“If I hadn’t seen such riches, I could live with being poor.”
To many, an iconic lyric from the 1990 James hit, Sit Down. But to me, these words perfectly capture the quandary tax departments across the world find themselves in as technology transforms their operations to deliver greater visibility, accuracy and efficiency than ever before.
Tax professionals who have been working in the industry for 20, 30 or even 40 years are accustomed to manual processes and, in some cases, outsourcing as a way of getting their work done. Some, sadly, remain resistant to change. Others don’t even know of the range of solutions available to them.
But the ever-growing pool of forward-thinking tax workers who have embraced technology – or, should I say, seen the riches – along with the innovative tax technologists behind these new solutions are sculpting a fresh and exciting landscape that’s here to stay. And if you’re one of those, you’re on the right path.
It may surprise you to discover that at least 95% of clients I talk to are, at best, borderline compliant. Perhaps it’s therefore easy to see why so many are investing in tax technology to drive new levels of precision and reliability. But there remain many more that are not – and will continue to remain non-compliant as a result.
If your organisation is ready to change and you have identified tax technology as the answer, I recommend following my three-step plan to putting together a business plan that’s sure to win around colleagues and stakeholders.
1) Define the key drivers
Correct me if I’m wrong, but I’d be willing to bet that your personal list of drivers for aspiring to implement state-of-the-art tax technology looks something like this:
- You want to achieve 100% compliance.
- You want greater accuracy in your tax returns and reporting.
- You want to work more efficiently; shedding manual processes and allowing technology to take the strain instead.
- You want more time to do your job effectively.
- You want to be motivated by working with the latest solutions.
However, the critical factor to remember is that your CFO has only one driver: $$$.
Now you’ve identified your key drivers, you’ll need to work to attach a monetary value and potential ROI to each. After all, that’s what will ultimately win you sign-off from the budget holders.
2) Put a price on the key benefits of automation
The financial benefits of investing in tax technology can be split into three areas:
You are legally obliged to be compliant in every tax transaction you make, which I believe is reason enough to invest in a solution. But when it comes to building your business case, you can also shine a light on the huge financial gains associated with using technology over people.
For starters, you’ll massively reduce the risk of fines for non-compliance. And with such fines often running into millions of dollars, this is one risk it’s not worth exposing yourself to.
Similarly, technology eliminates the possibility of human error, giving you confidence that the data you submit to each tax authority is correct. With senior directors often personally liable for your accounts – and tax authorities increasingly developing the tools required to carry out instant, comprehensive digital checks – you will remove another potential penalty from your radar.
Perhaps your most expensive – and certainly most important – resource is your people. Are your colleagues currently low on morale and motivation due to the sheer volume of manual processes they are expected to complete? If so, automation will free them to focus on other, more satisfying and financially rewarding tasks and projects.
It’s a win-win: your team is revitalised and their future work becomes more valuable to the business.
You can run simple calculations (based on the number of staff involved, the number of hours saved and an approximate difference in the hourly rate of somebody doing manual work and a skilled project) to determine the projected cost benefit.
The rapid pace at which your business will process data with technology means you’ll move many times faster than you do with manual steps in place. Month end will become smoother and more streamlined, saving time and therefore money.
What’s more, you’ll be able to recover VAT sooner and will enjoy greater visibility of your finances, all of which combines to boost cash flow.
3) Communicate the value to key stakeholders
Communicating with stakeholders – ranging from those you need help from to those who will provide the budget you need – is the most important thing you’ll ever have to do as an ambitious tax professional.
Just because you can see something clearly, it does not mean others will!
For example, if you don’t have automation and your data is poor, it will be clear to you that not being able to input accurate information in your tax reports makes it difficult to reconcile, which therefore creates a risk you’ll be fined. Or not being able to submit tax returns on time is likely to result in the same problems.
It may be obvious to you, but it’s probably not to others. Your challenge is being able to explain these issues to stakeholders and educate them of the penalties that are coming your way if they fail to act.
Ultimately, indirect tax touches almost every aspect of your business so it’s in everybody’s interest to get it right.
When dealing with stakeholders, I suggest following this simple five-point plan:
- Present current risks.
- Explain what is coming, i.e. new regulations such as SAF-T (Standard Audit File for Tax) is a file type based on the XML standard. It is created in a standard readable format from data exports taken from accounting records. SAF-T is used internationally to ensure the fast and secure digital transfer of tax information. It is known for its high level of security, ability to simplify the collection of tax data and simple readability due to its standardised format., Electronic invoicing - widely referred to as e-invoicing - is the exchange of a digital document between a supplier and a buyer. E-invoices are issued, transmitted and received in a structured data format that enabled automatic and electronic processing. They contain data in a machine-readable format so that an AP system can read an invoice without manual data entry, leading to faster and more efficient invoicing., Making Tax Digital.
- Reveal the costs you are incurring (both real and hidden).
- Share details of the available solutions.
- Future-proof any investment you make.
What does the future hold?
Businesses that fail to invest in adequate tax technology and continue to be non-compliant will face even greater punishments in future. VAT rates across the world are high at an average of around 22% to 23%. Governments cannot continue to increase rates forever to maintain their revenues, so instead they will invest more in systems that allow them to carry out stringent diligence to find out where companies are not performing and then fining them.
Invest now to prevent a €10 million fine or pay the fine and still have to invest at a later date?