EPM first: Reframing tax with EPM integration

Companies that integrate tax into an EPM system (Enterprise Performance Management) transform their tax function from merely a compliance task into a strategic powerhouse. In this blog, Dieuwke de Haan, Marit van den Akker, and Hans van der Leeden explain how you can improve your business results in this way.

When people think of tax, they are quick to associate it with complexity and compliance with laws and regulations. They often see it as a purely functional subject. However, when you integrate tax into your EPM system, it becomes an exciting and strategic part of your organisation. Integrating tax processes within EPM allows you to streamline your tax operations, improve compliance, and make better decisions.

Enterprise Performance Management (EPM) is a system that helps organisations understand their business results by bringing together data from different departments. Think of it as an overarching layer that combines financial and operational information to assist with planning, forecasting, reporting, and – yes – tax. Initially, EPM focused on financial data, but it now also includes non-financial data such as CSRD and HR statistics, giving you a more comprehensive view of business results and enabling better strategic decision making.

Our American colleagues recently indicated in an article how an 'EPM First' strategy can provide significant value and clarity for your digital financial journey, rather than diving straight into an ERP transformation. As mentioned in the 'EPM First Article': "The need for change caused many organisations to overhaul their Enterprise Resource Planning (ERP) and related systems that provide the core data needed to feed business insights, instead of looking at the blueprint (of the house that will support it)."

It becomes even more interesting when the tax function enters the picture, as it is expected that tax will increasingly play a strategic role. The Tax Function Benchmark Survey reveals that currently only twenty percent of the tax function’s time remains available for strategic advice, with nearly half of the tax leaders approached for the survey believing that technological solutions can help address capacity issues.

The tax function faces increasing challenges: digitalisation, the net zero transition, global minimum tax and associated compliance issues, and digital reporting requirements. The rapidly changing tax landscape forces executives to look at how the tax function is organised within their company and how the tax strategy aligns with commercial goals. By applying an 'EPM First' approach, the tax function plays a valuable role in the business strategy.

For tax professionals, this shift means moving from cumbersome and time-consuming spreadsheet work to an automated system that consistently captures and analyses both deferred and current tax data. EPM (Enterprise Performance Management) can facilitate forecasts and variance analyses with just the push of a button. This level of automation reduces manual errors and frees up time for more insightful work. Using a consolidated data system ensures accuracy and creates a single source of truth, extending beyond traditional corporate tax recording to support the documentation of Pillar Two, CbCR (Country-by-Country Reporting), and Safe Harbor, resulting in reduced compliance complexity and improved strategic tax reporting.

With the rapid digitalisation of tax authorities, the role of data is becoming increasingly important. There is a demand for more transparency and digital reporting. This places pressure on the tax function to process ever-growing amounts of data and to monitor data quality. EPM provides a solution for monitoring data quality and compliance by ensuring the consistency of tax data throughout the organisation. Additionally, EPM includes detailed audit trails of all transactions, including tax-related transactions. Moreover, EPM can be configured to automatically comply with various tax regulations and reporting requirements.

Benefits of integrating taxation into EPM:

1. Unified data approach 
   EPM integrates tax data with financial and operational data, creating a 'single source of truth.' This unified approach ensures consistency and accuracy in your reporting and compliance.
2. Real-time monitoring and adjustments
   EPM systems offer real-time monitoring of tax data, allowing you to quickly implement desired adjustments. This ensures that you can identify and resolve any discrepancies or issues promptly, preventing them from escalating into larger problems that could result in fines. Real-time monitoring also means you can stay ahead of regulatory changes and ensure your tax reporting remains compliant.
3. Automated tax calculations
   Automating tax calculations within an EPM system eliminates the need for manual data entry and complex spreadsheet manipulations. Manual processes are prone to human error, which can result in incorrect tax filings. Automated calculations ensure that tax obligations are calculated accurately based on the most up-to-date financial data. As a result, you reduce the risk of errors that could lead to fines and penalties.
4. Improved compliance and reporting
   EPM systems help you comply with tax regulations and reporting requirements. By automating tax calculations and reports, you can submit accurate tax filings on time. This also reduces the risk of fines and penalties.
5. Enhanced tax performance
   Incorporating taxation into an EPM system allows you to better manage your tax performance. EPM systems provide insights and analyses that help you optimise tax strategies, enhance the presentation of the tax function and tax obligations, and ensure that you allocate sufficient resources for tax payments.
6. Adaptability to changing regulations
   EPM systems are designed to adapt to new and changing tax regulations, such as Pillar Two, CbCR, and Safe Harbor. This adaptability enables your organisation to remain compliant and quickly respond to regulatory changes.
7. Increased efficiency and risk mitigation
   By automating and integrating tax processes into EPM, you can reduce manual activities, increase efficiency, and mitigate tax-related risks. EPM systems offer automated controls and workflows that improve data management and security.
8. Strategic decision-making
   EPM systems enable you to look ahead and make informed strategic decisions. By combining reports from previous periods with forecasts, EPM provides a forward-looking view of tax positions and obligations. This leads to better financial planning and decision-making.

In short, by integrating taxation into your EPM system, you transform it from a routine compliance task into an integral part of your organisation's strategic framework.

How do you start integrating an EPM system?

Ask yourself these questions to determine if an EPM First can work for the tax strategy of your organisation:

• Do we currently have an EPM system that supports our tax reporting? If not, what steps can we take to achieve this?
• Do we have a clear vision of the specific systems, processes, and operational model to give the tax function a more strategic role?
• Do we have a clear understanding of our tax position and tax obligations?
• Does our current tax data model support the flexibility we need to be successful as regulations change?
• What are the expected compliance challenges when integrating taxation into EPM, and do we have a clear vision for addressing them?
• Have we considered opportunities to improve our tax insights by streamlining data usage and leveraging AI solutions?

With that, your organisation will be ready to start a successful EPM-Intergration.