From manual to automated: how progressive companies are cutting their compliance costs by up to half.

• Author: McIntyre, Irish

A recent Thomson Reuters poll of 229 tax executives revealed hat difficulty reconciling data and the volume of data being processed are top data management issues affecting tax compliance. From multiple charts of accounts to multiple accounting standards that need to be harmonized quickly, getting the right data for tax returns and the tax provision is a serious headache for most tax departments.

Often tax departments depend on IT, finance, and foreign controllers for the data necessary to do their job. The amount of time spent manually collecting, reconciling, scrubbing, and reformatting data is staggering. Many tax departments spend thousands of hours each year dealing with this by working longer hours, throwing more people at the problem, or paying a premium to outsource the work. Specific areas like state apportionment data collection and computation in the United States are so cumbersome that companies often use data that is 12-18 months old when computing their tax provision. The enactment of new tax legislation creates additional burdens at a time when most tax departments find it hard enough to keep up with the status quo.

According to a 2011 poll of more than 200 executives conducted by Deloitte Tax LLP, 21 percent said they spend 35-40 percent gathering and manipulating tax-relevant data, whereas 18 percent said they spend more than 40 percent of their time doing so.

What Makes Data Difficult to Manage?

By nature, global companies have complex structures, various operational and software systems, and multiple locations, which lead to information that is difficult to manage. Unless tax departments are willing (and able) to throw out existing systems and start fresh, they typically face many of the following challenges:

* Disparate systems and data sources

* Decentralized finance and tax departments

* Difficulty accessing or locating the most current data and documents

* Constantly changing tax laws

* Poorly documented standards and loosely controlled processes

* M&A activity

* Employee turnover

Ideally, companies would have one system for all their tax and finance needs so that their data are always current, available, and accessible. Regrettably, that is not the reality faced by most tax departments, which have a plethora of legacy financial applications and an over-dependence on Excel spreadsheets for mission critical tax functions. These factors create silos of data that are difficult to share and that require lots of re-work...