Recently a number of corporate tax and accounting professionals were surveyed to gain insight into their tax provision process. They identified three major issues with their provision process:
- Data collection — the provision model does not contain all of the required financial information.
- Resource constraints — the tax provision process is very labor intensive.
- Timing — more than half the companies surveyed reported that they have less than one week to prepare their consolidated tax provision.
The survey clearly demonstrates the need for automation. Corporate tax executives understand an automated system provides the standardized platform to consolidate data, eliminate many of their manual processes and be more time effective.
Tom DeMetrovich, director at Crowe Horwath LLP, says the survey results are indicative of the challenges faced by most corporate tax departments.
“Responsibilities are increasing and staffing trends generally are flat,” he says. “Implementing a Web-based software tool, such as the Thompson Reuters ONESOURCE Tax Provision, can be the solution that most corporate tax departments are seeking.”
Smart Business spoke with DeMetrovich about automating the tax provision process and the capabilities provided by a software solution to address the three major concerns expressed in the survey.
How can an automated solution assist with data collection?
An automated solution allows a company to consolidate the majority of its data into one platform. The software can interface with the existing accounting or financial reporting system and upload the required financial information. The software also is able to roll data forward from period to period. There’s no need to manually update and reconcile multiple Excel schedules for the new year or roll forward Excel workbooks. This functionality significantly reduces time spent gathering data and eliminates many of the errors in the current process.
How can an automated solution assist with resource constraints and timing?
Reducing the need for manual processes frees up corporate resources to handle more strategic, higher value tasks, leading to increased review time and increased time for analysis and forecasting.
An efficient, automated solution also reduces the time needed for processing the provision. The system allows multiple users to access and update the provision calculation in a controlled, secure environment. Therefore, the provision calculation is done more timely and accurately, which allows additional time for analysis, adjustments and reporting.
Can the software be implemented in-house?
Companies rarely implement a provision system in-house. The project generally is undertaken in conjunction with an outside provider, whether an accounting firm or the software provider. Tax departments have knowledge of their current provision process but lack the depth of knowledge necessary to select, install, configure and train their personnel on the new software.
The benefit of using an accounting firm for implementation is that the firm provides in-depth knowledge of the software and has broad-based knowledge of tax and the provision process. The company also has access to the accounting firm’s knowledge of its industry. The firm can:
- Align software to the company’s current processes.
- Make sure processes are correct from a technical tax standpoint.
- Use industry knowledge to provide best practices that can be incorporated into the new automated process.
Once implemented, can tax departments manage the software without assistance?
Once the software has been properly installed, configured, tested and training has been completed, the tax department staff should be able to maintain the software. One of the biggest benefits to a Web-based solution is that the company’s internal IT group rarely has to be involved. Software updates are handled directly by the software provider. And, the tax department will be able to handle updates for changes in general ledger accounts, the addition of new entities and other enterprise-wide changes.
Tom DeMetrovich is a director at Crowe Horwath LLP. Reach him at (214) 777-5272 or Tom.DeMetrovich@crowehorwath.com.
More information on tax provision automation.
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