For the second year since Covid-19 disrupted every aspect of life, the Treasury Department and Internal Revenue Service have extended the tax submission deadlines—as have other tax authorities across the world. This leads to an interesting chain of thought: Should businesses look at the delay in the filing deadline merely as extra time given to close accounting books and file taxes, or re-look the way they operate their tax and financial accounting processes?
Definitely the latter.
Today, CFOs and their teams must be true business partners—generating accurate, real-time insights to make their organization future-ready. This means rethinking their ways of working to become a more analytical, data-driven, and digitally-enabled strategic arm of the organization.
The ongoing uncertainty has forced many (if not most) organizations to adopt change at a much faster pace. New investments, especially in digital technology provide much more than just work-from-home enablement and efficiencies. The Global CFO Survey 2020 highlights how most CFOs are looking at future-ready accounting functions to have more real-time and predictive analytics with significant efficiencies in bookkeeping to enable higher proportion of effort in analyzing.
So accounting functions are going through real and permanent change now. Are you ready for the future of the accounting function?
From ‘Race-to-Report’ to ‘Record-to-Analyze’
Tax operations, in its quintessential record-to-report role, has become more about efficiency in closing books on time or earlier. In other words, it’s a “Race to Report”. The underlying premise is that the faster and earlier books are closed, the more time organizations have for analyzing their performance on revenues, profitability, and taxability.
But corporate accountants typically end up spending less than 20% of their time on analysis and more than 80% on organizing data. Even the niche-skilled and highly-paid business partners (FP&A), tax and treasury accountants spend at least two-thirds of their time and effort on tactical activities like reconciliations. If the tax function wants to increase its meaningful contribution in terms of value, insight, and efficiency, the time and resources spent on analysis must be more than 50% (Figure 1)
Agility Through Data and Digital—The Ultimate Endgame
According to the majority of the 300 senior finance executives surveyed in the Everest Group Global CFO Survey 2020, supported by WNS, agility is the name of the game (Figure 2). Agility is also about improving the speed of analyzing the data in the finance department’s operating funnel to enable real-time forecasts and trend analysis. This is a defining feature of the future-ready organization, and it must be a closely tracked objective of all digital efforts beyond just efficiency.
F&A teams must look at data as a driving fuel, and not as a dragging exhaust. Powerful analytical tools can transform huge data volumes into differentiating sources of intelligence that will influence the direction of the organization. By combining human expertise and judgment with big data, artificial intelligence (AI), machine learning (ML), blockchain, and cognitive computing, organizations can leverage data accurately, securely, and in a structured way for purposeful analysis. Cloud-based software systems deliver flexibility for anytime, anywhere data—especially in a future of virtual work. Together, they enable the analysis to step beyond historical data to the predictive realm, and beyond static to dynamic data inputs.
Finance functions must unshackle themselves from the burden of legacy systems, disparate data sources, manual-intensive tasks, and ad-hoc reporting to become a digitized tax function that offers advantages of continuous accounting, a single-source of truth, and enhanced real-time reporting.
Automation must be leveraged not just for vanilla efficiencies of cost reduction, but for better analytics. robotic process automation (RPA) meets the CFO’s vision of high return on investments, low risks, and reduced timelines of implementation, empowering accounting teams to respond with speed to business needs, even as they occur. Cognitive computing’s self-learning systems can go a step further, to use data mining, pattern recognition, and natural language processing to mimic the way the human brain works.
For example, RPA and intelligent workflows can optimize tax accounting and cut down liability in keeping with regulations, ML can help classify tax-sensitive documents and notices, AI can mine data to identify potential tax fraud or errors, and a unified view of tax data can boost the time spent on analysis and review.
Toward a Futuristic Accounting Function
CFOs must craft new strategies with business intelligence that empower their organizations to be agile, transparent, and adaptable. They must look at newer models that leverage non-traditional methods such as financial forensics, econometric modeling, intuitive visualization, and edge analytics to get an integrated view across lines of business and functions for sharper and un-siloed decision making.
For instance, with advanced econometric models, finance executives can calibrate cause and effect to optimize resource use. Similarly, finance leaders can leverage distribution analytics for forensics to detect potential fraud, data irregularities, and process design flaws to limit abuse.
The roles of accountants and advisors must evolve to focus more on the areas of value-adding strategic accounting—say, focusing on real-time reports rather than period-end close analysis. Organizations will also have to redefine the skills and structure of the F&A organization to develop talent to match evolving needs.
To meet stakeholder expectations, finance will need to step up with the acuity of a business partner and the acumen of a smart specialist. Such an intelligent function will then be more agile in driving exponential value for the enterprise.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Krishnan Raghunathan heads the Finance & Accounting Practice for WNS, a leading provider of global Business Process Management (BPM) services.
Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute, please contact us at TaxInsights@bloombergindustry.com.