The indirect tax landscape is rapidly evolving, thanks not only to fast-changing regulations but also to a slew of technological advancements. From APIs to artificial intelligence, these emerging technologies are revolutionizing how tax practices operate.
Several factors are driving the adoption of tax technology, including a shortage of professionals. The latest AICPA Trends Report shows some sobering statistics around a continuing downward trend of accounting graduates, intensifying indirect tax complexity and a growing embrace of e-invoicing.
I recently spoke with Mo Huda, Senior Manager of Indirect Tax at top 25 firm, Moss Adams, and Lee Irwin, Solutions Engineer for leading indirect tax technology provider, Vertex, about how accounting firms and tax technology providers are leveraging advanced analytics, business intelligence, edge computing, AI and other advancements to optimize tax compliance activities and deliver insights that drive decision-making.
Six key technologies
While some of these key technologies are more widely adopted than others, tax professionals should keep an eye on each of them:
- Cloud: Cloud-based solutions offer scalability, flexibility and accessibility, facilitating seamless integration between tax engines and finance systems.
- APIs: Application programming interfaces (APIs) can seamlessly connect e-commerce systems with enterprise resource planning (ERP) systems, integrated tax engines and other back-end applications. APIs ensure connectivity that allows for accuracy and data integrity which makes APIs a vital component of tax technology.
- OCR and RPA: Optical character recognition (OCR) automates data extraction from documents, eliminating manual data entry and continues to improve in terms of accuracy. Robotic process automation (RPA) deploys robotic agents to streamline repetitive tasks, enhancing tax processes' efficiency. Both are vital to help free up staff to focus on tax advisory.
- Data analytics: Advanced tax data analytics help organizations mine, cleanse and transform data into actionable insights. These insights encompass changes in customer behavior, marketing campaign effects, optimization opportunities and more.
- BI Tools: Business intelligence (BI) tools leverage data analytics to empower organizations and advisors to create key performance indicators (KPIs) and visually compelling dashboard views, providing insights into past, current and future performance across various business areas.
- Machine learning and AI: These technologies analyze vast datasets, identify trends and predict outcomes, improving decision-making. Machine learning (ML) and Artificial intelligence (AI) tools are rapidly evolving, and innovative tax professionals are regularly finding new ways to use them in practice.
Practical Use Cases
To grasp the real-world impact of these technologies, below are three ways tax professionals are harnessing technology in an indirect tax setting:
- Automating sales and use tax compliance and reporting: Automation is now table stakes for many businesses, and the sales and use tax compliance process is no exception. Automating sales and use tax can involve a combination of cloud technology, APIs, edge computing and other components to drive accuracy, scalability and risk management. As we see the tax base expand and new ways of reporting such as e-invoicing creeping up on the horizon, it is crucial for businesses to implement sales and use tax automation as a foundation to optimize compliance and audit performance.
- Streamlining refund review with OCR: OCR-based, machine learning tools automate invoice review workflows, reducing the time required to process a refund review. This automation translates to significant time savings.
- Centralized data warehousing: A strong BI and analytics foundation, supported by a data analytics warehouse, enables organizations to develop advanced analytical insights using AI and ML tools. This includes detecting patterns in customer behavior, creating marketing and operational strategies and facilitating data-driven decision-making.
- Choose substance over flash, the power of true expertise: While a plethora of shiny new tax technologies may entice you, it's crucial to approach adoption judiciously. Conduct a diligent technology evaluation process, cutting through the hype to identify solutions aligning with your organization's needs. Seek trusted vendors, establish repeatable processes, and evaluate technology proactively rather than reactively.
Read the white paper, Practical Insights (and Use Cases) on Emerging Tax Technologies, for expanded analysis and commentary.
For more on the latest sales and use tax trends from Mo Huda, check out this video.
About the author: Jeremiah LaRue is the senior product marketing manager of CAS at CPA.com. He has more than a decade of experience supporting the accounting profession as a technical consultant helping to lead firms through technology change.
