Discover how the digital revolution could influence your firm and sector.
The proliferation of digital technology, social media and cloud-based platforms has revolutionised the tax and finance industry. Technological agility and efficient tax practices now go hand in hand across the board. Organisations that are quick to embrace technology not only improve the efficiency of their tax and financial practice, but see reduced costs and improved business opportunities over time.
Institutions that fail to adapt and continue with inefficient practices in the age of technology and stricter compliance requirements will inevitably fall behind their more forward-thinking, tech-savvy competitors. This is because continuing with outdated, manual practices can not only drain valuable resources, but also increase risk, potentially impacting both the firm’s reputation and its bottom line.
The disruptive power of technology
We now live in a world without borders. There are tighter regulations, heightened global economic volatility and ongoing skills shortages. Our widespread mobile practices have also seen a huge surge in data and information, as well as data and cybersecurity issues.
On top of this, we live in an age of outsourcing, intense competition and the pressure to do more with less.
Ernst & Young recently identified tech disruption as one of the six global megatrends that will shape the future. The firm predicts that these megatrends will have far-reaching consequences over business and economics, and a variety of industries, societies and individuals. The firm also claims that technology is disrupting all areas of enterprise, while driving a new set of opportunities and challenges.
According to the report, fuelled by the convergence of social, mobile, cloud, big data and a growing demand for anytime, anywhere access to information, technology is now disrupting all areas of the business enterprise. Disruption is taking place across all industries and in all geographies.
At the same time, the report stressed there are now enormous opportunities for enterprises to take advantage of connected devices enabled by the Internet of Things to capture vast amounts of information, enter new markets, transform existing products and introduce new business and delivery models. Enterprises and individuals that can seize the opportunities offered by digital advances stand to gain significantly, while those that cannot may lose everything.
Technology driving tax transformation
Historically, tax has found a way to do the best with what it had, which resulted in lots of manual work and management of records and data. Now, the key enabler for digital tax transformation is effective data management, which shapes process design and drives the resource model.
The ability to analyse data in real time is now a necessity for the tax sector. Detailed transaction-level data already aligned to entity and tax-sensitised data helps creates that opportunity.
Moving towards new ERP systems will significantly help prepare tax calculations and improve tax reporting capabilities. The outlook is that tax will receive “tax ready” information from the ERP or tax data hub. Tax data hubs will include all necessary data and house data from provision and compliance solutions.
New systems that offer real-time collaborations, scenario planning, cost modelling and risk simulation tools will revolutionise traditional tax practices. At the same time, real-time data aggregation, data visualisation and predictive forecasting, along with the automation of workflow, document management and internal controls, will significantly improve practice efficiencies.
In the long run, well-integrated tax data and analytics toolsets will become a vital part of tax accounting, TP, compliance and dispute resolution.
CFO considerations in a digital age
Technology has created a far more volatile business environment, with increasingly complex stakeholder expectations as well as shifts in customer and staff expectations. Data volume management is becoming more and more complex, while at the same time governance and regulatory risks are more prevalent than ever.
As a result, the role of the CFO has expanded considerably, but with fewer resources. The modern CFO is trying to manage the increased risks of cybercrime and data security while overseeing business support, predictive analysis and transaction processing.
For CFOs to manage these ever-evolving responsibilities, it’s imperative they implement the latest in streamlined, efficient and reliable digital processes to minimise risk and improve their managerial capabilities moving forward.
How technology is impacting tax directors
With the external pressures of heightened regulation, compliance requirements and evolving business models, tax directors are now faced with meeting far more complex levels of financial reporting obligations. As a result, greater capabilities in forecasting, analytics and scenario planning will be required to address the broad influence of tax shifts on the wider business.
In order to futureproof practices and bridge the gap between current capability and future industry needs, the pressure is on tax directors to redesign historic practices and processes and leverage technological capabilities.
Digital transformation and the impact on the practitioner
Tax and financial services professionals in the digital age need to be agile and adaptable, keeping their skills up to date and relevant. New skill requirements including proficiency in data analysis, technology and process design, as well as data, project and risk management, are all key weapons in the fight to remain relevant and competitive.
As a result, it’s vital that leadership, ICT and human resources actively collaborate within the organisation in order to attract, retain and nurture their pool of financial and tax professional talent.
What these shifts mean for your firm
While this dizzying pace of change can be disconcerting for tax professionals, directors and CFOs, it’s important to think about how these shifts impact your business and its future direction.
An effective digital transformation plan will ensure the key benefits of technology are leveraged across the board in your business. Over time, implementing the right plan will save compliance time, increase corporate governance, reduce risk and improve business efficiencies.
Importantly, an effective organisational digital transformation will give practitioners the opportunity to focus more on analysis and technical treatment, rather than completing the compliance process. As a result, leveraging technology will allow staff to truly focus on unlocking value within their business operations, rather than being burdened by their compliance or reporting function.
In order to create a digital transformation plan, it’s therefore essential your firm factors in ongoing compliance changes. Firms that implement an effective and cohesive plan can see measurable cost savings and reinvestment opportunities as a result of reductions in compliance hours, time-consuming manual work and risk, freeing up more time for analysis and the effective tracking of value-added opportunities.
The tax and finance industry is rapidly evolving – your firm needs to evolve with it. Consider what value smart digital transformation could bring to your business and start making the changes your business needs.
Donal Graham, Partner – EY & David Allen, Senior Sales Manager – Thomson Reuters presented on The Role of Technology in the Evolving Finance and Tax Team at The Tax Institute – VIC 3rd Annual Tax Forum on Friday 9 October 2015.