What tax technology looks like in 2021 and beyond

As businesses and the economy recover from the COVID-19 pandemic and seek to reestablish some normalcy, tax professionals have a rare opportunity to lead change within their organizations. For some, that means managing restructuring or mergers and acquisitions activity. Just as often, it means that the C-suite is looking for tax leaders to be technology experts.

When guiding how your organization drives value through tax efficiencies, expect the unexpected. Technology is always changing. Those of us in the field are used to the pace of reinvention. The key is to be proactive in discussions with business leadership and control the narrative. Here are some things to watch out for as you approach these conversations.

1. “Speed” has an expanded definition.

In the past, one-size-fits-all technology solutions came to tax professionals right out of the box, which checked off that item on your list of requirements for quick implementation. Sure, you could be up and running right away. The only catch was the new tax technology tools were bootstrapped to your existing systems, which ultimately meant many manual tasks for as long as you had the tool.

Even if your tax compliance work was outsourced, manual tasks added up and slowed your ability to get results. The investment group did not consult the accounting group or the due diligence group. The same platform ended up running in two different instances.

Not so fast after all.

You still want to implement quickly in 2021. But now you also need to take into account the entire life cycle of your product. You need tax technology solutions that are holistic to your environment with end-to-end integration and support, saving you time-consuming steps that add up to thousands of hours over the course of several years.

Speed should also be a given when we talk about data, because …

2. The data you have is only as good as the time it takes to act on it.

Did you feel you were able to scenario-plan on a moment’s notice as situations changed this past year? Here are some questions and challenges you may have heard in 2020:

• An investor needs a quarterly estimate. Oh, and what might these look like under the Biden administration’s proposed tax plan?
• An investor is planning a big investment or divestiture. They want to see a variety of options.

A tax technology platform should allow you or your advisors to clone data multiple times, run multiple scenarios and get charts or graphs to see quickly if you make a change or a decision, here is the result. Where we talk about multibillion-dollar funds with thousands of investors, access to real-time data is incredibly hard to harness.

Your system should be able to give you the answers you need. Once you write your questions down, ask yourself: Will my new platform answer all of these questions? Will I be left to decipher data from spreadsheets? Your pain points are the pain points of your investors. Solve those, and you are driving value for your role and for your team.

You may also be interested in: Tax innovation for partnerships

Complex partnerships and complex tax rules call for simple answers. Tax departments for pass-through organizations may be stretched thin, but they still need automation, enhanced insights and a trusted provider. RSM is here to help.

3. Data is an asset of your entire organization, not your vendor’s organization.

Who owns your data? This is two-part question: one for your vendors and another for other departments within your organization. The platforms you leverage have an advantage if they keep a tight grip on your data.

Do you want to customize how you visualize that data? It can’t be done without controlling the data. Do you want to harmonize tax data and transform it using other tools you have? Forget about it. Make a resolution this year, then, to ensure the partners you choose give you full control over your data.

As tax laws become more complex, it is important that tax professionals are able to work outside the tax department to ensure real-time compliance and accurate data reporting. Many chief financial officers I talk to do not want to be stuck looking through the nitty-gritty tax data, just as much as the tax executives don’t want to be held responsible for data they cannot process. Tax leaders who use their analytics acumen to guide business transformation up the chain solve both problems.

4. Efficiency is king—but reliability is queen.

You need to be able to tell investors up and down the organization how tax efficient an investment is going to be. Again, this is table stakes. Recently, a client said to me: “You’re telling me I could change a few numbers in your system, hit ‘calculate’ and have an answer? We just took three days to collect information, assimilate it and run it through 10 different spreadsheets and hope they have it right.”

Hope is not a strategy. As companies seek to cut costs, the post-pandemic tax professional must protect the firm’s revenue. Any technology new to the firm must be reliable. Taking your firm out of the recession with a solid financial footing is going to require some research.

If you are in the market, you want to see a demo of your new tool, not just a slide presentation. What looks efficient on the outside could actually be a clunky solution that ingests data and populates a workbook and nothing more. This is not to say that some of these providers do not have technology—it’s just that what they have isn’t worth much.

5. Tax compliance technology isn’t a product; it’s a service.

Tax compliance the traditional way was a one-sided, after-the-fact process. We need to reinvent tax compliance. Technology offers the potential for so much more, but only if you have the team beside you to see your vision and collaboratively use the technology to get you the insights you need.

You do not have to take your tax work in-house to maximize technology. Your tax advisors should provide you with insights and full transparency to the extent that everything you need is at your fingertips, thanks to the technology. If you are currently working in-house, make sure your technology tool comes with the training, support and upgrades from a partner dedicated to technology serving the whole tax compliance process.

When I talk to clients, two common themes stick out to me: They want to come out of the Dark Ages, and they want to solve as many problems and challenges as they can at once. Those goals are attainable in 2021. The key is to sit down with an advisor (not just a vendor), look at your business as a whole, and implement technology that is customized for your needs, gives you full data transparency, is efficient without losing reliability and is part of the overall service you get from a partner you trust.