3 Must-Haves of Small Business Tax Provision Software

Recently published surveys indicate that 50% to 70% of the tax departments in publicly traded companies exclusively use spreadsheets to manage ASC 740 processes. However, the percentage would be higher if the surveys focused strictly on small and medium businesses (SMB). These numbers have held steady the scrutiny of the last 15 years relative to the tax areas of financial statement reporting and internal controls. The current provision offerings have not met the needs of SMB tax executives. If a technology solution wants to be an answer to the homegrown spreadsheets running the ASC 740 process, it must be accurate and comprehensive while being easy to use.

Accuracy

Accuracy is required to reduce the risk of accounting for income taxes but the complexity of ASC 740 threatens a tax professional’s ability to be accurate. Precision in following the balance sheet approach, jurisdiction-by-jurisdiction rate calculations, loss and credit tracking, currency issues and uncertain tax benefits are all highly complex. Spreadsheet tools drive tax professionals to adopt shortcuts and work-arounds that chip away at accuracy. Accuracy will only be achieved when the details of ASC 740 are embedded in the technology that enables embracing the complexity, not cowering to it.

Comprehensiveness

A comprehensive solution will cover all the aspects of ASC 740 in a single application. Current modularized solutions (with questionable interfaces), whether packaged software or spreadsheets, only add to the risk of the tax provision. Payables, UTBs, RTPs, footnote presentation, and all aspects of ASC 740 should be native to the solution. Comprehensiveness does not mean embedding underlying tax calculations within the provision tool. ASC 740 is solely focused on the financial statement presentation of tax positions. Accordingly, a comprehensive solution should not try to recreate tax calculations found in tax work papers. Rather, the solution should leverage work performed for prior year as well as upcoming returns.

Ease of Use

While ease of use (like beauty) is in the eyes of the beholder, as tax professionals we prepare, review and analyze work a certain way. Our work flows from source data to tax work papers to returns.  We read transactions like others read sentences. Therefore, tax technology should be built to flow with our work. We should not trade the complexity of ASC 740 for a complex software tool. Most SMB tax departments don’t have the luxury of a full-time provision expert. So the solution must be intuitive enough to avoid a steep learning curve with each provision cycle. Calculations should flow from one part of the provision process to the next, preparer and reviewer notes should reside with the numbers, and reconciliations and roll-forwards should be completed automatically. We need to drill from summary to detail and back to summary as we review and make comments. And once the detail is accurate and complete, the outputs should appear at our fingertips. Finally, business and accounting changes should be easily identified and addressed.

Tax Prodigy Provision

Tax Prodigy Provision is a powerful, web-based (SaaS) ASC 740 engine that is accurate, comprehensive, and easy to use. Tax Prodigy Provision is designed to follow the natural flow of the tax accounting process intuitively, even for the most technically-minded tax professionals. The application addresses every aspect of the provision including S-Ox controls. The algorithms within Tax Prodigy Provision provide accurate accounting for income tax at the detailed level mandated by the rules of ASC 740. In other words: no more short cuts, no more guesstimated blended rates, and no more spreadsheet blows. Tax Prodigy Provision is the solution that supports the SMB tax executive in getting ASC 740 right.

Author: With more than 25 years’ experience as a tax executive, in both industry and consultancy, Stephen Day is accomplished in leading high-performing teams to achieve results. He has the rare ability to deliver tax planning, driven by the business landscape, and to operationalize those tax strategies through creative process and organizational solutions. Simply put, he is passionate about developing and improving tax and finance operations to create value for the enterprise.