In today’s tax and finance environment, organizations are grappling with multiple challenges, including complex regulations, escalating costs, and an increasing talent crisis. According to the 2024 EY Tax and Finance Operations (TFO) survey, budget limitations have now become the biggest challenge facing tax and finance leaders, surpassing talent shortage concerns for the first time in the survey’s history. This shift highlights the mounting pressure for tax teams to modernize their data strategy and management to address both cost control and regulatory demands.
The Cost-Cutting Potential of Data Modernization
An efficient data strategy and streamlined management can significantly reduce costs without compromising quality. The survey found that 81% of respondents believe that a more effective data management approach can reduce operational costs while maintaining high standards. With clean, structured data available for real-time use, tax teams can automate routine processes such as tax filings, reconciliations, and compliance. This reduces reliance on manual tasks, cuts down on labor costs, and minimizes errors, all of which are crucial in preventing costly penalties.
Additionally, well-managed data offers a single source of truth for various uses—compliance, audits, reporting, and more—thereby reducing time spent gathering and validating data across different systems. This enables tax teams to meet tight deadlines and make timely, accurate submissions, which is especially important given the accelerated pace of regulatory change and digital transformation.
The Role of GenAI in Transformation
As technology continues to evolve, GenAI (Generative AI) is emerging as a game-changer in the tax and finance space. The survey reveals that 88% of respondents believe GenAI will enhance the effectiveness and efficiency of tax functions. With GenAI, organizations can automate more complex cognitive tasks, such as interpreting tax regulations, identifying compliance risks, and predicting tax liabilities. By integrating predictive analytics, AI can perform advanced tax scenario analysis, providing insights that help tax leaders make strategic decisions.
However, leveraging GenAI successfully requires access to high-quality, structured data. Data gaps or incomplete data are significant barriers to implementing AI effectively. Without meeting specific data management requirements, AI models cannot fulfill their potential, which highlights the need for robust data preparation.
The Regulatory Challenge
The regulatory landscape is changing rapidly, with jurisdictions worldwide introducing stricter compliance requirements. For instance, e-invoicing has become mandatory for VAT reporting in many countries, impacting tax and finance operations globally. By 2024, around 24 countries had already implemented e-invoicing for all B2B VAT transactions, with another 50 countries applying it for certain transactions.
As 45% of tax personnel’s time is spent on routine compliance tasks such as data gathering, many teams are struggling to keep up with the demand for more real-time tax reporting, driven by public tax transparency, global minimum tax obligations, and digital tax filings. To address this, many organizations are turning to external service providers for assistance. 63% of survey respondents rely on co-sourcing for consolidating data from multiple ERP systems, as managing this complexity in-house is often not feasible.
Leveraging Data for Strategic Insights
With a modernized data strategy, tax teams can generate predictive insights to inform strategic decisions, helping CFOs and other stakeholders plan for future tax liabilities, assess the impact of mergers and acquisitions, and model the tax implications of business decisions. Advanced data analytics tools enable teams to identify anomalies or patterns in tax data, flagging potential compliance risks or tax liabilities before they escalate into costly disputes or audits.
Integrating tax data with broader financial data also helps tax teams provide more strategic value, moving beyond compliance and playing a more proactive role in the broader financial ecosystem. With real-time access to financial insights, tax functions can better contribute to the organization’s growth strategy and decision-making.
Addressing the Talent Crisis
The growing talent gap in the tax and finance sector, especially as experienced professionals retire, is a major concern. Many organizations are turning to co-sourcing to bridge this gap. Co-sourcing provides access to skilled professionals who are familiar with the evolving tax landscape, while also alleviating some of the routine work that bogs down in-house teams. This enables companies to focus on higher-value tasks, such as strategic tax planning and financial analysis.
Organizations are also attracting talent by offering opportunities to work with innovative tools such as automation, AI, and advanced analytics. By automating repetitive tasks, companies can provide a more fulfilling and intellectually stimulating environment for their staff, which is a key factor in retention.
Conclusion: A Necessity for Future Success
As the tax and finance landscape continues to evolve, a modernized data strategy is no longer a luxury—it’s a necessity. Companies that leverage automation, AI, and advanced analytics are better positioned to reduce costs, enhance compliance, and deliver strategic insights that drive business growth. With co-sourcing and managed services becoming increasingly common solutions to manage the talent crisis, organizations can remain competitive while preparing for future challenges in an increasingly complex and dynamic regulatory environment.
In short, optimizing your data strategy is essential for navigating the complexities of today’s tax and finance world while positioning your team to deliver high-value strategic contributions to the business.
Related Topics:
Europe’s New Green Bond Standard Set to Transform Sustainable Finance
Broadcom Shares Surge, But Is the AI Chipmaker Overvalued?
Four Key Strategies to Accelerate Clean Hydrogen Finance by 2025
