5 questions to ask before buying a tax solution
Now more than ever, large corporate taxpayers are looking to technology to solve their long-term productivity requirements by adopting the old adage “work smarter, not harder”. Whether it’s keeping up with regulatory change or retaining key talent, technology is often perceived as the better way to solve the problem, rather than recruiting in a highly constrained employment market.
In fact, experts across the globe agree that technology and process automation tools are one of the best ways for departments and companies to reduce tax compliance risk while increasing output. A 2021 Reuters study of corporate tax departments shows that direct tax compliance and tax provision are perceived as the most value-added sectors involving technology.
Additionally, regulators are also taking an interest. Speaking on digital transformation, the Australian Taxation Office’s Second Commissioner, Client Engagement Group, Jeremy Hirschhorn said technology and data management are improving the nation’s tax system. He said digital solutions give people the opportunity to invest time in higher-value work, which in turn will maximise profit.
However, technology investment in many cases is not leading to productivity gains and in some cases is leading to regression. The manifestation of poor investment decisions can lead to broader negative impacts on tax operations like employee engagement, employee turnover, wasted effort, and limited recruitment options.
So, what leads to buyer’s remorse? There are many reasons for buyer’s remorse but ultimately most failures can be pinpointed to limited information or misinformation during procurement. Being aware of the following two areas will give you a big head start when going through your next procurement process:
● Mind the gap – This is when the buying process is choreographed by the vendor and centres on what they offer rather than what you need. This diversion tactic obfuscates the functionality gap that exists in the software and ultimately leads to unmet needs and potentially expensive workarounds. Vendor lead sessions also make it incredibly difficult to compare solutions on a like-for-like basis.
● There’s more than meets the eye – Sometimes functionality can take centre stage drawing attention away from the non-functional areas of the software program. Demonstrations, sales, and marketing pitches can hide deficiencies in critical areas like adoption, support, reliability, and evolution, and should not replace seeing the software in operation or speaking to end users.
So, what strategies can you use to make better software buying decisions and avoid buyer’s remorse? Well like any critical decision, having accurate, reliable, and relevant information is key.
5 questions
Ready to invest time in research?
Software demonstrations are important, but this shouldn’t be where your journey with a provider ends. When you ask questions that clarify the entire purchase process you gain a better understanding of exactly what you get for the price. Arm yourself with the following questions to ensure you have a clear understanding of the product you are paying for:
1. Does the solution fundamentally solve our problems?
The answer to this question should involve an honest and frank analysis of your operational challenges against the solution’s proven capability.
So, how can you guarantee that your chosen solution is the right one for your needs?
Firstly, you must be clear on your needs before discussing potential products with vendors. Identify your particulars from a data and process perspective and ask vendors to demonstrate how their solution will meet your needs.
We suggest writing detailed questions and ranking them in order of importance ahead of initial meetings. The responsibility then falls on the vendors to show how their solution meets your specific needs. Encourage them to communicate clearly and honestly about any gaps in the software that will fall short of your requirements. It is only when you are clearly informed and educated that you can make the right decision.
Don’t shy away from asking to view recordings or a live demonstration to see how the product works and consider communicating with the vendor’s pre-existing clients. What better way to gather pros and cons than speaking with someone who uses the product?
2. How does the solution improve confidence in outcomes?
Process automation should improve data management and overall functionality for a business. As a function leader or manager, you need to have confidence that a software solution will produce the right answer after a process has been run and not expose the organisation to risk.
But how do you know that the tax technology you plan to invest in does just that? Having a thorough understanding of digital transformation and tax functions will give you the edge you need.
When it comes to sitting down with potential vendors, don’t be afraid to ask the question - what checks and balances are in place to ensure the program is used correctly and working as expected? Will a user be notified if there is a data integrity issue, or if they are not using the software correctly? What process is in place to mitigate the risk of errors, and how will digital transformation and this product increase your likelihood of success?
The correct education and awareness will ensure you are at the forefront of the game.
3. How does the solution deal with our highly iterative process?
As Australia progresses into the new decade of tax compliance and administrative change, tax functions are presented with fresh challenges, particularly around data management. The rise in source system functionality and performance means that software used by tax functions must be good at dealing with the three Vs of data, volume, velocity, and variety.
Many tax processes are highly iterative in nature and while functional assessments are often done on a 1x process basis, many tax processes require fluidity. This often means a process must be completed many times before the outputs are finalised and inefficiency on a 1x basis will have an exponential impact when the software is used live.
Weighing up these considerations prior to investing in a tech solution can help your team identify and manage potential risks. Embracing technology the right way can also assist managers and directors in confidently navigating the industry while supervising increased workloads and associated staffing issues.
4. What does user adoption look like?
So, you’ve found the right solution for your company’s functional needs? Great! Now comes the difficult part because while a solution might meet functional, reliability, and efficiency criteria, without a concrete adoption process, those features become irrelevant.
Adopting software is not a challenge specific to the tax industry, but it can have dire consequences for tax operations.
As clearly outlined in the Reuters study revealed that while technology can improve workflow and productivity, a failure to implement it correctly will result in an underutilisation of the tech resource.
There are a few key ways to address this issue:
● Ask to speak to multiple customers and with the people who should be using the software the most i.e., preparers
● Ask to be in a user group session
● Ask to see testimonials that speak to the usability of the solution
● Schedule staff training and ensure all relevant team members have a “how-to” information guide to fall back on.
● Ask about after-sales support. This should be part of the vendor's business strategy, as it plays an important role in customer satisfaction, brand loyalty, and word of mouth.
When all is said and done, the solution must entice people to want to use it.
5. How will the solution evolve in the future?
If all goes well, the solution you implement should continue to meet your needs for many years, evolving and increasing in value and enabling your continuous improvement.
Unfortunately, this is not always the case. Over time, software ages, and vendors lose agility in the support and development of new features. Technical debt and knowledge lost through staff turnover significantly reduce productivity and evolution. Typically, the older the software, the slower it will evolve.
This can have a material impact on user adoption, as when bugs and limitations are not addressed, users must continue to spend superfluous effort working around the problem.
When asked about missing features, vendors will often use the phrase “it’s on the roadmap”, referring to their future product plans. Be very skeptical of these futile commitments and seek evidence of their evolution through other means. A good way of sense-checking vendor evolution is to seek evidence of the material improvements they have delivered over the past 12-18 months.
Any business that commits to a solution or new program must factor in the future investment of ongoing research and development, associated staff training, and IT support.
Prior to signing on the dotted line, speak with the vendors about possible issues that may arise.
You can ask about the following:
● How the configuration of the software is maintained after its initial setup and if you can do this yourself or if you need to engage the vendor or other consultants.
● What the vendor’s processes are for evolving software, how they involve customers, deal with bugs, and other information available for them.
● The percentage of vendor product investment allocated to research and development versus maintenance and support. This will give you an indication of the rate of evolution that you can expect from the vendor and help in planning for the future of your tax operations.
Where to now?
Once you have all the information, only then can you make a fully informed decision.
The demand for tax function resources is at an all-time high. Managing this with a lean budget can be challenging. The impact on people is significant and often creates an unsustainable and high-risk environment leading to suboptimal outcomes. Understanding solution options and how they work is key. People, processes, and the technology ecosystem are critical to the success of tax technology projects.
With a few insightful questions and a collaborative provider, you can avoid regret altogether. Getting prepared for that next solution can be simpler than you think. Get in touch if you want a free consultation on buying a tax solution.
