Taking tax to the cloud

As recently as two years ago, the balance between tax software sitting on desktop systems compared with in the cloud was in the region of 60:40 in favour of the desktop. However, over recent years, this ratio has flipped in favour of the cloud – a trend that is set to continue as part of the continuing growth of the cloud-based Software-as-a-Service (SaaS) delivery model. Today, there are more options than ever for tax teams to choose powerful and flexible software tools geared to the changing tax ecosystem.

So, why is this happening? In general terms, cloud computing has generated enormous market momentum, thanks to a diverse range of compelling benefits. For instance, the convenient subscription model used by many cloud-based software vendors enables users to only pay for what they use, when compared to traditional procurement methods where software is bought upfront.

Cloud solutions can also offer better performance, service levels and security compared to legacy software and hardware infrastructure. The list of advantages goes on but suffice to say that the cloud/SaaS argument has become so convincing that it has driven the software market worth to almost $250bn (£194.8bn) in value worldwide this year.

Looking more closely at the role of cloud computing for tax departments and professionals reveals some interesting issues that are helping to increase adoption. For instance, the overall tax environment is increasingly digital-first – Making Tax Digital (MTD) being an obvious example.

In this context, today’s cloud-based solutions are a massive enabler for the tax function, not least because they provide professionals with access to the real-time information they need, backed by the tools they require to maximise efficiency and output. In contrast, without the kind of dynamic and feature-rich cloud-based tools that enable these closer working relationships, teams are much more likely to end up working in silos and using repetitive, time-consuming processes that suppress productivity.

A cultural shift driven by technology

This is part of a wider cultural shift in the way organisations and their tax professionals operate. In the past, the tax function has generally adopted an all-or-nothing approach to getting the job done, where organisations retain control of their processes or outsource everything to a third-party specialist. More recently, cloud technology has enabled teams to use a more flexible co-sourcing approach, whereby they continue to manage processes such as end-to-end compliance in-house but use external experts and technology services for mundane or specialised added-value tasks.

Put these factors together, and the use of technology across the tax function is significantly more cost-effective today than it has been in previous years. For example, installing and rolling out traditional desktop software solutions manually was generally a time-consuming and expensive process. In contrast, the SaaS approach does away with these issues almost entirely, while also allowing organisations to move IT infrastructure costs from CapEx to OpEx categories.

Cloud is also enabling tax professionals to employ the latest technology innovations to improve on a wide range of objectives, from accuracy to efficiency. Among the most important current examples is the increasing use of cloud-based AI and automation tools, which are set to have a transformational effect on the way tax departments work. In the years ahead, it’s certain that these technologies will act as the catalyst for innovation, as organisations apply them to boost analysis, deliver improved levels of insight and automate mundane and repetitive tasks.

In common with other finance functions, data protection and cybersecurity are mission-critical priorities for tax departments. Most established cloud providers offer very effective levels of security, data protection and backup services as part of their overall approach, with many certified with standards such as ISO 27001. This plays a key role in ensuring compliance requirements are met and that an organisation’s overall security posture is protected.

Using cloud-based services can also make a positive contribution to organisational sustainability objectives. Removing outdated and inefficient legacy hardware reduces electricity consumption, while the major cloud platforms can deliver better environmental performance than many on-premises solutions.

Managing cloud migration

The process of adopting cloud-based solutions involves more than just switching from one tech strategy to another. Success also depends on senior executive buy-in and helping users fully understand how to use new services and tools. In many situations, cloud-based software has training resources built-in, but this can be supplemented with further training and coaching so users understand how it integrates with their processes and data. This will help avoid the potential pitfalls associated with poorly integrated technologies and staff who don’t feel confident using them.

Finding the right technology partner is a key part of the overall process, not least because they can help deliver a frictionless experience that minimises the operational impact of a major change in technology infrastructure.

Moving to the cloud also means that organisations must ensure data integrity and that it is sufficiently protected during any transfer process. Without safeguards in place to ensure data remains consistent when moving from on-premises to the cloud or from one provider to another, there is the risk that extremely valuable data could be damaged, leaked or even lost. Clearly, this could have serious compliance repercussions and, as a result, data integrity should be a focal point when adopting any cloud-based software service.

In the years ahead, tech-led innovation will feature more heavily in the working lives of tax professionals. Organisations that embrace the capabilities offered by the cloud will be ideally placed to balance the efficiency, automation and productivity advantages that the best tax technologies can offer with their company processes and compliance requirements.