Tax departments face a range of challenges, including burdensome manual processes, high-stress deadlines, data quality issues, technology solutions that require significant verification using Excel, and limited resources. In addition, the complexity of taxes, increased globalization, and the increased volume of data continue to make the tax practitioner’s job even more challenging.
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Tax Department Challenges
According to our survey, corporate tax professionals report that keeping track of legislative changes and tax reforms are their biggest challenges, closely followed by the overall burden of compliance and data management.
Based on these results, streamlining solutions, such as automation and integrating processes, data sources, and tax information, stand out as useful ways to address the challenges tax professionals face.
Tax organization leaders also seek more control over processes, greater data traceability, and the ability to complete work without any last-minute scrambling.
The steps involved in transitioning data from source to destination are not always straightforward and can require complex business logic to achieve the desired results. Manually reformatting data is not only time consuming but can also threaten the integrity of the data due to human error. The ability to automate tax processes offers an opportunity to mitigate these common stumbling blocks and achieve greater control over tax processes.
The Case for Automation
Using data automation, tax professionals can upload, process, and manage data using technology rather than doing it manually (via Excel, for example). Automation addresses the following data challenges related to extraction, transformation, and control:
Pulling data from multiple ERP systems and tax systems is complicated and leaves room for mistakes
Gathering data may depend on other departments
Data security is a prerequisite, and there is resistance to external software connecting directly to systems owned by different groups (e.g., ERP systems)
Transforming source data into a format useful for tax in Excel is error prone and time consuming
Process involves tedious and repetitive steps, such as mapping, referencing external files, concatenating, and filtering
Existing process is not well-documented, leading to issues with auditability or troubleshooting
Excel spreadsheets support a limited number of data rows
Source system data may have inconsistencies
Identifying the cause of inconsistencies can be challenging with data coming from many different places
Ability to make changes in a controlled fashion that allows tracking and reviewability to trace data extraction and transformation steps from source to completion
Ability for multiple resources to work with data simultaneously
When it comes to data management, automation offers the ability to reduce manual mistakes, allows more than one person to work with the data simultaneously, and generally provides greater consistency, control, and traceability.
Even beyond data, automation provides quick access to tax law and tax rate updates and tools for modeling and planning for potential situations, such as M&A deals.
There are a variety of different types of tools to consider when seeking an automation solution. Options include:
Extract, transform, and load (ETL) tools, which use repeatable, rules-based processes – you create the rules within the ETL tool itself, as the middleware – to transfer data to wherever you may be tracking your tax data or fixed assets. Some examples are Alteryx, Microsoft’s SSIS, and MuleSoft. These low-code or no-code solutions allow non-developers to create automated processes; however, they can be limited in handling complex transactions and high volumes of data.
Robotic process automation (RPA), which scripts tasks that a user is currently doing manually. One of the pitfalls of RPA is it does require a certain level of maintenance and upkeep. If you are using these types of processes, you will need to have resources available for continually making sure that, as changes happen to either the data source or the format of the data, the RPA process is also updated.
Application programming interface (API) tools, which are essentially contracts between the destination software and the data that you’re feeding into it. If your software solution offers APIs, they can also be lower maintenance than ETL tools. There is an upfront development cost associated with APIs, but once that’s done, they offer robust, easy-to-monitor processes that are better able to handle errors and exceptions than other types of automation.
One of the biggest challenges for tax organizations is that enterprise automation tools (e.g., legacy ETL solutions and RPA solutions) don’t provide the controls and traceability that are required, can’t be changed dynamically, and require IT involvement. In addition, most enterprise automation tools are not purpose-built to serve tax professionals, so all tax logic must be updated and maintained by the organization itself. Thus, tax departments should carefully study a number of factors in selecting an automation solution.
What to Look for in an Automation Solution
When deciding which automation solution to implement, you’ll want to consider how the solution will fit with your particular tax organization and resources. For example, a highly reproducible process typically done outside the tax organization, such as creating an output file from an ERP system, may benefit from an RPA solution owned by a combination of the accounting and IT departments. For dynamic but repetitive solutions that are done within the tax organization, like working up book-to-tax calculations, it may be useful to employ an automation solution that does not require much, if any, help from IT.
Circling back to our three key data processes, consider the following questions when selecting a tax automation solution:
Is the software designed to work with any system that can export csv data?
Does automating the extraction process remove dependencies on other departments and/or manual report generation?
Does the solution provider have experience working with IT departments to configure the most streamlined ways to extract ERP data securely? Experience extracting data from a tax system would be bonus.
Does the solution apply automation to manual processes to free up tax resources for higher value activities?
Does it document the repeatable rules for automation to create more transparency into the flow of data and reduce risk?
Does the software provide a review step, enabling users to review and edit data post-transformation?
Does the solution provide the ability to trace transformed data to the source system?
Does it allow manual corrections without needing to reload and transform data again?
10 Steps to Get Started with Automation
To help identify and prioritize your challenges and evaluate the available solutions, follow our 10-step quick guide.
Case Study: Fixed Asset Automation with Bloomberg Tax
A large multinational manufacturer has identified their fixed asset management processes and solutions as being extremely manual and bifurcated. Book depreciation is done in its ERP system, while tax depreciation is done by exporting the data from the ERP system and manually doing the work in Excel. In addition to eliminating risks due to the process being extremely manual, the company would like to optimize both book and tax depreciation calculations.
Fixed Assets Challenges
The company identified the following as major challenges in the fixed asset process:
Fixed asset additions must be manually cleaned for assets below capitalization threshold. This takes five hours, and if a mistake is made, it means the company has taken fewer deductions than they could have. Mistakes happen 10% of the time.
Fixed asset additions must be manually classified to the correct tax fact pattern before importing. This takes 30 hours every quarter, and mistakes are made 30% of the time. When mistakes are made, it means the company can miss out on bonus expense.
There is a need to manually identify cost basis adjustments for late capitalizations. This takes 30 hours every quarter, and mistakes are made 30% of the time, which results in missing bonus expense and incorrectly computing gain/loss when assets are disposed.
After carefully considering their challenges and options, company leadership identified Bloomberg Tax Fixed Assets with Standard Automation as their best solution. This software has an advantage over traditional ERP systems in that it is specifically built to handle the challenges of fixed asset tracking for GAAP and tax. With Bloomberg Tax Fixed Assets Standard Automation, the data is pulled directly from the ERP system.
With a new fixed assets solution implemented, the company can focus on understanding, modeling, and updating its fixed asset data in an automated fashion without the need for IT resources.
Bloomberg Tax Fixed Assets with Standard Automation not only streamlined and automated the depreciation work, but the company is now positioned to optimize fixed assets for both GAAP and tax purposes. Advantages include:
Workflow automation to help automate tasks and keep fixed assets connected to external systems. In addition, it helps ensure data is synchronized, improves productivity, and eliminates errors.
Integration with any ERP system
Faster response to business changes such as mergers and acquisitions
Automated state depreciation calculations to alleviate the burden of monitoring individual states’ depreciation rules, eliminating the need for time-consuming and error-prone manual work outside of the software.
Automated state tax law updates to reflect changes in federal conformity
Built-in calculations for states that do not follow federal depreciation methods
State bonus modification reports to help ease the compliance burden
Real-time fixed asset tracking and access
Track CIP assets for multiple projects
Adjust fixed assets before project completion
Convert CIP assets into depreciating assets
Control and compare budgeted expenses to actual expenses
Data access in Excel to enable deeper insight into fixed assets data.
Pull fixed assets data into Excel automatically
Pull fixed assets data for multiple companies
Create a custom report or generate a report based on standard report templates
Further customize reports by adding unlimited asset fields
Sort, pivot, and analyze fixed assets data
Automatically update Excel reports when data changes
Foreign currencyfunctionality to take the uncertainty out of managing and reporting on multiple currencies.
Ability to track and audit exchange rates
Automatic currency translations based on historical or current rates, allowing management of assets in both standard and hyperinflationary currencies
Support of multiple currencies with the option to report assets in one or more currencies at the corporate level
Automation tools are useful for optimizing your tax department processes and should be chosen carefully. One such technology solution for tax is the best-in-breed software application Bloomberg Tax Fixed Assets with Standard Automation, which checks all the boxes and maximizes automation around one important area of tax: fixed assets.
No software does everything perfectly but creating an ecosystem where each part of your toolkit is the best at what it does enhances your capabilities and reduces risk.
Bloomberg Tax offers integrated solutions and research to help you on your automation journey. You get the information you need, when you need it to make well-informed decisions. We want to streamline your tax processes so you can be responsive to tax law changes, data changes, and source changes while maximizing traceability, transparency, and efficiency.
Automate your workflow so you can focus on your organization’s strategic outlook.