A road map for tax function automation.

• Author: Sala, Michael

Corporate tax practitioners have received many invitations for webinars and seminars about the "Future of the Tax Function,"with related technology consulting and software offerings. Tax functions, it is said, will leverage predictive analytics to anticipate and mitigate the likelihood of audit, use connected general ledger systems that interface directly with government systems, and rely on intelligent software capable of taking action without human intervention. (1) At the heart of these predictions is a promise of automation; that is, through the automation of everything from the tax return preparation process to the collection of sales tax exemption certificates, tax practitioners will cease to be movers and processors of data.

In a world of machine learning, neural networks, and robotic process technology, these promising outcomes are at least theoretically possible. But the practical reality of the automated tax function remains elusive for several reasons: First, in most firms, a technology project must be justified by payback. Second, tax functions do not implement technology in a vacuum but, rather, are prioritized within an enterprisewide technology demand management process. Finally, during the process of implementation, the firm will encounter resource constraints, in that its teams will need to keep up with legacy processes while serving as implementers of new technology solutions. In short, there are only so many dollars, people, and hours in the day.

Approaches to these tax transformation obstacles--payback, technology demand management, and resource constraints at implementation--are discussed below. For purposes of this article, it is assumed that the basic ingredients for tax automation already exist in a finance organization. These could include, for example, a recently established center of excellence for development of robotic process automation (RPA) throughout the finance organization or recently authorized project spend on solutions that augment the quarter close. In either case, the practical realities of corporate tax function automation are no less daunting at this stage. For tax leaders, the question is, what next?

The outsourced-automation conundrum

The technologies that support tax automation are unavoidably attractive, as with any technology on the automation or "cognitive" technology spectrum. Promises of a more efficient close, fewer late nights during time-compressed compliance periods, and improved controls appeal to tax managers and staff alike. But at budget time, automation projects may need to do more; in most firms, they must first present a compelling return.

Consider, for example, a tax team that seeks to automate the creation and export of a set of reports from Thomson Reuters's ONESOURCE Tax Provision (OTP) for use in an account reconciliation tool, such as BlackLine, which generally occurs during each quarter close. This task has all the indicia of one that can and perhaps should be automated. Specifically, the task is rules-based and repeatable. It must be completed routinely each quarter. Automation of the task would free up many hours of one or more associates' time. Well-documented, step-by-step desk procedures that explain how the process is completed by an associate-level staff person are in place. These attributes put the task in the wheelhouse of automation.

Having determined that the task is ripe for automation, the firm calls its chosen outsourced-automation provider to develop cost estimates for the project. To develop this robotic task, the provider tells the firm, it will need both RPA and several Microsoft Visual Basic scripts to format the data once it is exported to Microsoft Excel. Nevertheless, relatively few variables and "clicks" are...