On the surface, it looked like corporate professional services functions like accounting, finance and legal fared pretty well during the Covid-19 crisis. The vast majority of these roles were already set up for some level of work-from-home operations and – unlike other areas of the economy such as travel, hospitality and retail – they were in hot demand as corporations navigated a highly complex financial situation.
Technological Chaos Descends on Corporate Accountants
(Photo illustration by Mairo Cinquetti/NurPhoto via Getty Images)
NurPhoto via Getty Images
Beneath the veneer of tech-enabled efficiency, however, many in-the-trenches professionals have been struggling. According to a new study we just conducted to assess the current state of corporate tax departments, over 50% of tax departments describe their current level of technological optimization as either “chaotic” or “reactive.” Citing a combination of constantly changing and increasingly complex tax codes, a general lack of tech support throughout their organizations and shrinking budgets, many corporate tax professionals have been keeping their departments running during the Covid-19 crisis by manually logging information into spreadsheets, sending e-mails back-and-forth to colleagues and pouring over labor intensive processes that are totally inefficient.
One respondent explained the situation in stark terms: “I was frustrated at how (little) time my team was spending on value-added work — I don’t pay them to manipulate data in Excel. I pay them to analyze data, understand what it means to us, and file returns.”
Under-Resourced Tax Departments
So, what happened? After the last several years of talk about automation, breaking down of organizational silos that limit access to information and promotion of seamless tech integration, how were so many tax departments left scrambling to get by with decades old technology and processes?
The short answer is the cloud. According to our study, corporate tax departments who described their teams as “chaotic” were significantly more likely to feel under-resourced technologically – either unable to access the technology they need to connect their teams or lacking the skills, training and support to use the technology they have properly. Overall, 30% of corporate tax pros say that implementing new technology/automation is their biggest challenge right now.
The findings echo the results of another survey conducted by SmartVault during the height of the pandemic. It found that the majority of accounting firms who felt they were responding to Covid-19 successfully (62%) were also more likely to be using cloud-based technology.
This gap between technology haves and have-nots in the accounting profession was amplified by Covid-19 because operational inefficiencies that were easy to hide in a traditional office environment suddenly became big challenges when everyone started working from home.
Take a process like audit, for example. The typical corporate tax audit process involves chasing data from clients, cross-checking that data with transaction records and bank account information and sharing the output with accounting firms and finance. For all of its repetitive monotony, the process actually requires a great deal of collaboration across disparate departments and organizations. That’s one thing in an office-based environment, where it’s easy to call your contact at the bank or nudge your colleague in finance on the way to grab coffee when you need to chase a specific data point. It becomes exponentially more difficult when everyone’s working at home from a cell phone and VPN connection.
Eye on Sustainability
By contrast, those tax departments that had already implemented cloud-based automation solutions for their audit functions before the pandemic were largely unfazed by the switch to remote work. Similarly, those who had fully integrated cloud-based tax determination and indirect tax compliance software were able to share data between teams, manage international exposures and coordinate critical processes with other departments without flooding each other’s e-mail inboxes and frantically hunting for cell phone numbers.
Alas, according to our study, just 37% of corporate tax departments fell into the camp of having this type of “proactive,” “optimized,” or “predictive” technology in place during the crisis.
As we look ahead to the post-Covid business world, the lessons learned during this period are going to weigh heavily on tax departments who were hustling to get by in the remote working environment. Many still report that their budgets have been crimped and they have been struggling to get the tech support they’ve needed to get things running smoothly. Expect the reality check of the last few months to change some of that. Seamlessly integrated cloud technologies, automation and predictive analytics are going to be a major focal point for corporate technology spending as companies take a hard look at what worked and what didn’t during the Covid-19 crisis.