The corporate tax department business case: Making the final tax technology pitch

For corporate tax departments, making the tax technology pitch for an automated solution is a relatively simple one.

1—It will save money by:

• reducing tax errors and over-payments
• making the department’s overall operations more efficient
• reducing IT maintenance costs and reliance on third-party outsourcing

2—It will protect the organisation against:

• fines and penalties for being out of compliance
• the reputational risks of being penalised or sanctioned
• errors and violations associated with out-of-date tax rates and codes

3—It will save time, allowing tax teams to:

• conduct more forward-looking forms of data analysis
• contribute more strategic and meaningful business intelligence
• ensure that reporting deadlines are never missed

4—It will make the organisation more competitive by:

• facilitating smarter and more strategic decision-making
• introducing multiple workflows and process efficiencies
• enabling easier technology transitions during mergers and acquisitions

What numbers do you need to build your business case?

Decision-makers also want to know how the promised efficiencies and benefits will be achieved, and what the timeline for profitability will look like after the initial investment.

In order to help corporate tax teams illustrate the potential cost savings and business advantages for their organisation, Thomson Reuters recently commissioned an independent research study from Forrester Consulting on the cost savings and business benefits of ONESOURCE Indirect Tax, the cloud-based tax engine from Thomson Reuters.

Forrester conducted extensive interviews with seven ONESOURCE indirect tax customers, then aggregated the results into a “composite organisation” to illustrate its findings. Every company is different, of course, but for the sake of comparison, Forrester’s “composite” corporation is a multinational corporation that sells products and services in 70 countries, generates $5 billion in revenue, and has 28,000 employees.

Forrester found that over the course of three years, this composite organization experienced benefits of $3.8 million against a cost of $1.7 million, resulting in a return on investment (ROI) of 120% and a net present value of $2.1 million. Furthermore, Forrester Consulting found that the ONESOURCE indirect tax  system, after which the gains accumulate accordingly.

Main benefits to highlight in your tax technology pitch:

1—Improved accuracy

Tax automation significantly reduces invoice error rates, as well as the amount of time required to correct errors. For example, in Forrester’s research, the composite organization had an error rate of 3% using legacy systems. After implementation of ONESOURCE Indirect Tax, the error rate fell to well below 1%, resulting in savings of $2.6 million over three years. All of ONESOURCE’s indirect tax rates are continuously updated and calculated automatically.

2—Improved efficiency

A centralised, cloud-based, global solution provides efficiencies by giving tax teams a single platform to track and manage their work. In addition, the single platform simplifies workflows, facilitates smoother inter-departmental communications, and makes numerous everyday processes less time-consuming.

For example, Forrester Consulting’s  research found that can reduce the workload of compliance teams by approximately 50% by introducing process efficiencies and by utilizing such capabilities as built-in reporting and automated certificate management. Indirect tax teams can realize a similar workload reduction through the more efficient handling of everyday tasks such as pulling reports, working with auditors, and filing taxes.

In the composite organisation from the Forrester study, efficiency gains for the compliance and tax teams resulted in savings of $493.8K and $468.1K respectively. In each case, the time savings enabled three full-time employees from each team to reallocate their time to higher-value tasks such as forward-looking data analysis, risk management, and strategic intelligence.

3—Less maintenance and hassle

On legacy systems, keeping track of tax rate and regulatory code changes in multiple countries is time-consuming work typically handled by IT teams. If manual entry is involved, errors can easily creep in, resulting in over- or under-payments, compliance violations, and potential fines or other penalties.

ONESOURCE Indirect Tax solves this problem by tracking global rate and code changes and implementing them automatically, thereby improving accuracy and eliminating the need for IT personnel to monitor and update the system. For the composite company, Forrester estimated that  4,800 hours in years 1, 2, and 3 were saved resulting in savings in IT support costs and maintenance of $297.1K.

Add it all up, and you have:

• Total benefits over three years: $3.8 million
• Total costs for implementation, licensing, maintenance, and training: $1.7 million
• Net Present Value: $2.1 million 
• ROI: 120%

When making the final pitch for a tax automation system, remember also that tax automation offers other benefits that may be more difficult to quantify, but are extremely valuable nonetheless. In Forrester Consulting’s  research, the tax teams studied cited numerous such benefits, due mainly to the accuracy and reliability of the ONESOURCE Indirect Tax system overall.

 Among those benefits were:

• Reduced time to value when introducing products/services to new markets
• Improved up time and reliability compared to legacy systems
• Smoother technology transitions during M&A activity
• Reduced costs related to legacy tax solutions (computers, licenses, etc.)
• Peace of mind knowing calculations are accurate and no longer subject to human error

For a more in-depth look at Forrester Consulting’s independent research on the costs and benefits of ONESOURCE’s tax automation platform, download the full study.