How Leading Tax Groups Influence ERP Implementations

While I’m sure you’re heard this before, it bears repeating: Tax groups should get involved with ERP implementations and cloud migrations at the onset of those initiatives.

Doing so gives tax groups “a voice in key conversations, to ensure the right setup and tax technology are selected with tax compliance in mind,” as my colleague Paul Guyer, the Vice President for Vertex Europe, notes here.

The process of securing a chair at the ERP implementation table begins well before the project officially launches. Tax leaders and their teams can help finance and IT colleagues recognize the importance of addressing tax compliance during larger transformation and cloud migration efforts during other collaborations and routine interactions.

Another one of my colleagues, Vertex Vice President and Chief Tax Officer Michael Bernard, describes how tax leaders and managers can advocate for tax’s business transformation involvement by:

• Discussing how tax affects other business processes and strategic priorities: Advanced tax automation supports accurate and timely reporting, reduces compliance risks and gives indirect tax groups the time and data-driven insights needed to optimize tax credits, incentives and deductions. In turn, these benefits help increase cash reserves, which CFOs and finance groups appreciate. Accurate tax compliance also prevents tax calculation errors. When those errors are made on purchases from high-value customers, they can quickly turn into major customer experience issues.
• Emphasizing that other business groups affect tax compliance: As Mike points out, the tax function consists of the complete collection of organizational processes that affect tax compliance. These processes and activities extend beyond the direct control of the tax department -- to procurement, accounts payable, accounts receivable and IT. When these parts of the business are affected by ERP upgrades and migrations, tax compliance is, too.
• Continually nurturing relationships with other business leaders and groups: By engaging in strategic planning sessions, risk and governance committees, and scenario planning exercises, tax leaders can educate colleagues on tax compliance risks. These discussions also help lay the groundwork for future tax automation investments.
• Framing tax compliance risks in traditional risk management terms: It’s the CFO’s job to ensure that the company assumes a prudent level of risk. It’s the indirect tax leader’s job to manage tax liabilities and risks. Identifying the potential impact and the likelihood of any given tax compliance threat helps frame the risk in a familiar way to the CFO. It also helps link tax compliance threats and opportunities to measures and performance areas – cashflow management, investment opportunities, geographic expansion for example -- that resonate with the CFO.

“Framing risks along those dimensions helps tax leaders align and collaborate with their finance chiefs,” Mike adds.

For more of Mike’s insights on optimizing the tax technology stack, see his recent Tax Executive article here.