Leveraging Big Data in the Modern Tax Function
by Terri Eyden on
As the final step in the overall big data strategy, a well-executed and robust document management approach is critical to an effective tax function and can take inefficiencies out of the tax life cycle, thereby freeing up resources. Frequently, tax departments use shared file servers or paper files for a majority of their document management needs. These decentralized and outdated document management systems make it difficult to quickly and easily locate essential documentation needed to support the tax function. Quite often this leads to hours spent on rework and locating the final version of key documents.
Innovative document management systems, when managed and maintained properly, are highly effective in driving the re-use of tax documentation as well as significantly reducing risk of using outdated or incorrect materials. As an example, private equity firms typically collect and store withholding statements for each investor, often in paper format or scanned into a repository typically maintained by the investor relations department. Tax will then take a copy of those statements in order to calculate withholding for investors, but they may not check to ensure that they have the latest versions of those documents. Consequently they may not know, if, for example, the investors have moved since the last filing. By storing these types of documents in a central location, accessible by both investor relations and tax, version control is effectively resolved and the risk of incorrect withholding is drastically reduced.
A centralized, structured document management solution provides a consistent, known location for critical documentation and provides effective capabilities for classification and indexing. In turn, organizations improve risk management through one version of the truth; documents in modern document management systems provide for tracking, searching, version control and lockdown, and the ability to audit the edits of documents. And as more and more tools continue to emerge to mine the unstructured data found in these files, a well-organized document management solution will put the organization one step ahead in leveraging this information.
As previously mentioned, document repository content is among the largest sources of unstructured data within an organization and represents a previously untapped source of valuable information about investors and business trends. A solution that offers the ability to easily tag or categorize the information in documents to facilitate ease of retrieval and identification of relevant data can offer significant improvements in efficiency and eliminate countless hours spent searching through disorganized data stores.
Tax departments may choose to enable web access to their document management system in order to facilitate real-time collaboration with internal stakeholders as well as outside service providers. As an additional benefit, the organization can more easily impose processes and standards around document archival and retention, security, and backups in a well-maintained document repository. The established document management system offers an efficient method for sharing and collaborating within the overall organization as well as minimizing risk within the tax function and eliminating administrative burdens around outdated shared drive file storage.
The Way Forward
Implementing a full-scale global tax platform is often too complex or costly for many organizations, particularly in today's economy. But that does not preclude opportunities to enhance the data literacy of the tax department. Most of the solutions discussed above can be effectively utilized independently and still add significant value to the organization. Regardless of the scale of data transformation within an organization, the key steps to an effective data management strategy are the same.
Determine the business goal
It is crucial that the emphasis be placed on accomplishing a specific business goal. The value of big data lies in what new or better knowledge can be gained through its analysis. Identify a specific goal within the tax function that is served through better or additional data as the focus of the new strategy and use this as an opportunity to establish a framework.
Wait, there's more!
There's always more at AccountingWEB. We're an active community of financial professionals and journalists who strive to bring you valuable content every day. If you'd like, let us know your interests and we'll send you a few articles every week either in taxation, practice excellence, or just our most popular stories from that week. It's free to sign up and to be a part of our community.
Premium content is currently locked
2 weeks 2 days ago by mucar1990