Archive for Alex Fazelat

Where To Start With Process Automation

Because a tax department’s processes are interconnected, it is often overwhelming to think about process automation. Those who have succeeded in this endeavor have managed to do so by breaking down the bigger picture into smaller sub-functions and treating each sub-function as a separate manageable project.

It is critical to choose the right projects for automation. As a rule of thumb, you should always start with a sub-function that has high volume with high ROI. These sub-functions normally center around data transformation tasks such as data validation, data reconciliation, report creation, tax adjustment calculations etc… Based on our experience, tasks that meet the below criteria are normally the best candidates for process automation:

  1. Is the task performed routinely (weekly, monthly, quarterly…)?
  2. Does the current manual process take more than “X” hours or days? You decide what value to assign to “X”. We suggest starting with those tasks with the highest “X” value that take the longest to complete.

As you may have noticed, in order to answer the 2nd question above, you will need to quantify and time the steps that are involved in your routine tasks. Do not be surprised to find out a manual process that you thought takes 10 minutes to complete actually takes 30 or 50 minutes or even longer. The information that you collect in this discovery phase can also be used to determine the ROI of the project.

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Common Tax Department DIY Cost-Saving Plans And Consequences

Common Tax Department DIY Cost-Saving Plans And Consequences

Ignoring professional technology services by a tax department can have several significant costs and consequences. Here are some of the potential drawbacks:

  1. Inefficiency and Error-Prone Processes: Without the assistance of professional technology services, tax departments may rely on outdated or manual processes for data entry, calculations, and reporting. This can lead to inefficiencies and a higher likelihood of errors in tax returns and financial statements.
  2. Compliance Risks: Tax laws and regulations are constantly changing. Failing to keep up with these changes can lead to non-compliance and the risk of penalties or legal issues. Professional technology services can help tax departments to avoid non-compliance.
  3. Data Security Concerns: Tax departments handle sensitive and confidential information. Ignoring professional technology services can expose this data to unintentional security breaches and cyberattacks. Tax IT professionals  can implement robust security measures to protect sensitive data.
  4. Missed Opportunities: Tax Technology professionals can help tax departments to efficiently identify potential deductions that can save a company significant taxable income. Without Tax IT expertise, opportunities for tax savings may be overlooked.
  5. Inefficient Resource Allocation: Tax department personnel usually spend a significant amount of time on manual and repetitive tasks. On the hand, a competent and trusted Tax IT professional can easily automate these processes by creating repeatable solutions that will significantly reduce the time to perform the repetitive tasks. Any inefficient resource allocation can limit a tax department’s ability to focus on strategic tax planning.
  6. Lack of Data Analytics: Professional tax technology services can provide tax departments with the tools and skills to analyze large volumes of financial data. This can be valuable for making informed business decisions and optimizing tax strategies.
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Written by | Posted in Tax Technolgy • TaxConnections

Most Tax Department Heads Are Afraid Of Incorporating Advanced Technology In Their Process

Most tax department heads are afraid of using any type of automation solutions that their tax preparers cannot maintain. In other words, they are afraid of creating a “black box”.  The fact is that most tax preparers have a very limited understanding of MS Excel and technology in general. Therefore, this reality limits most tax departments’ automation options to the basics of Microsoft Excel.

A tax department will never be able to embrace technology to the fullest degree possible until they agree to give up control of their Excels and trust their professional IT partners who specialize in developing advanced automation solutions.

The term Tax Technology has been around for over a decade or more.  However, in most tax departments, a Tax Technology staff is a tax preparer who imports data to vendor applications and maintains user access. On the other hand, a true Tax Technology professional is an individual who has a strong IT background plus a basic understanding of the tax process. A good Tax Technology team member is an individual who can design and maintain advanced automation solutions like Alteryx, Power Query, Power BI, RPA, etc… and is a great teacher who can elevate the rest of the team’s understanding of technology along the way.

To be successful in incorporating technology into the tax process, tax department heads must be able to establish a trusting partnership with non-Tax IT-trained professionals.

Have a question about tax technology implementation? Contact Alex Fazelat, Tax Technology, LLC

Written by | Posted in Tax Technology

Why Do Tax Automations Fail? Tax Process Automation Is A Journey, Not A Destination

Why Do Tax Automations Fail? Tax Process Automation Is A Journey, Not A Destination

As we’ve witnessed in the last two years, the global labor shortage is a post-pandemic new reality that businesses of all sizes must deal with. One of the areas where labor shortage is a real challenge is the field of Tax. As more senior Tax professionals opt for early retirement and not many college grads are willing to put in the long hours on repetitious spreadsheets, Tax has a real problem. To make the issue worse, while Tax Technology has advanced many Tax Departments are still relying on the old and time-consuming manual procedures performed by the Tax preparers. Why? Honestly, a sustainable transition to technology and automation is not that easy. Simply hiring a consultant to automate a Tax process is not a realistic and sustainable solution if your Tax professionals who use the new solution cannot maintain it for future use. This is why most Tax Technology investments either fail after the 1st cycle or do not yield the expected ROI.

Designing rewarding automated solutions require some basic understanding and best practices of technology concepts. Therefore, we believe it is unreasonable to expect a Tax professional to develop or maintain complex scripted solutions that are normally developed by professional IT staff.

To guarantee automation success and to protect investment in automation we recommend the following:
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Common Mistakes Made In Tax Process Automation

Common mistakes made in tax automation process

Lack of preparation: Failing to properly prepare for automation, such as not thoroughly understanding current processes and not having clear goals, can lead to implementation problems and slow progress.

Inadequate data management: Poor data management practices, such as failing to validate and clean data, can result in inaccurate results and delayed processes.

Neglecting security and privacy: Neglecting to implement appropriate security and privacy measures can lead to data breaches and loss of sensitive information.

Underestimating complexity: Underestimating the complexity of tax processes and failing to adequately address all process components can lead to errors and inefficiencies.

Ignoring feedback: Failing to gather and incorporate feedback from stakeholders, including tax professionals and business owners, can limit the effectiveness and success of automation.
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Written by | Posted in TaxConnections