Tax departments are increasingly aware of the benefits of digital transformation. At times of economic instability and fast-evolving tax requirements, the agility and resilience offered by automation and transparent data are even more valuable. Add to that rapidly shifting tax legislation and technology, and the message to tax professionals is clear: doing nothing is not an option.
In this article by Andrew Burman, Principal, and Global Practice Lead of Transformation at Ryan, we ask: how should tax executives begin their transformation journey while continuing to manage their existing responsibilities?
The five principles listed below should be kept in mind by all tax leaders hoping to drive digital change.
- Understand the Importance of Self-Knowledge
According to research by Industry Dive and Ryan, 68% of tax executives believe that outdated technology will impact the effectiveness of the tax function within three years. However, only 37% of finance executives share the same concern. To overcome this challenge, it is essential to have an external partner who can provide fresh perspective and coordination efforts to communicate with other functions like IT, finance and operations. Tax should communicate well with other stakeholders, understand its context and engage in a confident, consistent, positive way about why change is needed and how it can be achieved.
- Culture is key
Tax departments must embrace digital transformation as a permanent culture shift, not just a one-time event. This requires focusing on non-digital factors such as change management, communication, processes and employee upskilling. Tax professionals must adapt to changing tax legislation and evolving technologies, and embrace a culture that values data ownership, adaptability and change. By focusing on data, tax departments can provide insights, identify trends and avoid mistakes, becoming a strategic asset to the organisation.
- Identify pressure points
Every organisation faces different pressures that evolve over time. Any review for tax must be performed with a proper understanding of these broader factors (whether internal, market, or compliance-driven) to help ensure the tax function can secure the right amount of investment to deliver its ambitions.
In a recent survey, 58% of finance executives felt competing priorities diverted technology investment away from the tax function, while more than seven in 10 tax professionals feel they are being overlooked when it comes to the business investing in transformative technology.
If the tax department can identify bottlenecks during the year when resource demand is at its highest, there may be ways to smoothen that demand and provide value to the organisation through more timely data insights. By identifying pressure points, tax functions can be clear about what problems need to be solved and adapt their transformation plan to solve them to the benefit of the function and the wider organisation.
- Choose the right technology
Global regulators are driving technological change as they increasingly require tax departments to interact with them more efficiently in real-time, with greater access for audits and data interrogation. This means technology investment is a requirement rather than an option. Choosing the right technology requires not only a detailed understanding of the various digital systems but also of the functional requirements and priorities.
The solution will probably be found in a number of systems. Advocating for brand new digital platforms purely for the tax department is unlikely to succeed – investments have often already been made and systems already integrated. Tax needs to find pragmatic solutions that leverage software that’s already available, wherever possible. Where new systems are being implemented, it’s important that tax has a ‘seat at the table’ to feed in requirements, as well as ensuring tax is seen as a creative user of existing systems where possible rather than simply asking for tax-specific ‘bolt-on’ solutions.
This requires a two-way and often ongoing conversation with other functions, where relationships are built, ideas tested and these other functions are communicated with using language they understand. Gaps can be filled where needed, but whatever is built needs to be deployed and maintained to the satisfaction of the wider business. Relying on IT or any other team can cause bottlenecks in the future, so the tax function needs to be, as far as possible, able to manage its own processes, controls and systems. At the same time, tax needs to provide IT with the confidence it can properly manage its data and systems.
- Find an expert transformation partner
The right partner with the experience, technological expertise, and know-how can help design and implement the solutions tax functions require, creating the optimal operating model and risk control framework, working closely alongside the rest of the business, and leveraging the technology already in place as much as possible.
Beyond the initial changes, they can also help with maintenance and management once systems are live. Doing so may involve building and upskilling new teams to help ensure future flexibility and scalability, together with the development of a robust operating model.
The partner should feel part of the existing team, working hands-on alongside you rather than acting as a separate consultancy firm. They engage key stakeholders, translating the languages of tax, IT and other crucial functions to help proactively problem-solve in real-time with the rest of the business.
A tax function that feels it lacks the expertise or the bandwidth to be more transformative would benefit from keeping these five principles in mind. Today’s exacting tax environment demands tax departments keep up to future-proof their business. Often, it’s the introduction of an experienced transformation partner that can finally make the difference and help turn good intentions to action and results.
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