Use Automation to Solve Tax Department Pitfalls

[Automate and easily manage the lifecycle of fixed assets with fixed assets depreciation software from Bloomberg Tax.]

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:

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: