By John O'Rourke July 8, 2020
Many processes and groups within the Finance function have benefited from purpose-built provision software solutions over the past 20+ years – payroll, accounts payable, general ledger accounting, financial planning, reporting and other processes. Meanwhile, the tax accountants have been toiling away in obscurity, mostly relying on homegrown Excel spreadsheets to accomplish the complex task of tax provisioning and reporting. But that situation is changing.
Tax Provision Getting Increased Focus
The good news is that there are purpose-built software solutions available for the tax department, that can bring them out of obscurity and into the 21st century. This is the focus of a recent research perspective authored by Robert Kugel, SVP and Research Director at Ventana Research.
In his research perspective titled "The Corporate Tax Management Software Imperative", Mr. Kugel highlights how the tax provision and reporting processes are receiving greater attention from CFOs and audit committees. Two key drivers here include increasing focus on shortening the period-end accounting close and demand for greater transparency in tax planning, provision and compliance.
Challenges with Spreadsheets
In the report, Mr. Kugel cites a 2020 Ventana Research survey that indicated that most organizations use spreadsheets to support their tax provision and reporting process, while only 22% rely solely on dedicated third-party applications. He cites three issues inherent in relying on spreadsheets for these critical processes.
One of the issues is that spreadsheets, and the manual data collection and calculation processes that go with them, are time-consuming. Second is that spreadsheets are a black-boxes that are difficult to control and are prone to errors. And the third is the two-dimensional nature of spreadsheets and the challenge of applying them to a multi-dimensional problem.
Aligning Tax with Financial Reporting
Mr. Kugel then goes on to highlight the capability of purpose-built tax application software to increase the speed and accuracy of the tax provision and reporting process. The speed and accuracy gains come from having a central database of all tax information, powerful data collection and calculation capabilities to eliminate errors, and more dimensionality available to organize and analyze the data – by time periods, regions, currency, and entity.
Furthermore, Mr. Kugel highlights that most companies will find that they can achieve a consistently high degree of accuracy, auditability and visibility by having their tax provision application share the same platform as their financial consolidation and reporting system. Using the same data source ensures that the data used in the tax provision process is always reliable and up-to-date. This, in turn, can shorten the close process.
This was the case with OneStream customer Victaulic, who automated 86% of the tax provision process by extending the OneStream XF platform to support their tax provision and reporting requirements.
Learn More
The good news for tax departments is that there are a growing number of purpose-built software solutions available to replace spreadsheets and improve the tax provision and reporting process. However, those who implement tax applications that are aligned with financial consolidation and reporting will see reduced points of risk and chance for errors, and a more streamlined process.
To learn more, read the Ventana Research Perspective "The Corporate Tax Management Software Imperative."
