Reflecting on the mounting challenges tax departments face, Michael Holt recalls a large organization he worked with recently that wanted to install a tax provision software package. One of the main goals of the project was to take some of the pressure off the company's tax professionals during the year-end close. How heavy was their workload? Eighteen-hour days. Plus weekends. "For about two to three weeks, those people did not go home," says Holt, global director of Jefferson Wells's tax accounting automation center of expertise.
For tax departments stretched thin by routine processes -- not to mention a slew of rising challenges such as globalization, the demands of enterprise risk management, and the tougher regulatory environment -- technology is a traditional ally. But companies have a long way to go to realize the full benefits of automation, according to a recent tax reporting study completed by Business Finance and Longview Solutions. The study involving a survey of some 240 tax and finance pros at a wide range of companies revealed spreadsheets still dominate tax reporting. On average, they're used for 54 percent of this process. (See Figure 1.)
Surprisingly, about one-quarter of $1 billion-plus companies, and 24 percent overall, use nothing else. Third-party tax software is used for one-third of the reporting process, on average, and custom software for 8 percent.
The control issues posed by spreadsheets are well known, as is the difficulty of ensuring the accuracy of the data they contain and the integrity of the files themselves. "Spreadsheets produce more spreadsheets," notes David Davidson, senior executive with Accenture and leader of the firm's tax excellence practice. They can easily proliferate to the point where companies are "challenged in trying to find a single version of the truth."
Spreadsheet sprawl may also be partly to blame for the hectic schedules and crushing workloads that too often accompany the drive to integrate the tax reporting process with the accounting close. Twenty-two percent of survey respondents describe these processes as "very integrated." (See Figure 2.)
Source: Business Finance, Oct 6, 2008; http://businessfinancemag.com/article/time-tax-tech-tune-1006
