As many know, during the monthly close, after the accountants have made their adjustments and consolidations have been run, it is time for the tax people to begin to put in the tax entries. These are the people who rely on not only actual consolidated numbers, but planning numbers as well, to come up with the appropriate close entries. In order to meet requirements, Tax departments often live in a world of excel spreadsheets. More often than not, these files require a complex road map to comprehend, hence the burden often falls on one person to co-ordinate, get the data, balance and cleanse the input by field personnel. Templates for collecting this data are often standardised to assist in streamlining the data results. The different businesses within the organisation are often significant in nature, and do not neatly fit the templates. Add to this the limited time that the tax department has to complete their monthly tasks and one has the risk for significant error. In order to create efficiencies in their processes while mitigating risks of erroneous data, Tax departments look at different ways of automation to solve their problems. Companies address automation of tax computations and Tax reporting in different ways. There is the plethora of Excel sheets, a third party Tax system, and sometimes, an internal home-grown system.
Excel ...may be fine in a small org and a tax dept in its infancy, but over time people often build links into them which make them complex and unmanageable and they are not done on the basis of standardization which is part and parcel of a controlled system. Versioning is much harder to maintain and retention of historical data is not so secure. More manual triggers are usually required and a bottleneck often ensues as more and more entities need to be loaded into these spreadsheets and, invariably, it is one person who can load it at a time.
Third party solutions are generally good at meeting core tax needs but they are also not integrated with other corporate financial systems such as Accounting, Consolidations or Budgeting. Any requirements above and beyond core tax needs are often hard to achieve using someone else’s programming. First of all you do not have access to the external code and secondly, you often do not have resources to support this. Add to that the fact that it is one more system whose structures, objects and functionality have to be learned and understood.
At the other end of the spectrum are specialized home grown systems. Home grown systems give a corporation the flexibility needed as and when required. The problem with home grown systems is that they are separate from the accounting and planning systems. They usually are maintained by the tax department themselves and thus are left out of other system updates and designs. In some cases, they are even over looked when it comes to IT planning. Over time, these systems can be expensive when a modification is needed because the knowledge base for making these modifications may no longer reside within the organization.
How would it be if we had a system that picks up the benefits of the three types of systems? Excel with its user-friendly functionality and familiar feel, the ability to meet all tax computations and reporting requirements with appropriate controls on a system that is functionally stable, and based on the same foundation and integrated with the planning and consolidation systems? A system that could be integrated with the other key financial and planning systems instead of being interfaced (which can cause time delays). Such a system would allow for transition of people across departments, easier training as individuals may have used the basis of such a system before. Remember, there are many organisations that use SAP as their financial, consolidation and planning systems which means many of the objects/terms that would be used within such as tax system would already be known by individuals new to the organisation.
Using SAP’s BPC module as the foundation for a tax module is the wave of the future.
By Tara Sitaram and Davida Cohen
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