Choosing the right tax technology for your organization
With the complexities of new reporting standards and increased scrutiny on tax disclosures, you need a solution that meets regulatory requirements and integrates into your organization’s broader financial technology stack. Below are the key factors to consider when choosing a tax provision solution.
Internal controls
One of the most important – yet often overlooked – considerations when adopting new tax technology is its impact on internal controls. Complying with ASU 2023-09 likely requires changes in the company’s internal controls to ensure that data is readily available and that review processes consider the additional income tax disclosures. Most software solutions provide SOC 1 reports to their customers.
Internal controls should be built into your tax provisioning solution to prevent errors, detect inconsistencies, and ensure compliance. This includes establishing checkpoints for data validation, giving appropriate personnel access to the necessary information, and setting up reviews for rate reconciliations and provision adjustments. Integrating strong internal controls reduces the risk of errors and noncompliance while improving the efficiency of tax reporting.
Scalability and flexibility
Another crucial consideration is whether the chosen software is scalable and flexible enough to accommodate your organization’s evolving needs. As businesses grow or experience changes in their tax obligations – such as entering new jurisdictions or expanding their operations – the tax technology must be able to handle increased complexity without requiring a complete overhaul.
Scalability ensures that the system can support a growing number of users, transactions, and jurisdictions. A flexible system is easy to update as new requirements emerge.
Integration with other systems
Effective tax technology must integrate seamlessly with your existing financial reporting systems. The tax software should communicate with enterprise resource planning (ERP) platforms and other systems. Integration reduces the need for manual data entry, minimizes the risk of errors, and allows for real-time data sharing across departments.
For example, when preparing for ASU 2023-09 compliance, your tax provision solution can pull data directly from other systems used in the provision process, ensuring that all relevant information – such as foreign jurisdiction taxes, cash payments, and permanent items – is automatically included in the final provision.
Vendor reputation and customer support
Vendor reputation and customer support are critical when choosing any technology. Work with a provider with a track record of delivering compliant and reliable tax solutions. Evaluate the vendor’s experience in the industry, customer reviews, and the stability of the technology they offer.
Strong customer support is also essential, especially during the implementation phase. Selecting a vendor that provides ongoing assistance, clear documentation, and responsive service when issues arise makes a big difference in the success of the implementation.
Implementation ease
Another factor to consider is the ease of implementation. Your chosen technology shouldn’t disrupt your regular workflows. You need a system that can be implemented with minimal downtime so the tax department can maintain operations while transitioning to the new technology.
An intuitive user interface ensures the system is easy to use once implemented. The provision model should be straightforward, with inputs that mirror the existing tax provision processes, making it easier for tax teams to adopt the software without extensive training. While some training is always necessary, the goal is to choose a solution where the inputs resemble a provision model, making it easier for users to transition and use the system effectively with fewer hours of training.
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