This is the third installment of our Tax Technology Corner. As a corporate tax professional, you know how important technology is and how it’s evolving at warp speed. With new regulatory and compliance initiatives in the federal, state, and international areas, landmark tax reform legislation, and globalization of tax monitoring and enforcement, keeping up with tax technology is not a luxury—it’s a necessity. Each installment of this column will pair a taxpayer with a service provider. Together, in Q&A format, they’ll tell a story about how they have worked together to solve a specific tax problem, implement a better solution, cut costs, or improve productivity. In this installment, Rob Clary, state tax manager and a member of the office of tax counsel at Ford Motor Company, and Kathleen Harrott, CSC Corptax’s product marketing manager, discuss how they dealt with a substantial filing methodology issue. Michael Levin-Epstein, senior editor of Tax Executive, moderated the discussion.
Michael Levin-Epstein: In general, what have been the ways in which you think tax technology has changed since you first came to Ford two decades ago?
Rob Clary: I think night and day, probably, is a good way to explain it. When I started at Ford, our processes were very manual. They were labor intensive. Accuracy and the experience level of the staff was a significant challenge. We were constantly struggling with the uncertainty of our processes and managing the risks that uncertainty presented. Today, we’ve come light-years from where we were. Our processes are all automated. We generate absolutely no paper. There is substantial use of data analytics. We have done a much better job of obtaining accurate and verifiable data sources. We are in the process of implementing both a data hub (TDH) and robotics—digital workers. We are constantly looking for the next and best use of automation.
Levin-Epstein: And how has tax technology changed at Corptax?
Kathleen Harrott: Our goal at CSC Corptax is—and always has been—to take the work out of workflow. Advancements in technology over the last twenty years provide our customers with direct connections to their data and the ability to mine data at any level needed—using just one tax system. Seamless access to data sources allows our clients to easily populate their choice of data analytic packages. Corptax automates how they get, manage, and use data, eliminating the need to open and close multiple systems, manage huge Excel files, and spend a lot of time on manual and repetitive work. Technology has given tax professionals time back to spend on high-value activities, which not only improves performance, [but also] improves job satisfaction, too.
Levin-Epstein: My understanding, Rob, is that you had a tax issue that you thought Corptax could help you with. What was that issue?
Clary: We changed our filing methodology in a key jurisdiction, which is material to Ford. The change in that filing methodology was substantial. Most big taxpayers have utilized the filing methodology that we were switching to for a long time. Making that election was substantially complex, and it required review and implementation of data from tax return for over 300 controlled foreign corporations. Collecting all the information, analyzing it, and then importing the analyzed data into the Corptax application would have been very time consuming if done manually. By utilizing functionalities that exist within the Corptax application, we were able to ensure that all of the data we needed to analyze was populated in the database. Data can be added via direct inputs, but calculated amounts are not necessarily populated. We were able to populate all required data, mine it from the system, and directly import it into a worksheet that we had built. The worksheet did the analysis. When complete and by using Corptax metadata, we imported all the data for the more than 300 subsidiaries directly into the Corptax application. The number of hours that were saved is, I would conservatively say, between 200 and 300 hours.
“Technology has given tax professionals time back to spend on high-value activities, which not only improves performance, [but also] improves job satisfaction, too.”
The Tax Issue
Levin-Epstein: And Kathleen, how would you describe the issue?
Harrott: Ford wanted to analyze current and proposed filing methods using updated analytical schedules to calculate each method. In order to do the analysis, Ford required access to a greater level of detail than previously shown on or needed for the tax return. Also, they needed the ability to automate the push of new reporting data back into Corptax to save time and avoid manual errors. Because Corptax stores data at any level of detail needed, Ford was able to easily extract the right data to analyze. Using unlimited data sets, Ford kept their current filing approach secure as they created other sets of data for the alternate scenarios. Using Corptax Office (an Excel add-in), they created a direct connection to Corptax with their customized analytic schedules, and they set parameters to populate only those worksheets needed to analyze the impact of the new filing method. Corptax Office also allowed Ford to automate the push of data into Corptax once the new filing method was determined. By providing Ford with a way to automate data to and from Corptax, [the system allowed] Ford [to] streamline the process of changing filing methods for their jurisdictions, and they maintained security for processing returns.
Levin-Epstein: So this was kind of a customized approach that Corptax took to solve the problem?
Clary: I would say it’s a combination of customization and solid functionality that is contained within the application itself. Corptax is a very robust product. It lends itself very well to mining information. The customization was related to federal calculations, where certain functionality was available but had never been utilized. We turned it on and made sure that functionality was operating. Then, using the functionality within the system, [we] extracted the data. The customization also is with respect to using Corptax Excel add-in products to extract the data from the database and then import it directly into a large Excel spreadsheet.
Harrott: Corptax architecture is built to store everything that matters and make it easy to access data quickly and to move data into or out of the system just as easily. Ford needed to mine quite a bit of data to do modeling and planning to fully analyze the new tax position. The direct connection Ford used to pass data between Corptax and Excel workbooks for the analysis was highly intuitive to set up and use. They were able to configure settings to collect and store the needed data without any consultation or implementation services; it was all handled within their existing product and support license.
Levin-Epstein: Could you describe a little bit more about how the process worked with Corptax?
Clary: There was clearly a focused team within my group. We identified that we had to find an automated solution for this new filing methodology and the compliance requirements that went with it. I had a dedicated team of three people. Those people have very expansive knowledge of Corptax. Once we identified the functionalities that we wanted to use, we communicated with Corptax via phone and email to solicit their support and confirm that our understanding of the functionality was correct. We got some insight into best practices with respect to how to utilize that functionality. Corptax was able to guide us through “traps for the wary,” which avoided rework.
Harrott: Most of the work was done by Ford with assistance from our subject-matter experts. Rob and his team discussed the project roadmap via phone calls and email with our team members. Like all of our clients, Ford has dedicated support and account representatives who are CPAs with extensive tax industry knowledge and deep expertise in Corptax. Ford also takes advantage of our 24/7 online knowledge base and online and onsite educational opportunities. They attend the CONNECT conference every year as well, and they host our CONNECT user group Detroit meetings. At Corptax, we provide considerable resources to our clients to provide more ways to get education and support. We encourage our customers to continue evolving their processes and to utilize the vast resources we make available to help them solve challenges and achieve better performances. In fact, I’m proud to say we’ve won the TSIA support staff excellence award for ten years in a row.
“There are a lot of technology tools that exist in the marketplace, but if you don’t have a clear road map on what your process is currently, it’s going to be very difficult to find the right tool that will fit your needs.”
Acquiring Tax Technology Expertise
Levin-Epstein: How do you make sure someone has the required knowledge of tax technology to do the best job possible?
Clary: That’s a challenge. First of all, the new professionals coming from the university level, and particularly the millennial generation folks, are easily adaptable to technology. It’s become part of their DNA from the time they were probably old enough to read. Some of the older folks, like me, might take a little bit longer to get adapted. From a recruiting perspective, it is a skill that tax managers would find very appealing. Big Four firms are clearly focused on technology as a core competency early in their careers. Folks coming from college that do not have a solid technology understanding are going to enter a challenging environment. A lot of the functionality in the applications that a professional is going to encounter in a corporate tax department will be new. Tax technical education is not focused on technology. I believe that is changing. What I mean is, education is focused on the “tax-technical,” but not on the “technology-technical.” I think the two have to become much closer together. We do a lot of internal training with our new hires. To be honest, not having a direct experience level is not necessarily going to exclude someone from being a strong candidate. What is more interesting is what did [they] experience in college, and how easily are they able to adapt to the technologies? Because, let’s face it, it is revolutionizing everything that we see in the tax world, all for the good, in my opinion.
Levin-Epstein: And Kathleen, how does a vendor acquire knowledge about the tax issues facing a client?
Harrott: Our client-facing groups—customer support, professional services, Corptax University, and our dedicated product teams—communicate with clients from different industries to understand new and common issues that tax departments face. We regularly connect our users with both Corptax subject-matter experts and fellow tax professionals for general and peer-to-peer learning. As an organization, we work closely with all the firms, including the Big Four, to understand the hurdles tax teams encounter outside of Corptax.
Levin-Epstein: Do you have any advice in terms of lessons learned from the perspective of the taxpayer dealing with a vendor?
Clary: I think the most critical issue is the taxpayer and the taxpayer’s organization must be able to clearly identify what is the challenge the technology would solve. There are a lot of technology tools that exist in the marketplace, but if you do not have a clear road map on what your process is currently, it is going to be very difficult to find the right tool that will fit your needs. The taxpayer must have a road map—“How do we do what we currently do?”—whether it [is] manual or labor intensive. It is equally important to be sure that the vendor understands that road map. There are a lot of terrific tools that exist in the marketplace, and the vendors obviously are very excited about their own tools, but if that tool doesn’t fit the road map, you could get off on the wrong exit, so to speak. Once the road map has been vetted and the application has been identified, make sure the vendor understands, “Are we going to be able to utilize the application as it exists?,” meaning, Is it going to come out of the box and be usable, or, if not, how much customization [will be] required? Customization is a workstation. When you need a technology application to solve a problem, to really improve your process, what you do not want to do is spend a lot of time maintaining the application. The customization is almost as big a project as migrating to a new technology.
Levin-Epstein: Kathleen, do you have any advice to add?
Harrott: Rob is spot-on when he talks about the importance of a clear road map. For long-term gains, it’s vital to select a solution that will scale with the demands of the business and the inevitable changes in reporting regulations. When changes occur, the efficiencies of a single database for adjusting workflows, processes, and tax positions become even more important. Before the new tax law, gathering and processing data was a serious challenge. Now, with so many new interdependent requirements, the need to automate and streamline processes has grown. Tax teams must assess how they get and tax-sensitize data from data sources and how they review it, analyze it, share it with key stakeholders, and report on it. Work with your vendor to see where you can automate and how to keep data secure. Learn how your organization uses data from the tax department. Ensure you are analyzing using real-time information. The Corptax single system is today’s only system that helps tax professionals automate how they get, manage, and use data throughout the tax life cycle.