As Digital Transformation and automation takes hold, accounting firms and businesses are striving to adapt to a new way of working. This is not just about the government’s tax initiative Making Tax Digital (MTD), but a wider shift, that is seeing technology being embraced to make managing tax affairs more efficient and cost-effective across all departments.
Firms are increasingly seeing the advantages of emerging technologies that employ automation, to reduce time spent on arduous and menial tasks, freeing up more time to focus on adding value for clients, and ultimately increasing profitability.
As we approach the upcoming tax season, now is as good a time as any to explore the tax trends to be mindful of, and a system that firms can use to make an accountant’s life easier while adding value to their firm’s service offering.
More than just regulation
When considering the digitisation of tax, many will think of the UK Government’s initiative ‘Making Tax Digital’, or MTD. But tax digitisation is about far more than just regulation and compliance, with true digitisation bringing in real-time data, more in-depth analysis and the automation of traditionally manual tasks.
For many, MTD is seen as a digital solution to an old way of working, and there are more innovative digital tax solutions out there that help firms and their clients, with the reporting of tax and many other services within a practice.
However, several other countries have had digital systems in place for several years, putting the UK in a position where it is playing catch-up with other nation’s tax authorities.
Mexico, for example, has required companies with income over 4m MXN (£256,000) to send all invoices digitally, enabling the tax authority to track payment receipts. Spain requires all large-sized VAT registered businesses to report invoices within four days of their issuance. In Italy, tax filings have been online-only for more than a decade. These examples could be a glimpse into the UK’s regulatory future.
HMRC has clearly seen the value of digitisation. Since the MTD announcement in 2015, technology has come a long way, and digital capabilities are far more advanced. Accountancy firms would be wise to share a similar vision and stay ahead of HMRC’s digital plans, before being forced to by further regulation.
For some accountants, automation can be a frightening prospect. With digital transformation comes new technologies such as AI – including Machine Learning, Optical Character Recognition (OCR), Robotic Process Automation (RPA) – which will automate many tasks in tax accounting. The focus of this technology is to reduce the human requirement of menial and tedious tasks.
There is a need for change. As the financial services industry drives digital transformation and experiences its ‘blockbuster moment’, accountancy firms must keep up and automation will drive this by freeing up time to focus on advisory work and driving value for clients.
While some accountants fear that this will result in some of their work becoming redundant, that is not the case. As the more tedious tasks become automated, it will free accountants up to change the value proposition to clients, and work more closely with their clients, helping them to analyse data – giving them more time to be an accountant than a data manipulator.
While the more menial tasks may reduce, the accountant will be also required to spend more time working with new regulation which comes hand-in-hand with further digital transformation, and new, less tedious work will need to be done, opening up more opportunities.
With increasing digital transformation comes more sources of data. Tax is no different. Powerful analytics tools have turned data into a source of intelligence, and as a result, firms are seeing data more as something to utilise than an organisational by-product.
For tax operations, this means that data can help improve compliance with government organisations, result in projection and insights that inform decisions and influence the direction of an organisation and even help spot mistakes that could result in tax rebates, or avoid underpayments.
Data analysis allows for CFOs and tax directors to remain informed when navigating an increasingly complex environment, and for businesses that operate internationally, good use of data is vital to ensure the company is complying with different regulations.
As people demand business services to be more in-line with what they have become accustomed to in their personal lives, accessibility is vital. New generations work with an ‘always-on’ mindset, and therefore being able to access data and information remotely, on their mobile devices or at the very least on their PCs, has become an expectation rather than a novelty.
This is no different for tax information. While analytics was once the domain of analytics experts and IT specialists, with the quantity of data and data analytics now available, this is open to everyone. This expectation of accessibility will continue to grow, and people will continue to expect to have this information at their fingertips, and access to technology that enables everyone to interpret that data intelligently.
With this level of accessibility comes an expectation of transparency. Clients are looking for the same transparency with tax that they have come to expect with other services. As accounting firms embrace digital transformation and automation, the user experience is key to customers, and part of this is transparency. Clients don’t want to see their tax information at the end of the month, or end of the year. They want to see it now, in real time.
To illustrate this, when speaking about the need for transparency among clients, Chuck Kosal, Chief Transformation Officer at Deloitte Tax LLP, said: “Transparency is really important to our clients, and it’s important to us. You could talk about Uber as an example. One of the value propositions with Uber is that you know where the car is all the time. When you order a car, you know how far away it is and how long is it going to take to get to you.”
Speaking on what Deloitte clients have come to expect, Kosal said: “Some of those experiences aren’t available in public accounting, not just tax. Our clients have been very open in their desire to say, ‘we’d like to see more transparency,’ and we agree.”
Transparency is also key for regulatory bodies, and ultimately there will be an expectation that real-time tax information is available to them. Implementing systems that increase transparency will ensure a practice is ahead of the game.
A value-adding solution
The creation of an advanced solution for clients that meets their expectations is a daunting task and a project only the largest firms have the resources to undertake. This is a luxury that many practices cannot afford, but there are some emerging tools available to firms looking to offer their clients a comprehensive tax service.
One such system is Practice Gateway, a single portal solution developed by technology consultancy T-Tech, who serve accountancy practices. Built around the idea that, in the future, basic tasks will be done by a virtual resource, T-Tech’s solution is built to be the resource that completes the mundane tasks, so that the accountant can do the high-level activity.
The solution automates data collation and input, thus allowing accountants to be more productive, focusing on meaningful tasks. It is a one-stop-shop solution that is application agnostic, simplifying the processes we all find menial, so accountants can do more to serve their clients.
One example of this, is the submission of personal tax returns. Rather than the accountant manually collecting data in many different formats, plugging the data into the system, Practice Gateway allows clients to input this data themselves. This information is then read by ‘robots’, which enter this data straight into a tax return preparation software, without error. This frees the accountant’s time up more to focus on other, more valuable tasks, benefiting both the client and practice.
This does not only apply for the tax department, however. Practice Gateway is not just a tax solution, but one that can be used across all departments within an accountancy firm and can work with anything. The real value in Practice Gateway is the potential into the future, and that it can be implemented at any pace.
Daniel Teacher, Managing Director at T-Tech commented: “After decades of relative stability and standardisation in working practices, the world of accounting is encountering a period of transformation. Clients want access to information and advisory services on demand. New regulations centred around ‘Making Tax Digital’ mean processes are mandated to be digitised.
“To remain relevant, practices need to enhance their services to be more advisory based, whilst managing an increasing reliance on technology to remain compliant and satisfy client expectations. To address this, T-Tech have built Practice Gateway – a single location for every form of interaction between an accountant and their customer.”
T-Tech is excited by the current capabilities of its Portal product – Practice Gateway – and the potential for it to revolutionize the profession.
If you’re interested to see a demo on how this works, arrange a time with one of T-Tech’s consultant’s here.