Optimizing Your Tax and IT Stack: Tax technology road maps should address stakeholder relationships, tax talent, and risk management.

• Date: 01 November 2024
• Author: Bernard, Michael

Tax leaders, tax technologists, chief financial officers (CFOs), and chief information officers (CIOs) often ask, How should we upgrade our tax technology?

Our response may sound surprising, given that our company is in the business of selling tax software services, but here it is: You will always be in a constantly improving state of flux, but your goal is to complete tax and IT projects on time, within scope, and on budget

To be clear, we strongly believe in the value of a top-notch user experience and a tax automation platform that provides end-to-end compliance support We also believe it helps to assess the bigger picture before zeroing in on a solution's features and functionality. That's because tax's footprint is much larger than many tax stakeholders realize. We mean that an organization's tax compliance and planning capabilities have implications for the CFO's governance model, enterprise risk management, and even the customer experience. (Make a large enough tax calculation error on purchases by a high-value customer, and you'll quickly understand that link.)

Tax's footprint is also more far-reaching than many tax people realize. The tax function--the complete collection of organizational processes that affect tax compliance--reaches into many parts of an organization, including areas beyond the direct control of the tax department This explains why tax's relationships with other groups--procurement, accounts payable, accounts receivable, IT, and more--are crucial to nurture.

Advanced tax automation plays a critical role in fortifying compliance, reducing operational costs, and increasing the tax group's efficiency. Yet making optimal decisions about tax automation investments requires tax leaders and managers to exercise skills and expertise not directly related to technology, such as diligent relationship-building, sound risk management and sharp assessments of tax (and tax technologist) skill sets. This need is especially evident in enterprise resource planning (ERP) implementations, projects in which the tax group's early and meaningful involvement helps drive efficiency gains and increases the return on investment

For this reason, designing an effective tax technology playbook requires tax leaders to strengthen their influence throughout the organization, instill a "compliance-aware" mindset beyond the tax group, and get their tax talent management strategies in order.

Extending Tax's Influence

In a recent McKinsey report on how rising finance leaders can ascend to the CFO seat, former finance chiefs describe what drives CFO success. "The CFO cant just sit in their office anymore," one former finance executive asserts. "They have to be able to coordinate across the business, across functions, and get people to collaborate." The same holds for tax executives. (1)

Although tax leaders have markedly different responsibilities and mandates from those of CFOs, many of the skills, collaborations, and activities that drive CFO performance also define successfill tax leadership. The following steps can help tax leaders get out of their offices and instill tax compliance...