In recent years, technology has played an important role in driving innovation across the UK tax industry. Advancements within technology mean that the co-sourcing model has moved from a binary perspective, where tasks are either performed solely in-house or fully outsourced, to a more flexible approach that benefits both parties. Russell Gammon, Chief Solutions Officer at Tax Systems, argues that the co-sourcing model holds promise for a complete evolution of the way tax professionals work.
Not so long ago, tax professionals worked on siloed desktops, forcing a black and white operating model; either an in-house team took responsibility for tax processes, or everything was outsourced to an external specialist. Now, increasingly digitised tax processes that enable collaboration and agile working practices are making hybrid co-sourcing models a realistic, practical choice for busy tax departments.
Why choose co-sourcing?
Businesses that open their tax compliance up to co-sourcing will be rewarded with significantly more flexibility while keeping control of costs. A corporate team can engage an advisor’s specialised knowledge, tools, and resources to fill a particular skills gap, for example. On the other hand, if an organisation already has strong systems and data skills, there is no tie-in to an outsourcing contract. Co-sourcing provides more fluidity. It doesn’t have to be all or nothing, with organisations now able to pick and choose which tasks to outsource and which to keep in house according to business needs. And advisers can benefit too – using this tech-led co-sourcing approach, there is much greater scope to offer their clients valuable advice.
An array of challenges have surfaced in 2023; financial uncertainty caused businesses to implement budget cuts which, as a result, lead to reduced funds for recruitment and training. Co-sourcing provides the perfect solution to this, prompting companies to work with advisors to bolster their existing skills and expertise, rather than fully outsourcing the service, which can be isolated and expensive. We also see some corporates wanting a “rubber stamp” from a firm to ensure accuracy of their returns, prior to submission to HMRC. The growth of cloud technology allows organisations to work on the same platforms, eliminating the ‘us’ and ‘them’ mentality that often comes with outsourcing. Instead, it offers a much more collaborative approach.
Sitting at the heart of these developments is a range of significant technological innovations and trends that help ensure the co-sourcing model is practical and logical for finance teams.
Automation and data analytics
When combined, automation and data analytics can become a very powerful tool for businesses. Using automation to take over common manual tasks allows organisations to elevate their tax processes, delivering more rapid and accurate reporting and sophisticated data insights. New and advanced data analytic technologies can help identify trends and patterns in the data that may end up being useful for planning and compliance.
Cloud computing
Cloud-based solutions allow both the advisor and business to have access to the same information and systems at the same time, helping improve collaboration and coordination. Throughout 2023, cloud-based services will gain momentum leading to UK tax industry departments spending more on cloud-based services as opposed to desktop technology by 2024. Eliminating the burden of system administration and maintenance will free up time for tax teams to focus on more value-added activities whilst providing better service, improved agility, and greater security.
Security
With the sheer amount of sensitive data that tax teams hold, alongside the growth of regulations like GDPR, data security is critical in the finance sector. Whilst the cloud provides a robust level of security, it can’t be relied upon for complete cover. Instead, organisations must utilise the wide range of technology created specifically for data protection and access control, such as multi-factor authentication. These technologies will ensure that confidential data is protected and only accessible to authorised personnel.
Let co-sourcing lend a hand in 2023
Co-sourcing models offer a flexible and attractive approach to tax and accountancy, with those businesses adopting them now in a strong position to realise the array of important benefits. This model allows a selection of best-of-breed expertise, without locking organisations into expensive and lengthy contracts. This agile scalability can be a good solution for businesses that experience rapid growth or changes in their tax needs, as they only use and pay for their advisor’s work as and when they need it.
With these capabilities and processes in place, tax departments can continue to be agile – a quality which is likely to prove essential in the current climate. And as technology continues to improve, with co-sourcing building significant momentum, we expect it will become the mainstay of the tax industry in 2023 and for years to come.
