The need to manage ever-changing corporate tax policies has created uncertainties for many tax department leaders, who fear they may not be able to fully anticipate all of the possible audit risk and exposure that their companies may face.

Tax jurisdictions around the globe are continually revising and upgrading the ways in which tax data can be collected and requiring tax departments to provide even greater transparency into their business’s operations. In the United States, for example, the Internal Revenue Service will receive $80 billion over the next 10 years, as a part of the Inflation Reduction Act of 2022, with more than half of that money being dedicated to tax enforcement, such as examinations, collections, criminal investigations, legal & litigation support, and digital asset monitoring.

Worldwide, the Organisation for Economic Co-operation and Development (OECD) rules around BEPS 2.0 (Base Erosion and Profit-shifting) included the move to a global minimum tax has created even more concerns, requiring tax departments to button-up how they function.

As tax department leaders seek to better manage how they’ll approach department operations, especially around compliance work, it may be necessary to make a review and assessment of what the tax team currently has at its disposal. Key questions in this assessment should include: How does the department gather data? How many people it takes to get specific tasks done, specifically compliance work? What are the current technologies the department uses, as well as others it can access from other parts of the business? And what are the other ways the tax department serves the overall company? As an advisor, or by providing data analytics to guide business decisions?

Changing the tradition of working in-house

Historically, corporate tax departments have primarily kept all or most of their work in-house, using an operational model that had as much work done within the department as possible. According to a 2019 Deloitte survey, more than 80% of respondents were “operating some type of centralized global tax delivery model” meaning most of their work was being done “in-house”.

As times changed and the volume and complexities of tax regulations grew apace, resource-challenged tax departments were moved to look for ways to improve the efficiency of the way they worked. The same Deloitte report noted that about 30% of respondents said they moved some work to a third-party vendor. Today the percentage of tax work that is being done by a third party is significantly higher, especially for tax compliance work. And while many departments benefited by having some or all of their compliance work done outside of the organization, there were concerns about the quality of the work being done and the potential risk to the business of having work done off-premises.

Risks and concerns related to outsourcing varies, of course, depending on where the work is being done. If its on-shore outsourcing (work that is being done outside of the organization by a third party in the same country) or off-shoring outsourcing (work being done out of country by a third party), many of the same risks and concerns are often cited by tax departments. These concerns include:

• • • • the quality of work;
      • the knowledge and skills levels of the outsourced workers;
      • loss of control over the quality of work or the processes used; and
      • change-over or loss of experience at the third-party firm. (For example, if a need arises to review past work for a current tax prep or audit, the tax department may not be able to access the people that originally did the tax prep.)

Despite the risks and concerns with outsourcing, a multitude of benefits outweighs them, including that outsourcing allows for:

• • • • tax department employees from tedious compliance tasks;
      • departments with limited staff can get compliance work done; and
      • department can do more strategic tax work including tax planning.

This is further underscored by a recent KPMG survey of more than 300 chief tax officers at large public and private U.S. companies that showed that more than 80% plan to use outsourcing or other managed services models in the coming three years. The survey also included the use of co-sourcing, which — although not a new concept — many departments are finding in most cases a better fit for how they work.

In a co-sourcing arrangement, tax departments can choose to have a third-party work together with the in-house team on specific projects. This allows the department to be involved every step of the way as the work is being done, alleviating concerns about potential errors, and creating more transparency into the third party’s work. A secondary benefit is that co-sourcing allows the internal tax team to work on different kinds of projects, which can help reduce burnout that comes from doing repetitive work.

Corporate tax department operational models must continue to evolve to accommodate continuously expanding global tax regulations. Many tax departments have long worked in a reactive way, with some leaders admitting that it’s a challenge to get all the work done from one tax season to the next. Clearly, this way of working isn’t sustainable, and it is one of the leading reasons for tax professionals burning out and quitting — in some cases, not just their current job but the entire accounting profession as well. In addition, many tax department leaders are being asked to provide more analytics and insights to their parent business, placing them in a business advisory role, according to the Thomson Reuters Institute’s 2022 State of the Corporate Tax Department survey.

In order to do address all these challenges, corporate tax departments will need to have the resources and bandwidth to ensure that their team members are free to step up into these new roles. That means, having an operational model within the department that allows this to happen is paramount.

The Wayfair ruling opened the door for states to later receive record amounts of sales tax during and after the pandemic as people shopped mostly online. Wayfair created an economic nexus in virtually every state and local tax (SALT) jurisdiction.

Given the current state of the internet of things (IoT) — the connectivity of almost every aspect of our lives — means that there is almost no industry that isn’t impacted by IoT. And this has created income opportunities for SALT jurisdictions, which, after Wayfair, were able to determine what items are taxable, going beyond a physical product like a hammer or a pair of pants and extending it software and code, as well as to services including communication and technology.

In some cases, the taxability of these transactions isn’t as straight forward as one would assume, consider free trials, what is the value of the goods or services there that have been exchanged? Because in many ways tax regulations have not caught up to modern-day goods and services, allowing SALT jurisdictions to get creative in how they apply the antiquated tax laws to businesses inside or outside their state.

The challenge to calculating taxes on items like digital automated services, computer service, information or communications services, is when they are treated like traditional goods. The Multistate Tax Commission is continuously working to determine what is considered a digital good, as well as how such digital goods are to be categorized. Add to this, the digital advertising tax, which currently holds that the digital advertising gross revenues tax of between 2.5% and 10% is imposed on entities that have global annual gross revenues of at least $100 million and deriving gross revenues from digital advertising in Maryland of at least $1 million. Although this tax requirement has only been rolled out and contested in Maryland, more than 10 other states are considering similar legislation, such as Massachusetts, which has various used approaches to taxing digital advertising including a gross receipts tax and an excise tax. The state is making a further a study of how best to tax such activity.

The challenge of time & resources

Not surprisingly, time and resources are the biggest challenges for many tax preparers. For corporate tax departments navigating the changes in tax regulations — especially around understanding how the classification of digital items are taxed — it’s more important than ever to ensure their data management is compliant. Tax departments need a strategy to organize data because failure to do so could provide risks, including subjecting the business to potential audits. The strategy requires consideration of technology that the company currently may have or may acquire and looking at the following three factors: data, workflow, and end-to-end automation. Assessing a tax department’s current technology stack and having an understanding of what technologies and corresponding processes are in place is necessary in order to get into compliance from the start. Firms should consider the following three factors in this technology and process assessment:

1. Data management — Knowing what technology is used in accordance with which process in step-by-step way is critical. Making sure such processes are streamlined, and that whichever software or application used can connect to multiple sources in order to gather and format the data to where it is then most easily usable.

2. Workflow — Having the right technology will also be determined by the people and their talent level. Indeed, having the best technology will only be as good as the people that are using it. Right-skilling your teams is foundational and allows for the team to create project pipelines that can be measured against key performance indicators (KPIs) which can in turn help provide a clear picture of the tax department’s value to the overall business. This overall picture can be leveraged to influence the company’s future spending on tax technology and other department needs.

3. End-to-end automation — Most tax departments have stated that there still is a relatively large amount of manual work that takes place. Manual works causes some of the highest inefficiencies within the department, including using more time and having a larger potential for mistakes being made. The most ideal situation is to have technology that provides end-to-end automation, limiting the amount of manual work needed. Using technology such robotic processing automation (RPA) to execute structured, repeatable, and logic-based tasks that mimic the actions taken by existing human staff, will free up staff to perform more analytical and strategic work that provides additional value to the team and business.

The general consensus is that the tax landscape will not become less complex and that SALT governments will continue to look for creative ways to generate more revenue. In fact, the state-level enactment changes to Section 174 that took effect last year further adds to the work and complexity that a corporate tax department will need to navigate.

In fact, tax department leaders would be smart to form a strategic plan — along with the necessary technology — that will allow them to gather and manage their company data while finding a way to analyze the data faster and more accurately.

Therefore, it’s no surprise that in this recent released survey of tax officers from KPMG these concerns have not abated. Indeed, close to 50% of chief tax officers report that they continue to struggle to find talent and more than 60% believe the changes to U.S. and international regulations (for example, around BEPS and Pillar 2) will significantly impact taxes.

Thinking about data

Before there can be any discussion about technology and how to use to it to solve for the challenges mentioned, it is necessary to first understand the data situation. The corporate tax department is one of the few departments within the company that gathers massive amounts of data from across the organization. How tax departments go about acquiring this information is a challenge, but most would say the bulk of their time is spent gathering data.

Succinctly put, tax data problem can be “defined as the inability to identify, collect, and leverage data to efficiently and effectively support compliance planning and opportunity management within the tax function,” according to a recent KPMG webinar.

The typical tax department is challenged in numerous ways, such as how it:

• • • keeps up with regulatory changes and provide information faster to regulatory bodies;
    • gathers data;
    • determines the quality of the data; and
    • assesses the limitations of current technologies.

To solve for these challenges, corporate tax departments can look to build an ecosystem to manage their data. Doing so creates a repeatable, clear way of processing the data needed for their various uses. A data ecosystem is a platform that combines data from numerous sources and builds value through the use of processed data. The use of the term data ecosystem is often used and understood in technical terms, and it most often sits with the IT department; however, tax departments can create a less technical but highly efficient ecosystem. (Of course, this is not to say tax departments don’t need to work with the IT department. They do.)

What are the necessary pieces for an ecosystem?

In the general terms there are four central components to a data ecosystem: data sources, data extraction, data storage, and data analytics. These terms can be specified for use in a corporate tax department in the following ways.

Data sources — Tax departments can catalogue the list of information that is needed for compliance work, strategic business decisions, and advising the company. Next, they will determine where each of the information resides and whether the data is structured or unstructured. Structured data is data that is in a standardized format, has a well-defined structure, complies to a data model, follows a persistent order, and is easily accessed by humans. While unstructured data is datasets (typical large collections of files) that aren’t stored in a structured database format, and most likely needs to be human-generated.

Data extraction — After determining where the various data resides and the format in which the data exists, there will need to be plan for how and when to access this information. Based on the timeliness of the information needed, priorities should be set accordingly. Included in this step should be considerations on how the data will be managed. For example, if the data is unstructured and therefore needs to be downloaded, departments would need to determine the best format needed for where it is to be uploaded and how it is to be used. If the data is structured, (i.e., if it is in an ERP or CRM) then, the department needs to identify how best to move the data into a format that can be analyzed by the tax team.

Data storage — The decision of how and where to store the collected data is the next step in establishing a data ecosystem. Ideally, this is an opportunity to create and use a system that is duplicable, especially when information is gathered from certain departments with frequency.

Data analysis — The tax team is now ready to have the data analyzed so they can do their job. However, this maybe a place where upskilling is required. The ability to quickly access information, make sense of it, and then provide an output can be key to working better and smarter, but it may require specialized training or hiring.

By creating an ecosystem for data, tax department leaders can now sit with their IT colleagues for a robust discussion on which technologies are needed to enhance how the corporate tax department works. The data ecosystems provides the IT team with a clear map, including what the pain points are for the tax group, and what technology or personnel investment is needed to allow the tax department to function at its best level.

Of course, recruiting new talent can often be easier said than done. Just under half (44%) of all firm respondents said they believe recruitment of new employees with necessary skills and experience would be “highly challenging” in the next year, while an additional 23% said it would be somewhat challenging. Compare that with training and development (21% highly challenging) and employee retention (17% highly challenging), and it’s clear where firms’ worries lie.

You can download a full copy of the 2023 State of the Tax Professionals Report here.

Tax firms have workarounds to the recruitment issue, to be sure. Technology is perhaps chief among them. Respondents from 41% of all firms and 56% of large firms said they would be increasing technology automation to address recruitment challenges, more than any other strategy mentioned. However, while automating tasks can certainly drive efficiency (another top priority in this year’s survey), automation isn’t a panacea for every task the modern tax & accounting firm needs to tackle.

And technology doesn’t just have to be a replacement for recruiting efforts. If done right, technology should augment tax & accounting firm recruiting efforts rather than replace them.

Tying in technology

For example, John Seale, Managing Partner at the Indiana-based midsized accounting firm RBSK Partners, said recently that his firm has gone all-in on purchasing technology, integrating everything from billing to calendaring to internal workflows into a large, interconnected software system. He’s aware that all of this technology isn’t the norm.

“I get a lot of feedback about, you know, my God, do we ever quit buying software?” Seale joked. “And I said, well, as long as it makes sense, makes us more efficient, and provides a better product, then no, we’re just going to keep buying.”

However, there was one area where that tech investment paid dividends that he perhaps didn’t expect. Seale said he wouldn’t lead with technology during hiring interviews, but he would make sure to mention that learning all of these software systems would be part of the job. Rather than balk at the work, however, he found that many of the candidates he most wanted were willing to embrace the career development opportunities that tech could bring.

“I describe to them the process, that it’s going to take them a while to just learn the processes and the software,” Seale explained. “But I say there’s a reason for that: You’ll be the highly efficient professional once you master these skills that you’re not going get somewhere else.”

Indeed, the 2023 State of the Tax Professionals Report mirrors Seale’s findings. Among survey respondents who weren’t in leadership roles in their firms, two drivers of satisfaction yielded particularly large correlations to overall satisfaction, but had overall lower ratings (meaning that they’re important, but respondents felt their firms were not doing them well). One driver of satisfaction may be unsurprising: compensation. But the other may shock some firms in its importance to non-leadership roles: efficiency and automation.

Seale said he also has found that this is an area where many tax & accounting firms fail to face the future. “They hang on to old tech or old processes and they hang on to paper,” he said. “And describe to me someone in the last 10 years who graduated or passed the CPA exam that’s looking for an old process and a paper process. Nobody.”

Respondents from 41% of all firms and 56% of large firms said they would be increasing technology automation to address recruitment challenges, more than any other strategy mentioned.

That’s why RBSK Partners is not only generously providing software to automate the business, but also ensuring employees have the hardware such as multiple monitors, scanners, webcams and other pieces of technology they need. Seale has found that these investments have a direct impact on not only efficiency, but overall employee happiness and productivity. “They’ve got the best of what there is, I think, as far as hardware and software,” he adds. “There’s nothing sacrificed there, and I think that makes for a happy work spot, to know that you’ve got the best that there is.”

Certainly, it’s an increasingly crowded market no matter what type of position for which a firm is hiring. Almost 90% of large accounting firms surveyed said they would be hiring junior, mid-level, and senior tax professionals this year, while roughly half of midsize firms said they will be hiring junior and mid-level professionals. However, more than 60% of respondents said they anticipate difficulty filling senior and mid-level roles, and 42% anticipate difficulty filling junior roles.

To compete in a crowded recruitment market may require different strategies. Seale said he is a proponent of firms getting out of their bubble and trying a new way of thinking, because better tools can lead to better talent and ultimately more business.

“There’s a lot of firms that I think live in a bubble. They’re just a deer in the headlights, like we’re crazy. You’re doing what? Why would you use that software? That stuff, it’s really expensive,” Seale said, admitting to the expense but saying providing employees with the best tools is crucial to the firm’s success. “You want to be a carpenter? You want to buy the best dang tool that you can buy, the best drill, the best this, the best that. Because you’re going be more efficient to serve more clients, be more profitable, and provide more value.”

Clearly, it is well past time to innovate in the tax & accounting industry, but the question immediately arises: Who is responsible for developing innovative ideas and driving innovation within a tax & accounting firm?

People within many organizations often can feel like innovation is someone else’s job. They hesitate to share ideas, believing they aren’t creative enough or that there must be a good reason why those ideas haven’t been tried. Or they get so bogged down in the details of the work, they can’t see the problem or even view it from a different perspective. And unfortunately, most tax & accounting professionals don’t believe they have the time or skills to innovate.

First, the good news is that innovation is not as complicated as we make it. Innovation is simply a “new idea, method or device”; so, one way to innovate then, is to make something new out of items that already exist. Take, for example, the smartphone. All the pieces of the smartphone had been invented previously, but it took someone, or a group of people, to reimagine how the components could be put together to improve how we communicate, work, and live. This means that anyone can innovate by tapping into their knowledge, experience, perspective, and awareness of a problem or a need that people have.

Specifically, in the tax & accounting profession, firms have several problems and needs to be resolved, including:

• • • getting more work done in a more efficient manner;
    • staying current on regulatory changes;
    • providing services that are relevant and appealing to new generations of clients;
    • building a profession that attracts talent; and
    • establishing a sustainable work/life integration.

No one person within a firm can solve all these challenges, of course. Yet, through collaboration and piloting ideas, answers can, and are, being found.

The role of leaders

It is not the role of leaders to generate all the ideas. In fact, as leaders advance in their careers, they get further away from many of the day-to-day tasks, making it harder for them to innovate around daily process improvements. Nevertheless, leadership strongly impacts innovation within the firm. As leaders share more openly and gather feedback from their team on the vision and direction of the firm, the firm’s talent is more likely to develop ideas that are relevant and timely.

To build a culture of innovation, leaders must first adopt the mindset of innovation, which is often described as a growth mindset. When operating from a growth mindset, leaders recognize failures will happen and accept them as valuable learning moments. If the reaction is punitive, rather than accepting, the professionals and staff within the firm will be more reluctant to vulnerably share ideas or attempt to try something different in the future. Leaders need to recognize successful innovation will include initiatives that won’t succeed; therefore, they should encourage their teams to learn from the misses and refocus on the desired result.

Leaders also enable innovation by clearly defining resources — such as budget, personnel involved, time allotted, and the timeline — when project ideas are approved. When resources are clear, team members have the confidence to experiment, test, and pilot within the boundaries that leaders have set.

Any innovation includes some risk of additional costs. To sustain the trust extended to the team that’s innovating, leaders should establish expectations about how frequently they want status updates on the initiative. There should be agreement about what success looks like and how it will be measured. Achieving the project as it was initially envisioned at first should not be the measure of success, since any good innovation process will be iterative and incorporate feedback along the way. Instead, measure success by how well the initiative solves the problem or fills the identified need.

The role of talent

Talent within the firm has various perspectives on processes, clients’ needs, effectiveness of technology, training, and much more. They should break the routines of SALY (same as last year) and ask themselves how things can be improved going forward.

When talent brings ideas to leadership, they should communicate the benefits of the innovation, not just what it is. Too often we assume the listener understands the benefits of the idea, but that is not always the case. When proposing the idea, talent needs to describe how the firm, clients, and the team will be better off as a result of making the investment in the idea.

In a culture where innovation is especially encouraged, many people may have ideas, so not all of them can be implemented at once. If an idea is not initially accepted as something to investigate, this does not mean the idea is worthless. The person bringing the idea to the table should ask for additional feedback to gain insights into how to adjust it or how to re-propose the idea at a later time. The key is to not get discouraged, but rather to keep watching for opportunities to contribute innovate solutions.

The innovation process should be looked at as a symphony with everyone in the firm playing in concert. This process also takes everyone being receptive to change. To accomplish this, leaders and talent must share with their colleagues the benefits of making a change by communicating how employing the innovation affects their workflow and processes. The key is to not leave them wondering what will be required of them if this innovation comes to fruition, so it may be wise to over-communicate at first.

Innovators also should recognize that innovation is exciting for some and nerve-racking for others, and they may need to adjust their message to address the concerns of a particular audience. Yet when these steps are followed, this process toward innovation can put your firm on the path to finding new solutions to the old problems the entire tax & accounting industry is facing.

We had previously discussed how outside audit and accounting firms can help their corporate clients with ESG activities, now we examine how internal corporate auditing functions have a role to play as well.

Indeed, internal audit functions help both increase transparency because most companies self-define ESG program requirements on what information is disclosed publicly, and help directors perform their oversight duties through the audit committee interaction with the corporate board.

Role of internal audit

A company’s internal audit function can step in to help implement consistent sets of standards and establish an internal independent mechanism by leveraging ESG program governance as part of a company’s overall governance program. This is crucial because currently, the lack of transparency on what information is disclosed publicly increases the importance of this type of internal independent audit function.

The short term challenge for internal audit functions is getting up to speed on the company’s ESG efforts, but fortunately, ramping up knowledge is something with which these teams often have experienced. The first step is to understand the ESG landscape of the industry and sector of the organization. Benchmarking what the company’s competitors are doing, attending industry conferences, staying current on changes to government policy and legislation, and keeping tabs on the varying perspectives among internal and external stakeholders are all critical to effectively assessing and managing ESG risks while balancing those risks with other high-priority auditing requirements.

Similarly, it is equally important for internal audit teams to understand the current state of the company’s internal strategy, maturity, and risk appetite as it relates to ESG topics. Critically, internal auditors must: i) understand the organization’s appetite for ESG risks, ii) grasp how ESG is aligned with and integrated into the company core strategy; iii) identify which company teams own specific ESG processes; and iv) map out the current state of reporting to internal and external stakeholders.

The last two factors are of key importance, because the audit function needs its role to be explicitly valued by leaders of the company who direct, govern, and own a data or delivery function within the company’s ESG program.

Further, integrating ESG assurance into the annual audit plan, especially when the level of ESG knowledge within the team is low, is another key challenge to conquer. To overcome this, audit team leaders should analyze how ESG could be integrated within the existing risk assessment program, then focus on larger issues that will deliver quick wins to maximize the impact and value of assurance.

To assess the level of integration of sustainability within a company’s operations, the following questions — suggested by the Institute of Internal Auditors (IIA) — should be considered:

• • • How do internal audit teams work with external auditors on ESG assurance?
    • To what extent does internal audit provide assurance on structures, systems, and processes for decision-making and reporting?
    • What controls exist that outline how data is collected, analyzed, and reported?
    • What are the policies and processes that measure, monitor, and report on progress towards company commitments?
    • What role does internal audit play to influence a shift in mindset to integrate sustainability into governance and operations?

Internal audit’s role in the “G” of ESG

Perhaps the most important role for internal audit teams in ESG strategy is in governance and teams’ ability to perform its responsibilities around testing internal controls to better assure accuracy in ESG information and information integrity in ESG data disclosure and reporting.

Appropriate governance around ESG will involve the oversight group that creates and directs mechanisms to harmonize ESG into the strategic objectives of the organization. It also includes management’s outlining all of the financial and nonfinancial inputs and investments, as well as an assessment of materiality for adequate operational performance.

Finally, the independence of the audit function from the oversight and delivery functions is the most critical part of its role in governance and ESG assurance. For example, the IIA’s Three Lines Model demonstrates how internal audit teams fit into the varying responsibilities across the governing body. Importantly, the independence from the ESG governing body and the management allows for the audit function to: i) maintain a reliability of internal control over ESG data collection, analysis, and reporting; ii) determine how the various corporate functions involved with ESG data are interacting regularly; and iii) monitor the evolving regulatory framework in order to anticipate ESG disclosure regulations.

When a company’s level of maturity around ESG is in the beginning stages, one of the key challenges for internal audit is getting senior management on board, especially in understanding ESG risks and how internal audit can help alleviate those risks. A company’s internal audit function needs to be seen by partners as a trusted advisor with an obligation to highlight on-going, new, and emerging risks that are not being addressed. In this way, audit functions can have the most effective pathway to influence a positive outcome in a company’s ESG operations.

At its core, cryptocurrencies are square pegs being forced into the existing round holes of traditional finance and accounting. With IRS Notice 2014-21 guiding crypto tax standards thus far and with the Financial Accounting Standards Board and other organizations helping guide crypto accounting, the conversation around crypto thus far has centered around treating it like other traditional assets under standard accounting protocols. While this may work for a new kind of traditional asset, cryptocurrencies are inherently a new asset class with different operational structures.

The potential challenges arising are obvious. How do you fit an entirely novel asset class into tax & accounting rules built for traditional assets? Well, this necessitates some way to translate cryptocurrencies into traditional formats — to fit the square peg of crypto into the round holes that make up modern traditional finance. In other words, financial tools are needed to bridge the gap between crypto and traditional finance.

New tools needed

While there are already such software tools emerging that could greatly aid in the translation of digital assets into more traditional financial accounting frameworks, there are certain components that are critical for this to happen successfully. A few key ways this needs to be accomplished include:

Aggregation — First, the data needs to be gathered and collected. Cryptocurrencies present an immense amount of data, most of it unstandardized and unclassified. In order to even begin working on making everything fit together nicely, we need to mold it into a form we can use in the first place, even if that ends up being a square peg.

Aggregating data, and finding a software provider to do so, is a significant hurdle that many financial institutions and tax & accounting firms need to overcome in order to package crypto up into a nice little square box.

For more on the status of crypto regulation worldwide, check out the full digital version of the Cryptos on the Rise 2022 report from Thomson Reuters Institute and Thomson Reuters Regulatory Intelligence

Normalization —Unstandardized, unclassified, abnormal — these words could describe my sleep patterns around the tax deadline — but they also accurately describe much of the overall trove of crypto data. Normalizing crypto data means standardizing the naming conventions, properly categorizing transactions, as well as establishing standards around tax issues such as a cost-basis, fair value, and more.

There is a plethora of companies that jumped through numerous logistical and categorical hoops simply to help standardize small bits of cryptocurrency. And while this clearly demonstrates that this is a big challenge, both in the size of data and in the size of  transactions, it also shows the great need for robust standardization of cryptocurrency data.

Legibility — Finally, the last step in the process is legibility, or, making crypto data understandable and readable to general ledger tax & accounting systems. This means building the final bit of the bridge, allowing crypto data to flow from buy-side to sell-side to better enable the closing of books with ease.

Everything we’ve just discussed at a birds’ eye view encompasses billions to trillions of dollars of business investment to solve these challenges. The private sector is racing to create solutions for tax & accounting professionals to allow crypto, at the end of the day, to be handled like any other asset.

For crypto natives, this is great news. While many in the crypto sphere want to subvert traditional finance, it’s a lofty goal that likely will only occur through traditional pathways. Ensuring cryptos inevitable adoption means allowing tax professionals and accountants to be able to handle it just like they would other securities and assets, such as bonds and stocks.

So, all it takes to fit the square peg of crypto into the round hole of traditional finance is a little pushing, shoving, shaping, and molding with the aid of software solutions, and like magic crypto tax & accounting could become as easy as ever.

You can learn more about tax solutions surrounding cryptocurrencies here

Or as legendary management consultant Peter Drucker once said: “If you want something new, you have to stop doing something old.”

More than two-thirds (67%) of projects fail in organizations that don’t value project management, according to the Pulse of the Profession 2020 survey from the Project Management Institute. Instead of wasting time and money on incomplete projects, however, firms can leverage project management principles to more effectively implement innovative initiatives. Here are four critical areas of project management that tax & accounting professionals can leverage to drive change in their practice:

The Vision

Some people perceive project management as just another workflow that needs to be defined or another person pestering you about things you need to complete. In actuality, project management adds structure to what can often be a nebulous process. It makes room for creativity, monitors risk, and maintains boundaries around a project’s scope while keeping the team focused on the overall vision.

One best practice that project managers use is to develop a charter at the project’s onset. The charter keeps the team on track and identifies the agreed-upon resources. Its purpose is to document key aspects of the project without overcomplicating the information. These key aspects include:

• • • • vision for the project;
      • scope and key objectives;
      • deadlines and milestones;
      • resources (budget, team members, etc.); and
      • communication protocols.

This vision exercise should not describe the end product but instead, the desired result. An effective innovation process will take twists and turns as you develop the final solution. Several years ago, the co-founder of Netflix, Marc Randolph, told a room full of tax & accounting professionals at the Digital CPA Conference that iterating as you go is essential during innovation. At the time, Randolph was not trying to develop a DVD mail-order business; instead, he wanted to change how people accessed their home entertainment — the result, not the end product. Having a clear goal keeps the team focused on creating an impactful solution.

The Timeline

While tax & accounting professionals are accustomed to deadlines, it’s important to consider what how critical the due date is for an innovation project. Some have a small window of opportunity, and if that window is missed, your organization can go from being ahead of the curve and defining new expectations to playing catch-up and competing with others.

Project management documents the due date and pertinent milestones along the path to completion. The process considers which deadlines can flex, which need to stay firm, and how to manage available resources to keep the project on track. Consideration needs to be given to the availability of each member of the innovation team as well. If everyone involved has the same busy season, look for who can be included to keep various activities going while the core of the team is heads down in client work.

Keep in mind that project management is not a workflow, so steps can be done out of sequence depending on the availability of resources and what can be moved forward.

Testing

Not every idea works, so there needs to be a testing phase or even multiple phases. You should test how well the concept works and the reception the project receives from the target customer or stakeholder. “The project management principle of scoping the vision helps to provide an outline of the parameters of the end result,” says Jessica Hartsfield, a project management professional and founder of Maven Source International. “In essence, it tells you what the customer or group wants, so the internal team gets a sense of what to look for to ensure they are hitting the customer’s objectives. This scope should then turn into a listing of necessary testing results.”

By documenting the scope from the beginning, the team knows for what it should be testing. Is the solution developed achieving the vision defined in the charter? If not, then it’s good that the team has this feedback before investing in an official rollout. If further iteration is required, the team should not feel they failed. In truth, this is part of any innovation process.

Project management principles promote risk management, including giving users the ability to track risk factors and testing. Do not skip this step just to expedite the process.

Deployment

Project management allows users to oversee the entire process, from conception through deployment. Often, because the team nurturing and developing the solution is very close to the details, they may lose sight of what is needed for the rollout. Not everyone in the firm may even remember that this particular initiative has been in the works.

You can counter this perception by investing in how the idea will be introduced to the audience and key stakeholders. Explain what is in it for them with the launch. Once you have buy-in, communicate how the project will be rolled out and when key stakeholders will be able to reap the benefits. Make sure that you are answering questions such as: Will it be launched in stages? Is there training required? Will everyone have immediate access? Additionally, share what will change and what will remain the same once it is launched.

After the launch, collect feedback on the development process and the final project outcome. Project managers will need this information to debrief the team and note enhancements for implementing future innovative initiatives.

As tax & accounting professionals look ahead to the next busy season, begin ideating on how to improve the workflow, offer talent a better work/life balance, and provide higher value services to clients. Then look to the expertise of project managers and how their methods might ensure a greater chance of completion on budget and on time.

The new Technology and Innovation Resource Center, one of six on the Thomson Reuters Institute page, launches today with an insightful look at six strategies that organizations can employ to ensure their implementations of new technology goes smoothly. Another recent article describes the simple starting points law firms can take when creating a highly beneficial metrics program for their IT departments.

The Thomson Reuters Institute is the dedicated thought leadership arm of Thomson Reuters and features blog commentaries, industry-leading data sets, informed analyses, interviews with industry leaders, videos, podcasts, and world-class events that deliver keen insight into the dynamic business landscape around the legal, tax, and corporate markets.

In order to stay ahead, we recognized that today’s professional services firms need to innovate. Whether it’s law firms adopting the latest in legal technologies, tax and accounting firms automating their processes to find more efficiencies for clients, or corporations finding new paths for growth with data insights, the most successful organizations also tend to be the ones that think most critically about their technology and innovation journey. That’s where the Thomson Reuters Institute’s Technology and Innovation Resource Center can offer organizations an advantage.

Innovation isn’t a futuristic term — innovation is now.

“Today, the working world is moving quicker than ever. If you’re not already thinking about how to innovate your own practice, then you may already be behind,” says Zach Warren, manager for enterprise tech & innovation content at the Thomson Reuters Institute. “But that’s where we come in to help.”

The Technology and Innovation Resource Center will provide insights to business leaders and innovative thinkers across the whole of professional services, capturing the future of law, tax, risk & fraud, ESG, government and more. Readers will receive analysis and reports from the Institute’s panel of internal and external thought leaders, all aimed at making organizations more forward-thinking. The center’s content is arranged in three wide buckets — AI & future technologies; Digital transformation & operations; and Data governance. These areas tackle a wide variety of ways organizations can affect change. The Technology and Innovation Resource Center will work hand-in-hand with the Thomson Reuters Institute’s other resource centers in Legal, Tax & Accounting, ESG, and more to provide a full view of today’s best practices.

“The Thomson Reuters Institute is excited to bring tech and innovation analysis across a host of disciplines to our readers and listeners,” Warren adds. “And I can’t wait to unveil everything we have in store. Innovation isn’t a futuristic term — innovation is now, and we’re ready to help you along your own journey.”

Among the most pressing of these problems are:

• • • skill gaps in technology and leadership skills;
    • feelings of under appreciation and lack of career progression as drivers of decisions to leave current employers;
    • time constraints to invest in employee learning and development in the short term;
    • flight risk of the next generation of corporate tax leaders; and
    • a lack of succession planning.

These factors come on top of increased demands faced by corporate tax departments, which include managing increased regulatory requirements, supplying governments with tax data faster and more accurately than ever before, collecting and analyzing data across the enterprise, providing strategic intelligence, and finding new ways to extract value for the corporation.

The direct consequence of all of these additional demands is that the tax & accounting professionals doing the work in corporate tax departments are feeling squeezed — and this compounded by employees already being burnt out after the pandemic. Indeed, more than one-half of the responding tax professionals to this year’s survey said they did not have the resources they need to do their jobs. This could expedite trends already in progress, which include older employees retiring, mid-career professionals leaving their employers more frequently, and younger workers strongly indicating they want a better work/life balance.

All of this is a wake-up call for corporate tax departments and corporations across the board. They clearly need to find creative ways to retain existing staff longer and replenish their workforce with people who have the requisite skillsets to meet the variety of new challenges corporate tax departments are facing. Here again, technology is a major factor, but it will not be enough to solve all the industry’s talent problems and meet current and future needs.

Determinants constraining corporate tax talent

The “emergency button” is flashing red for many corporate tax departments, and leaders of these functions need to take action now to address additional constraints occurring in the near term. Among the most challenging problems they face are:

Flight risk — The threat of employee turnover looms throughout many corporate tax departments, while the power of the tight labor market remains in the hands of employees. This fact is even more acute for corporate tax functions. Flight risk sits at 28% on average across all corporate tax professionals, according to the report. Compounding this fact is that the flight risk of those next in line (between the ages of 41 to 50) to lead corporate tax functions is even higher, at 30%.

Without proactive efforts by corporate tax managers to address the top three drivers of employees’ decisions to leave employers —feelings of under-appreciation, lack of career progression, and dissatisfaction with corporate culture — the problem will only get worse in the future.

Skill gaps in technology and leadership — Some corporate tax departments are making investments in technology to increase efficiency. The challenge is, however, that current employees don’t feel they have the necessary skills to take advantage of such innovation. In fact, 43% of corporate tax professionals indicated that their current tax technology expertise is ill-equipped for success.

Time constraints to invest in learning and development — In addition, these same time and resource challenges for employees prevent them from having the necessary time available to invest in learning and development to close those skill gaps. Without exception and by a wide margin, “lack of time” was identified as the biggest obstacle to meaningful professional development, especially for under-resourced tax departments, where almost three-quarters (72%) of respondents said time constraints prevented them from improving their professional skills. Even more illuminating is that when companies had a better sourcing balance, more than half (55%) of respondents still said that finding the time for professional improvement was their primary challenge.

Investment in efforts to upskill requires a commitment of time and resources by management; and without that, the current state will only get worse unless corporate tax managers can proactively finding in ways to free up time beyond simply investing in technology for efficiency.

Lack of succession planning — Many tax departments are reluctant to develop a succession plan because would-be successors on staff don’t have the proper skillset. However, those who are next in line to lead corporate tax departments don’t have the time to develop the necessary skills — including leadership skills, technical expertise in global tax, and ability to communicate with senior executives — on their own. Interestingly, younger respondents — those under 40 years old — expressed interest in improving their leadership and people management skills.

Compounding the stark reality, however, is that the probable flight risk at companies without a succession plan is roughly 11-percentage points higher than at companies with a succession plan in place.

The constraints on corporate tax talent are currently large, but the challenges will only grow over time if efforts by management and at the corporate level are not made to fend off flight risk. The lack of time to meet current and future functional tasks, the lack of bandwidth to address skill gaps, and the already high flight risk poses a negative multiplier effect on talent within corporate tax departments. Without immediate attention, these leaders will soon fail at performing even their most foundational requirements.