Time to Transform Tax Departments for the Digital Age, by Mark Mendola, PwC Tax leader

It’s no exaggeration to say that technology is radically changing almost every aspect of the way we do business. Companies across all sectors are grappling with how to harness this Megatrend, and to profit from it. In PwC’s most recent Global CEO Survey, 86% of U.S. CEOs told us that technology will transform their businesses over the next five years. They emphasized its impact on everything from connecting with customers to addressing talent challenges to remaking operating models.

Although C-suites are investing heavily in technology, the tax function often gets overlooked. In a survey of over 100 manufacturing organizations, almost 75% of those surveyed thought better use of technology and data would improve their tax team’s effectiveness, but only 20% had a dedicated IT role in their tax department. Unfortunately, this means that manual labor, reduced transparency and minimal attention to analytics are daily frustrations. Many tax teams spend more than 60% of their time gathering, manipulating and validating data. In addition to unnecessarily depleting resources, antiquated tools and processes also increase the likelihood of mistakes, a risky situation against the current backdrop of increasing regulatory complexity and scrutiny.

Bringing your tax department technologically up to speed can create significant value, often by piggybacking on investments being made in other areas of the business. So how can you position your tax department to take advantage of technology? I recommend four steps to move your tax function from the technology backwaters to the cutting edge.

First, devise a technology plan. This three- to five-year blueprint should address provision, compliance, controversy, document and process management, analytics, and data integration. Focus on extending existing enterprise technologies to the tax department by collaborating with stakeholders throughout the organization and building consensus for the blueprint. Cross functional consensus is key to advancing the tax technology agenda with IT and obtaining the appropriate budget.

Second, leverage Enterprise Resource Planning (ERP) and other financial and business applications with a tax-centric information approach. The manual labor and spreadsheets that characterize so many tax departments slow the pace of work and limit access to data. Leveraging technology to centralize and share data and documents allows teams to increase operational efficiency, enhance quality and manage risk more effectively.

Third, create automated, transparent processes and increase collaboration beyond tax. A tech-savvy approach to tax facilitates sharing of tax documents and hand-offs across tax, finance and other functions. Freeing tax professionals from time-consuming data management leaves them more time for strategic tax analysis, planning and risk management—areas that can generate business-wide benefits.

Finally, dive deeper into your data. Data is the new business currency, and it’s time for companies to cash in. Those that convert tax data into strategic information gain new dimensions for forecasting and modeling. For example, companies can model the effect of tax law changes or run scenarios for transfer pricing that integrate finance, supply chain and tax perspectives to create a holistic picture.

Although updating your tax department may seem daunting, the results are significant. At one multinational technology company that grapples with complex, multi-jurisdictional tax issues, the tax team spent huge quantities of time simply trying to find the most recent tax documents because several versions used the word “final” in the filename. The team was also saddled with reams of hard-copy documents, despite the company’s goal of going paperless. By implementing a document management and collaboration platform, the tax department eliminated significant wasted efforts. The group’s efficiency increased by 25%, freeing management to focus on strategy. No longer the company laggard, the tax department is now an enterprise leader and close to achieving its paperless objective.

Breakthroughs in technology - such as the ability to gather and analyze data in real time - may soon become a requirement for doing business, rather than a competitive advantage. Linking tax and technology will only benefit companies as they reinvent themselves for the future.