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Enterprise resource planning (ERP) systems should be used in conjunction with tax-specific software to optimize the tax function and help enable high performance.
Organizations frequently try to maximize the leverage of their ERP systems across as many processes as possible in order to enable high performance. While this approach is generally sound, tax accounting may prove to be something of an exception to this general rule. Accenture examines the issues and proposes the optimal approach.
Enterprise resource planning (ERP) systems have been widely deployed by large and medium-sized businesses. Given their significant cost, it is not surprising that companies are looking to get the most out of them. While using ERP for as many enterprise-wide processes as possible is a proven practice, using it for a highly specific function such as tax accounting may result in considerable complications.
In fact, Accenture believes that moving tax functions onto an ERP system may require significant investment in customization, as well as significant ongoing costs as tax regimes and regulations change.
Accenture’s experience suggests that three commonly-held tenets about ERP systems may not hold good when it comes the end-to-end tax accounting process:
One tenet that Accenture does believe that companies should follow is not to over-tax their ERP systems. An ERP system is intended to be a core transactional system to support finance functions such as record-to-report, order-to-cash, and procure-to-pay. While it has the capability to support transactional taxes including withholding, sales and use, and value-added tax, it is not and was never meant to handle the comprehensive requirements of the tax provision process.
Accenture believes that companies in pursuit of high performance in their tax functions should use tax-specific technology for core tax functions such as tax accounting. The proper role for ERP systems in respect of the tax function is to build into its data the specific attributes that tax will need to do its accounting and compliance functions later. In fact, high-performance in tax is principally characterized by the accessibility of tax-sensitive data in the company’s financial and operational systems.
March 15, 2011
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