Data collection is fundamental to the tax process but it’s often the most inefficient aspect. Up to 75 percent of the workload associated with the tax computation is spent on gathering the necessary data and it’s a task that falls to highly skilled tax professionals whose time could be better spent on other activities.
This is particularly apparent in the advisor-corporate relationship, where data collection increases costs, reduces margins and impacts service levels, but it also proves burdensome inhouse, with tax professionals required to manually source and convert data. In both scenarios, data collection is monopolising a valuable resource and is stealing away time that could be allocated to value adding services such as tax planning.
Aside from efficiency arguments, there are numerous reasons why manual practices such as copy and paste from excel sheets into compliance engines or even manual keying are no longer sustainable. These include:
Disparate data sources and formats – Financial and tax information resides in numerous accountancy or corporate ERP systems in structured and unstructured formats, making it difficult to extract and consolidate. As the wealth of data expands, it becomes far more difficult for the organisation to keep pace until a tipping point is reached when human resource alone cannot meet processing demands.
Data integrity – Tax professionals spend an inordinate amount of time reviewing the quality and integrity of data, reworking and then consolidating it into Excel or other formats. Each human “touch” represents a potential opportunity for error, resulting in duplicated records, corrupted files, or mistakes such as the application of incorrect tax codes etc.
Accountability and data audits – Ad hoc manual data processes can make it difficult to establish an unbroken audit trail to verify which transactions have been analysed by whom and when, and why particular nominal codes have been applied in some instances but not in others.
Compounding the problem is the need to digitally process data from ‘source to submission’ with a global trend among tax authorities to increase the flow of data from the tax payers to the tax authorities in a regular and standardised format. Tax reforms such as HMRC’s Making Tax Digital are seeing previously acceptable manual processes become non-compliant, requiring end-to-end digital processing. Together, these drivers are now causing businesses to reappraise how they collect tax data and to look at where they are on the roadmap to automation.
Automation as a journey
Today, businesses are on a journey towards automation to solve these issues. Where they are on that roadmap will depend upon the compliance requirements they face, the systems architecture they have in place, their processes and appetite for change. Yet regulatory change means these organisations must embrace the automation of data collection.
We offer three options in data collection automation, each of which becomes progressively more self-sufficient without the need for human intervention:
Automated Data Extraction – extracts the data at source. It simplifies the collection of data from multiple ERPs and accounting systems, including structured data from the trial balance and unstructured data and information from non-ERP sources into a data warehouse for cleansing, manipulation and onward transfer.
Accounts Integration – automates the import of the statutory accounts from a standard format into the tax compliance engines, with some customisable capability to ensure data templates and reports can be manipulated to accommodate deviations in compliance requirements.
Data Entry – automates the process of populating data into the compliance software engine and supports raising and responding to queries about the data received by presenting it back in a consistent format and automating the import of any responses.
Removing the human from the equation is the best possible way to streamline the data collection process. It removes the need for tax professionals to spend valuable time manually collating data and the stress associated with the weeks of chasing information to meet compliance deadlines. It removes the risk of data entry errors from handling data multiple times. And it avoids the complexity that can make it harder to verify source data and complete an audit.
Conversely, automation offers real benefits by improving data accuracy, reducing administration and freeing up tax team resource, the ideal being where compliance is automated up until the point of expert technical review. Furthermore, the data itself becomes a valuable commodity that can be used to carry out tax planning or even provide business intelligence to help inform strategic decisions within the company.
The need for speed
Automation of data collection is no longer merely a time-saving exercise. It’s fast becoming essential in order to provide the real-time access to data tax professionals need and regulators require. The devil really is in the detail and being able to source, analyse and access tax data more speedily will be key in meeting regulatory requirements now and into the future as the demand for more frequent reporting and transparent audit trails grows.
Tax Systems data automation solutions can automatically extract financial information from over 300 accounting software packages and ERP systems and translate these into common/standardised formats, offering a range of options to support you whether you’re at the Accounts Integration, Data Entry or Data Extraction stage. To find out how Tax Systems can help you automate data collection regardless of where you are on your journey, contact us today.