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SS&C Technologies (NASDAQ:SSNC) Benefits of Tax Process Automation
Presentation Overview
Automating a tax process increases accuracy and compliance, makes it more efficient, allows for greater collaboration, improves transparency, mitigates undue burdens on personnel, frees up time for greater data analysis, and allows for a more sustainable tax platform.
Tax process automation helps tax functions relieve cost pressures and enables the ability to do more with less. Tax process automation connects tax functions with broader business strategies and financial transformation initiatives. This provides more aligned planning, budgeting, forecasting, reporting, and analytical solutions across an entire business. It also mitigates data and process inefficiencies and helps external stakeholders by providing enhanced data integrity, timeliness, and transparency.
Benefits are available no matter where you are in the tax process automation cycle. For example, software users not yet maintaining a software-based tax data platform can reap immediate benefits by doing so; tax software users running old reporting can achieve significant efficiencies by easily transitioning to new tax reporting suites; those users who have already transitioned to efficient tax reporting can continue to add enhancements to their tax reporting tools.
Wherever you are in the tax process automation cycle, systems can help make a tax function better, faster, more reliable, and more sustainable.
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Contents
Background
Technology Trends
Why Automate a Tax Process
Drivers of Tax Automation
Barriers and Hindrances
Next Steps
Parting Thoughts on Best Practices
Work Cited
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Background
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Deloitte Survey EY Expectations Thomson Reuters Outline
PWC Framework
Background (cont.)
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Deloitte Survey
1. From 2012 to 2016 tax process satisfaction levels have declined from 45% to 16%
2. Key driver over next three years expected to be process efficiency 3. While 83% of Tax departments regularly report to their Boards on
Tax risk, only 38% have a formal or written tax policy or strategy a. Tax control framework
4. Tax professionals expected to have greater skills in technology, process optimization, vendor management and data analytics
Source: Global Tax Compliance and statutory accounting reporting: emerging trends and developments; Deloitte, May 2017
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Background (cont.)
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EY Analysis
1. 3 megatrends for 2017 include legislative reform, technology and Tax business process outsourcing
2. Tax outsourcing was at $25 billion in 2016 and expected to grow 5% annually to $33.5 billion by 2021
3. Disruptive forces facing Tax departments a. Ongoing globalization b. Cross-border transparency requirements c. Technology adoption d. Cost pressures e. Shortage of qualified talent
Source: BNA Daily Tax Report: Three Tax Mega-trends to Watch in 2017; Kate Barton, 1-17-2017
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Background (cont.)
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Thompson Reuters 7 reasons to transform Tax with technology
1. Accuracy and compliance
2. Process efficiency
3. Global collaboration
4. Transparency
5. Tax team satisfaction
6. Key insights and metrics
7. Sustainability
Source: Taxologist; 7 reasons to transform Tax with technology; 2015
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Background (cont.)
Business and tax environment • A company’s priorities and risk profile. • Special attention should be paid to strategy, i.e.,
strong tax governance to be coupled with an agreed tax strategy.
Tax risk management • Clear responsibilities for the management and
mitigation of key risks must be clear. • Documented governance process.
Monitoring and testing • Confirm the company’s tax control framework works. • Process subject to regular monitoring, testing, and
maintenance (for example, by Internal Audit or Risk Management).
Business operations • An understanding of and alignment with the full range
of a company’s business operations and transactions.
Tax assurance • Assurance as to the quality of a tax control
framework to internal (C-suite executives, corporate finance) and external (auditors, tax administrations) stakeholders.
• Performed by internal or external auditors.
Tax operations • The technical aspects of tax within a company (i.e.,
monitoring the tax ramifications of legal entity structures and business transactions and their alignment with the tax strategy).
• Focus on tax accounting and compliance, including the technological infrastructure (e.g., data and workflow management).
Source: Global Tax Transparency and Risk Management; PricewaterhouseCoopers, LLP (2015).
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PWC – A fluent tax control framework
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Technology Trends
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• Embracing Technology
• Business Pressures
• Commercial (current and anticipated) Drivers
• Tax Data Complexities
• Blurred Markets
• Evolving Workforce
• Forms of Tax Automation
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Technology Trends – Embracing Technology
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Tax is increasingly becoming a more progressive environment which integrates technology-enabled, group-wide tax processes, and feeds tax-sensitized data back into the business
Asia Pacific
Not Embraced
Exploring
Extremelyfocused
EMEA
Not Embraced
Exploring
Extremelyfocused
43%
Americas
Not Embraced
Exploring
ExtremelyFocused
59%
Technology Trends
65%
Source: Survey of global attendees of Deloitte Dbriefs “Tax Analytics: A New Era for Tax Planning and Compliance”
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Searching for quality and control with a desire to be able to add value
but too busy to do so
Technology Trends – Business Pressures
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Tax Services
Environmental Pressure From All Sides
Companies Following a Clear Path
Increasing tax governance and risk management
Taking early steps with technology but nervous about big change
Changing their tax operating models: centralizing; integrating;
and consolidating resources
Increased regulation
Increasing expectations of technology
Internal pressure to do more with less
Globalization of business
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Technology Trends – Commercial Drivers
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Tax Services
Source: Global Tax Compliance and statutory accounting reporting: emerging trends and developments; May 2017
Current Drivers:
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Technology Trends – Commercial Drivers (cont.)
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Tax Services
Source: Global Tax Compliance and statutory accounting reporting: emerging trends and developments; May 2017
Satisfaction Levels:
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Technology Trends – Commercial Drivers (cont.)
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Tax Services
Source: Global Tax Compliance and statutory accounting reporting: emerging trends and developments; May 2017
Anticipated Drivers:
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2. Technology Trends – Tax Data Complexities
of companies regularly or constantly have data collection issues
of companies regularly or constantly have accounting data reconciliation issues
of companies regularly or constantly have information systems technology issues
of companies regularly or constantly have quality of data issues
of companies regularly or constantly have resource constraint issues
of companies regularly or constantly have legal entity data issues
52%
41%
32%
32%
24%
22%
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Source: Finance Benchmark Report – “Breaking Away: How leading finance functions are redefining excellence” PWC 2015. Cited in PWC’s 2016 “Tax as a critical component in every Finance transformation”
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Technology Trends – Blurred Markets
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• The traditional tax compliance and advisory world has typically had three types of providers, each with distinct market offerings
• Increasingly varied technologies enable providers to encroach onto the other’s area of expertise
• The increase in the scope and availability of cognitive technologies could also see new market entrants
• Interesting analytics use cases are emerging as segmentation becomes less distinct
• Professional services firms are increasingly developing their own analytics tools or partnering with technology firms
• Competition between the three tax market segments increasingly replaced by increased collaboration in the form of joint ventures and strategic partnerships
Professional Service Firms
Tax Data Aggregators & Publishers
Software
Companies
Tax Services
Source: Tax data analytics: Trends in 2017; Deloitte Dbriefs; April 2017.
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Technology Trends – Evolving Workforce
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• Millennials now firmly established in the workforce
• Organizations that recognize their lifestyle and career expectations, as well as what attracts and motivates them will succeed in the war for talent
• Millennials often appreciate the opportunity to be innovative
• Desire to use analytics to analyze problems differently, and support the execution of the routine tasks and challenges
• Employers should provide an environment in which innovation can flourish
Tax Services
• Tech-savvy millennials understand how to find new ways of leveraging analytics within tax
• Employers will benefit from this innovation in finding new ways to gather and submit data to the authorities
• Organizations in the near future will establish analytics as a core competency, rather than a “bolt on” to more traditional services
• Increasingly individuals may take advantage of the freedom and earning potential of gig economy
• Employers will increasingly look to crowd-sourcing models to address resourcing needs, as well as deploying robotics to replace routine processes
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Technology Trends – Evolving Workforce (cont.)
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New capabilities will be needed
Tax Technical
Project Management
Data Management
Technology
Process Optimization
Change Management
Vendor Management
Analytics
Required
Not Required
Professional Skills Past Future
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Technology Trends – Forms of Tax Automation
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Licensing • Software instead of spreadsheets
• Automating a manual process
• Adopting the tax module of an existing licensed solution
• Adding Tax to the IT and Finance teams
Hosting • All of the above except for IT
• All of the benefits with mitigated IT risks and burdens
Outsourcing • The clear growth trend
• Neither better nor worse – just a different model
• Outsourcing some but not all of the process
• Mitigation of skilled resource needs
Tax Services
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Why Automate a Tax Process – Top 7 Reasons
Accuracy + Compliance a. Tax technology increases accuracy and compliance through comprehensive
data management
b. Allows tax departments to adhere to increasing regulation, enhance audit and closing activities, and keep tax activities in-house
Process Efficiency a. Tax technology streamlines processes and makes them more efficient by
enabling the flow of data
b. This results in far fewer hours and resources spent on tax processes.
Global Collaboration a. Tax technology enables you to meet the demands of today’s global
environment by breaking down time zone, language and data access barriers
b. Allows tax operations to run continuously.
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Source: 7 Reasons to Transform Tax with Technology; OneSource (2015); Thomson Reuters
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Transparency a. Unparalleled insight into interconnectivity of calculations between tax areas,
enabling a holistic view of tax activities
b. Decreases the administrative burden resulting from increasingly aggressive global disclosure and transparency requirements
c. Fortifies your tax audit
Tax Team Satisfaction a. More tax departments underestimate the importance of becoming a strategic
asset to their organization with tax technology
b. There is more time to focus on value-added activities that positively impact the bottom line
c. Opportunity to create a more rewarding work environment, which may lead to higher staff retention.
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Why Automate a Tax Process – Top 7 Reasons (cont.) 3
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Key Insights & Metrics a. Tax technology can transform your tax operations by giving you the ability to
analyze results effectively, determine best practices, and benchmark against companies in your peer group
Sustainability a. There is no doubt the tax landscape and your organization will continue to
evolve, so make sure to carve out regular time to look holistically at your tax department’s operational processes and technology;
i. Where you want to be 5-10 years from now, and make adjustments as necessary.
b. What you’ll discover is that technology lays a sustainable foundation for your tax department into the future
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Why Automate a Tax Process – Top 7 Reasons (cont.) 3
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Drivers of Tax Automation
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Checklist Key Stakeholders
Function Challenges
Governance and Risk Management
Tax Automation
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Factor Capability Yes No Comments
Cost Pressure: • Challenging tax functions to do more with less • Support of enterprise cost reduction initiatives
• Automated data processing • Time for greater data analytics • Personnel can be deployed to more
value added activities • Are savings in headcount or consulting
fees
Data and Process Inefficiencies: • Organize data at the source to improve
processes • Gain transparency • Minimize risk
• A single source of truth with
interconnected GAAP, STAT and Tax data processing
• Getting out of the spreadsheet business
Expansion into New Markets: • Assisting the broader business to assess return
on investment • Execute on reporting requirements
• Forecasting an ETR • Business integration
Regulatory Environment: • Managing risk, control and compliance • Improved data integrity, timeliness, transparency
• An automated process with strong
internal controls mitigates regulatory oversight
Drivers of Tax Automation – A Checklist 4
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Factor Capability Yes No Comments
Connect to Business Strategy: • Aligning tax technology strategy with the overall
business model and stakeholder needs
• Tax as a finance partner • Allows for a more collaborative
transformation initiative • Stronger dependencies
Planning and Forecasting: • Translating strategy into sustainable performance • Align planning, budgeting, reporting, analytics
• Use tax data for forecasting • Quarterly and annual results
Business Intelligence and Analytics: • Utilizing technology to provide business leaders
with timely, relevant and actionable information • Drive business performance
• The receipt of tax-ready data frees up
time for more value-added analysis and decision making
Focus on Value Added Activities: • Leverage technology to automate the tax process • Increase focus on value added activities • Provide tax related business insight
• Time saved in data gathering and
processing can be re-deployed for tax data analysis
Drivers of Tax Automation – A Checklist (cont.) 4
• Internal
‒ Data Owner (IT / Tax / Finance)
‒ Key Customers (Tax / Finance)
‒ Questions
• Who owns the data?
• Who owns the process?
• Who owns the sign off responsibilities?
• Where does the knowledge reside?
• Third Parties
‒ Governments
• Tax Authorities
• Regulators
‒ Investors
‒ Non-Governmental Organizations (NGOs)
‒ Media
‒ General Public
Drivers of Tax Automation – Key Stakeholders
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Drivers of Tax Automation – Governance and Risk Management
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US
44%
Global
59% 44% 57%
Have a formal written tax policy/strategy
Have formally assessed the appetite for tax risk in their organization
Have a formal process for managing and monitoring tax risk
Regularly report to the board on tax risk
38% 59% 83% 62%
Have a formal written tax policy/strategy
Have formally assessed the appetite for tax risk in their organization
Have a formal process for managing and monitoring tax risk
Regularly report to the board on tax risk
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Drivers of Tax Automation – Challenges
• Increased transparency and stricter reporting requirements
‒ This need will only increase as initiatives such as the Organization for Economic Co-operation and Development’s (OECD’s) base erosion and profit shifting (BEPS) project, including its country-by-country reporting (CbCR) requirement, continue to drive the need for more information.
• Tax data is housed in multiple locations
‒ Studies show only 20% of tax functions effectively leverage their accounting systems to accumulate ‘tax-sensitive’ data.
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Drivers of Tax Automation – Challenges (cont.)
• Data often must be manually reviewed, reconciled, and manipulated to be useful
• Inefficient collection and review of non-integrated data
Source: PricewaterhouseCoopers, LLP. (2015). Unlocking the Power of Data and Analytics [PDF]. PricewaterhouseCoopers, LLP.
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Drivers of Tax Automation – Challenges (cont.)
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5 Barriers and Hindrances
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• Inertia ‒ Absent a disruption, people typically see no need to change ‒ While spreadsheets and manual processes may be old, at least they work
• Size and Scale ‒ Can a smaller team achieve the same efficiencies from portals, centralized
databases and workflow tools? ‒ When is outsourcing more optimal than insourcing?
Barriers and Hindrances (cont.)
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• Complexity ‒ Most people are simply more familiar with spreadsheets than software ‒ Is the work effort required to scope, map and document tasks and
processes too difficult?
• Budget ‒ Can a smaller Tax team with less resources afford to hire the IT /
technology expertise and fund the training required?
• Quality ‒ How is quality measured? ‒ How is the cost of poor quality identified and quantified?
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Tax Services
Next Steps - Action Tax Executives Can Take
Assess the current state of your tax operating model (by asking the right questions)
Quantify value, prioritize investments, and build consensus across the organization
Align with the broader strategy of the organization, IT, and Finance functions
Don’t be afraid to put disruptive technologies at the heart of your vision
Develop a 3 to 5 year roadmap towards your future vision
Create champions of disruption across Tax that help identify and harness new technology
Parting Thoughts On Best Practices
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Tax Services
Every tax process transformation is different
Bad process can outweigh good technology
Design the process first, or at least contemporaneously
Work stream mapping provides an understanding of how the whole system fits together
What Tax lacks in volume it usually makes up for in
complexity
Its OK to concentrate on core skills, which vary by company
and industry
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Works Cited
1. Global tax compliance and statutory accounting reporting: Emerging trends and developments. Deloitte, May 2017
2. Bloomberg BNA - Daily Tax Report ; Three Tax Mega-Trends to Watch in 2017; Kate Barton, 1-17-2017
3. Taxologist. 7 Reasons to Transform Tax with Technology. OneSource. (2015); Thomson Reuters.
4. PricewaterhouseCoopers, LLP. (2015). Global Tax Transparency and Risk Management
5. Survey of Global attendees of Deloitte Dbriefs “Tax Analytics: A New Era for Tax Planning”
6. Finance Benchmark Report – “Breaking Away: How leading finance functions are redefining excellence” PWC 2015. Cited in PWC’s 2016 “Tax as a critical component in every Finance transformation”
7. Deloitte. (2017). Tax data analytics: Trends in 2017. Deloitte Dbriefs.
8. PricewaterhouseCoopers, LLP. (2015). Unlocking the Power of Data and Analytics [PDF]. PricewaterhouseCoopers, LLP.
9. PWC’s Finance Benchmark Report 2015: “Breaking Away: How leading finance functions are redefining excellence”
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John Pavlakis, VP, Global Institutional Tax
T: 860-298-4596 | M: 860-937-4663
