Magazine for Senior Financial Executives: Automating the Tax Department

Automating the Tax Department

John J. Xenakes

THREE HIGH-END SYSTEMS MAKE COMPLIANCE A LOT LESS TAXING.

Just as accounting software frees controllers from spending all their time keeping the books, the latest corporate tax software packages are helping tax managers spend more time on tax planning than on tax compliance. But while there are many enterprise accounting system vendors, there are only three major vendors of tax systems for large companies: Arthur Andersen LLP, Deloitte & Touche Technologies LLC, and Computer Language Research Inc. During the past few years, all three vendors have been upgrading their products into full-fledged client/server products that can integrate with client/server accounting systems.

Corning Inc., for instance, is fully integrating Arthur Andersen’s AACTS system with its PeopleSoft general ledger module. The Coming, N.Y., glass-product manufacturer uses a single chart of accounts for its 15 domestic entities and 80 international subsidiaries. This makes it possible to map the general ledger accounts to about 1,000 tax accounts, and to set up formulas in the AACTS system that make 175 adjustments automatically.

Thanks to AACTS, and in particular its real-time accrual module, Corning is completely revising the way it does taxes. “As transactions occur, we will be moving them continually from the general ledger to the tax accrual system,” says Tom Holland, tax systems manager. “As transactions occur throughout the year, we will analyze them, and once the year is completed, we’ll have 80 to 90 percent of our tax adjustments analyzed and ready to go.” This process also guarantees that provisional calculations (computations of estimated taxes to be paid each month or quarter) will be more accurate.

“We’re in our first year of implementation, so our real payback will be next year,” says Holland. “What we’re hearing from our CFOs is that they want us to do more than just complete tax returns. They want the big tax-saving ideas, and using this system will give us more time to find them.”

MAPPING GL CODES

Corporate tax software, not surprisingly, is far more complicated than personal tax software, involving a number of separate programs and modules. The first module that must be used is the one that maps the general ledger codes from the company’s accounting software to the tax software account codes.

“We haven’t been able to standardize our charts of accounts in all our divisions,” says Peter Zagrobelny, manager of tax technology at PepsiCo Inc. PepsiCo has implemented CorpTax from Deloitte & Touche to produce a federal return for about 200 legal entities as well as hundreds of state and city returns. “But CorpTax lets us convert all our different general ledger formats into a standard set of accounts for tax purposes,” adds Zagrobelny.

When these mappings are completed, typical use of the software begins with the tax provision module to compute the first quarterly estimated tax payment in April of the tax year (assuming a calendar fiscal year). Once the tax year has been completed, work with the tax compliance module can begin. This module computes federal tax returns, to be filed on September 15, and the state and city returns, to be filed no later than October 15. During this period, the international tax module is used to perform the tax computations for income from foreign subsidiaries.

MAKING A CHOICE

The three major corporate tax packages offer more or less the same functionality; hence, choosing one often comes down to other factors. For example, since post-sales support is an important factor, some companies may be influenced by whether they’re more comfortable being supported by a consulting firm (Arthur Andersen, Deloitte & Touche Tax Technologies) or a software firm (the Computer Language Research unit of The Thomson Corp.).

Beyond support, many users would agree with Zagrobelny that the choice of software depends on the user interface that determines how the taxes are computed. “We compared Andersen’s product to CorpTax, and we felt that we were more comfortable with CorpTax’s more flexible approach than with Andersen’s task-oriented methodology,” he says.

For other users, the choice of software depends on the platform. Client/server versions of AACTS and Computer Language’s In-Source are currently available, while a client/server version of CorpTax will be delivered in September 1999.

A client/server platform was particularly important in last year’s decision by Washington Post Co. to upgrade its tax software to InSource CS to prepare 65 federal returns and 350 state/city returns for its numerous divisions.

“Our tax operations are decentralized, and we had the tax database on four local area networks in four locations around the country,” explains Dean Rohrbaugh, manager of tax systems for the media conglomerate. “Now we have a single database, here in Washington. The system lets people dial in and work from anywhere. They can make changes, and we can all look at them at the same time.”

Of course, high-powered client/server tax software systems aren’t for everyone. Midsized businesses, especially those without international operations, should consider smaller systems, such as ProSystem fx from CCH Inc. (800-45-PROFX; www:prosystemfx.com).

No matter how sophisticated a tax system may be, it’s no substitute for expertise, or a panacea for inefficient processes.

“In general, tax technology is only one piece of the pie,” says PepsiCo’s Zagrobelny. “You have to take the people, processes, and technology into account, and look at it as tax process reengineering. Pick the processes first, and then pick the technology that does what you need to do.”.

MANY HAPPIER RETURNS

Arthur Andersen LLP Computer Language Deloitte & Touche Tax

(800) USA-1120 Research Inc. Technologies LLC

www.arthurandersen.com/ (800) FAST-TAX; ext. 1-7332 (BOO) 966-1639

technology/aacts www.clr.com www.corptax.com

SOFTWARE SOFTWARE SOFTWARE

AACTS InSource CorpTax

PRICE PRICE PRICE

$5,000 – $100,000 $5,000 – $37,500 $10,000 – $30,000

COPYRIGHT 1998 CFO Publishing Corp.

COPYRIGHT 2004 Gale Group