take a lot more time,” and is more expensive.
“There is a need, really, for everything from the small to the big,” Donohue said, explaining that automation can, to a certain extent, be created in-house, but also brought in via third-party licenses externally. Further, while the tools were relatively recently introduced to the market, she said they “became very popular very quickly because they do make everybody’s lives easier.”
Younger professionals in particular enter “the tax world with a pretty strong tax technical skill set,” which enables them to “take the initiative to learn them and get their hands dirty,” she explained. Industry veterans and leaders also are supportive of embracing new technologies when there are difficulties hiring new talent. “With the resource pool, what it is right now, managers and above are really leaning more on technology solutions” to handle processes in lieu of staff limitations, according to Donohue.
Automation is useful not only for completing manual work, but lowers the risk of human error. It can use data to compare, for example, activities of a business against another similar entity to pick up on a potential unclaimed but available tax credit that may have otherwise been missed. Donohue illustrated that there is an 80/20 rule, meaning 80% of the time a template will fit the needs of a client while the remaining 20% will need a customized framework.
She stressed the versatility of automated tools and how they can be adjusted, sometimes in conference with subject matter experts, when changes are enacted to the tax code or when new regulations go into effect. Tax tools should be refreshed on a regular basis, she said, but when built in a flexible way, “those changes can be maintained very easily by the individuals.”
If a business were to start at zero but was interested in implementing automation, Donohue recommends developing a technology strategy and a roadmap, with an endgame in mind to work backwards from. She said it is a matter of identifying pain points, such as if there are current processes in place where individuals spend too much time that could be spent doing more quality work as opposed to manual efforts. Businesses should consider what level of customization or tailoring would be necessary to suit their needs. Perhaps an auditor will be looking for a specific report, or a tax manager may want to review something from a high level, Donohue gave as examples.
She said it is “critical” that technology be built in a way that is interactive with clients, who should be engaged with it and involved. “It becomes an experience for them and honestly, organizations are looking for that,” she said. “They are no longer looking to just work with a firm where they toss data over a fence and then the next thing that they see is a finalized tax return. Every organization wants to be a part of it.”
Moving forward, Donohue hopes that by partnering with third parties that have “open connectivity and open architecture,” firms will be able to connect with other systems throughout the lifecycle of a return, including audited financial statements. This could potentially mean bridging communication gaps with the IRS, which is also amping up its own AI tools.
That remains to be seen, though, but for now, Donohue said what’s next for the space is to continue getting the word out. The work that should be done now, she said, is to expand “the knowledge of what tools are out there … giving the tax professionals the information they need to learn to build these solutions and just have them embed that within their day-to-day process.”
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