The arrival of the Tax Cuts and Jobs Act (TCJA) dramatically changed the landscape for tax departments. The new law’s ramifications had to be understood and executed in record time—from provision through international and domestic compliance through return-to-provision. Additional modifications required by the CARES Act, plus the advent of the remote workplace, simply compounded the challenges.
Because of these substantial changes, planning, provision, and compliance teams needed to react and react fast. And they did that using disparate data and disconnected models. But working in silos is no longer feasible—and using multiple tools to complete the tax lifecycle reduces productivity and efficiencies. We sat down with Gary Colbert, Senior Director, Tax Law Analyst, CSC Corptax®, for his thoughts on reimagining today’s tax department to align tax processes and stay ahead of increasing demands.
Q: Tell us how tax teams have been handling provision and compliance processes since TCJA came into effect.
When TCJA arrived, tax departments used a divergent approach, treating provision and compliance as separate functions with different needs at different times. Ahead of TCJA’s passage, Planning had to piece together hypotheticals about potential impacts of the law. After its passage, they used one model for provision at a high level and a different model to get a more detailed calculation for the return. Tax data came from multiple places, processes were overly manual, and it was difficult to repurpose data for analytics. Plus, sharing results with other departments was challenging, to say the least.
With the gap between adoption and technical guidance, and with volatility expected to continue, using separate models throughout the tax lifecycle is not sustainable and opens the door to risk.
At CSC Corptax, tax reform has validated our vision of building solutions within a single system that houses a single source of data. In today’s environment of uncertainty, it’s an ideal, actually necessary, time to combine tax planning and all aspects of tax reporting by standardizing processes and reusing data. By breaking down data silos, tax teams streamline data usage across the tax continuum, reduce risk of error in financial and compliance reporting, and simplify forecasting and analytics.
Q: How do tax teams take a step back in order to reimagine a new provision and compliance process?
Working with a broad base of CSC Corptax clients, we found that they’re a step ahead in assimilating their processes because they leverage a technology platform that supports it. With data already in a single system, it is a matter of building in the right level of detail and using tools within the system to align tax processes.
For companies without a strong foundation, we recommend following these five steps to save time and increase efficiency and accuracy.
Step 1: Organize and structure tax data. Take data out of disparate platforms and centralize it. Then, structure that data at its most granular level. Organizing it at this level allows you to use the same detail in the calculations and be able to aggregate and consolidate it for different levels of reporting.
Step 2: Remove duplication. Look at all processes and determine which ones do the same things. Leverage automation to remove redundancies. Simplify the process further with a common administration and user experience across provision, compliance, and planning.
Step 3: Build a data-driven review process. Instead of ticking and tying data on forms and reports, determine where you can let data drive the review process. A data-driven reporting and analytics process lets you review results for provision, compliance, and planning with the same underlying detail and aggregate it at the level you need. If you’re not anchored to a form or report, it’s much easier to leverage data to perform a risk-based review process and help guide business decisions.
Step 4: Make processes scalable and sustainable. The stable environment we lived in for decades created a certain complacency. But that has now given way to constant change. New guidance from Treasury, the potential for additional stimulus packages, and upcoming proposals from the OECD all mean there is more change ahead. Tax processes need to be agile, scalable, and sustainable to adapt to changing requirements. That’s much easier to do if your data and calculations are structured and your data is centralized.
Step 5: Automation is key. Let your tax system automate calculations for you, from source data through reporting. Starting with organized, structured, and centralized data and a single version of the truth, utilize technology to process rules rather than building them manually in separate models.
Q: What options do tax teams have to align processes?
Tax teams should consider three criteria when deciding upon a tax system to align processes: automation, risk mitigation, and change management. Let me outline the choices:
- Align processes manually using Microsoft Excel®. Excel is good for reporting but was not designed as a tax technology platform. It is a user of data, not a source of data. It’s primarily manual, limits data access and automation, and isn’t scalable. However, it has a place in assisting with analytics.
- Outsource or license/purchase individual modules. The problem with this approach: the tax team must get all tax data into a system to produce a return. Most of the time, the team ends up using multiple systems for one consolidated federal return. Or, they must put the same data into three different models to achieve provision, compliance, and planning, making it difficult to analyze and share data.
- Use a single system from CSC Corptax. Leverage automation to capture data once, store, calculate, and access it centrally, and reuse common data across the tax lifecycle. Further, a single solution is agile, scalable, and sustainable.
Today, tax teams need to store and organize much more data by category of income. Calculations have to be built somewhere. Corptax not only produces the return, it fully automates the process and the calculations.
For more information, reach out to the CSC Corptax Professional Services team to learn how aligning processes will benefit you and ensure you stay in lock-step with your counterparts in finance and business planning.