How to Automate Business Tax Compliance Processes

Internal direct tax functions are under increasing pressure to do more with less – from contributing to budget cuts for professional fees and improving oversight and governance, to acting as business partners – all in the context of changing legislation and improving reporting requirements.

While the use of tax engines for indirect taxation may be common, real-time corporate tax reporting and automation is less common. Likewise, similar activities – such as group reports, statutory account notes and the finalization of tax returns – often only occur on an annual basis. For large groups with a large legal entity footprint, these obligations frequently consume significant resources and time.

In the UK, Making Tax Digital for corporate tax is on the horizon, among other enhanced reporting requirements. This adds to a governance-driven ecosystem that already requires documented processes to meet the obligations of the Senior Accountant (SAO) and to limit the risk of representatives facilitating criminal tax evasion – processes that cannot necessarily be done. outsourced to advisers. HMRC, when undertaking business risk reviews, is interested in the company’s approach to technology and how it can generate insight and, ultimately, accuracy.

Over the past year, WeWork’s tax department has worked on transforming its corporate tax functionality with the goal of strengthening risk and governance processes while finding synergies (particularly temporal synergies). ) in the activity segments which have just been mentioned.

Transform direct tax reporting processes

Compiling, cleaning, and manipulating data is an often thankless task for the in-house tax specialist, who has historically been beholden to legacy processes and # N / A-sifted spreadsheets.

While there is an undeniable investment in time and resources, automation can relatively quickly facilitate a new hub of the internal tax function away from time-consuming manual compliance processes and towards greater added value and prevention activity. risks.

The path to automation is, in any case, recommended as a step-by-step path, but the improvement on several fronts that can result from small incremental changes is striking.

Vehicle for automation and evaluation

There are several avenues of automation for corporate tax compliance. In some cases, it may be more appropriate to undertake tax awareness directly in enterprise resource planning (ERP) software. In others, especially when statutory accounting adjustments are not kept in the ERP, or when multiple data sources are relevant for the compilation of tax returns, or (as in our case) when there is a large legal entity footprint, an external workflow tool may be more appropriate.

The workflow tool acts here as the bridge between the raw incoming data and the outputs of the tax return and / or tax provision software.

The workflow tool option also provides the ability to make changes quickly within the group tax function – no ERP configuration changes and no metadata changes that might require more change management processes. long (at least in the first iteration of transformation).

We chose to use Alteryx Designer – a data analysis tool that enables preparation, blending, reporting and predictive analysis of data to bring together source data to populate statutory account notes and returns and reports. corporate tax. However, there are many alternatives available from Microsoft (Power Automate) and others.

Our choice fell on ease of use and a clear and accessible training course, but also on the predominant use of the tool elsewhere in the financial organization and therefore the future synergies between the sub-functions.

Insourcing vs outsourcing

The issue of automation could also coexist with the issue of internalization or outsourcing of tax compliance and reporting issues, and should be considered in parallel.

When evaluating an appropriate model, the ability to exercise control over the governance related to the ODS as well as the ability to develop an automation capacity to conduct broad oversight (for example, with respect to management). corporate criminal offense risks for failing to prevent the criminal facilitation of tax evasion) motivated the decision to integrate a substantial part of our corporate tax compliance internally. This approach also works for our organization in the context of a large legal entity footprint with significant repetitive efforts, and where our systems and processes evolve as we continue to transform our business.

For other businesses, there may be occasions when it may make sense to outsource the automation entirely or share the automation effort and reward in a co-source relationship with an advisor, depending on the return on investment.

Manual with integrated data flows

Application programming interfaces (APIs) are common in various data-driven scenarios. In the context of corporate tax automation in its simplest form, APIs can allow data to be fed directly from the ERP (and other systems) to the workflow tool and then to the tax declaration / tax provision software, thus enabling real-time tax declaration according to the sophistication of the tax logic in the workflow tool.

Using APIs does not necessarily mean a significant investment in development or programming expertise. Increasingly, these APIs are found in the package of a “connector”, a plug-and-play way to facilitate this data flow from ERP to the workflow tool and tax reporting software. It is actually the availability of these connectors that has influenced some of our workflow tools and decision making in tax compliance and reporting.

However, at first it is recommended to use the pre-existing reports and data sources and download them in the first phase of the workflow. This inherently eases the testing process in the transition from manual compilation and manual manipulation to automated manipulation and ultimately to integrated compilation and automated manipulation.

In both cases (i.e. with or without API connection), the advantage of using a workflow tool is that the source report is never modified with a clear visualization and an audit trail indicating precisely how the source data is handled and prepared.

From discrete data to machine learning

General Ledger (GL) reports and other entries often include significant amounts of information that can help generate tax information and logic (for example, free text notes and dimensions, including vendor / cost center customer, GL account, categorization entries, etc.).

A combination of GL account and journal and / or cost center category may result in a basic tax sensitivity analysis and the first phase of a corporate tax workflow. But as the workflow continues to expand, machine learning is readily available in Alteryx.

Next steps

In our experiences to date, we’ve focused on tax compliance reporting, but in the next phase of our automation and transformation, we’ll look at how our data analytics tool can support our pricing efforts. transfer. The tool’s ability to simplify and speed up calculations and cost allocation models is widely discussed.

Tax forecasting should also be a more painless exercise. We expect fewer adjustments through the initial load of calculations at the group provisioning stage of the compliance cycle, and we will apply fiscal logic to forecast and planning data.

Tax does not have to be taxed

Using a data analysis tool can at first seem like a hammer to crack a nut – or, indeed, the thought of perfecting yourself can seem like a daunting task. However, neither of these statements is true.

There are many sources of training for data analysis tools, so improving skills can be an inexpensive and relatively quick experience. Feedback from our team was that data analysis tools are more user-friendly than a spreadsheet – not only because large volumes of data can be managed more efficiently, but because preparation, transformation and analysis step by step are clearly fluid and explainable.

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