The future of tax technology
Founder, Head of Tax Technology at BDO
Ian Bowden has worked in tax technology for over 23 years and is seen as one of the leading experts in this field. He joined BDO as head of Tax Technology last year having been the national Tax Technology leader at PwC. We chatted with him recently to get his views on where tax technology is going and how it can benefit accountancy firms and their clients.
Ian, how long have you worked in tax technology for and what roles have you worked in? How has the technology changed during this period?
So, I’ve been in technology for around 23 years. I started initially with Microsoft in Australia, on the basics, and then moved to PwC in the UK where I spent 21 years focussed on tax technology, before moving to BDO to lead the tax technology practice.
Initially, I was helping to design and improve the technology to support internal compliance offerings. So, thinking about how we do things more effectively, how we deliver to clients in a better way with process and technology. From then I recognised the opportunity to take what I had learnt improving PwC’s internal compliance and do that for a client’s own internal functions.
In simple terms, professional services firms are broken down to deliver three things. They help client’s insource, i.e. help clients do the work themselves, they help clients co-source, where professional services firms will do a little bit and the clients will do a little bit and then the classic outsourcing model of handing over chunks of what needs to be done. In my career, I’ve been lucky, I’ve worked across all those areas. I’ve helped my own firm improve and then I’ve taken those ideas directly to clients to help them insource. So, it’s been quite a journey over the years, but it has been really interesting.
In relation to your second point - How has technology changed in that 23 year period? Probably a surprising answer, but not as much as you’d expect. When I started, it was Lotus Notes 1-2-3, the, kind of, the pre-Excel solutions and the genesis of some basic compliance software that we
were actually developing ourselves at the time. The things that have changed are, the processing power, the technology itself, the user interfaces and experiences (ie ease of use), but the concepts themselves haven’t changed significantly.
We’ve seen and we are seeing lots of ways where automation is improving things and the processing power is certainly helping in that way, and there’s a lot of buzz in the market at the moment around robotic process automation, AI, machine learning etc. and some organisations are being a bit more holistic in their thinking. They aren’t thinking about the technology replacing people, they are using it to replace tasks.
They’re thinking about how their tax technology strategy fits with their overall approach, but for too long groups have focused on individual point solutions and not really thought about the wider vision.
That’s what’s changed, really. The organisations are now moving away from the best integrated solution for a job, to now looking at perhaps the best integrated and they are actually starting to move away from bespoke solutions and thinking more around market standard software.
So, the world of building giant bespoke one-off solutions for organisations has changed dramatically. A lot of the concepts we were developing when I first started are still firmly in place. You still need to provide tax computation information and you still need to provide reporting information - although that is electronic now rather than paper. So, although it’s been an incredibly dynamic market, and the technology is far easier to use, it has been a relatively slow transformation.
What was your role at PwC when you finished there?
I started on the development side of things, working more on the IT technical side. At PwC, when I joined, I was in the Global Tax Technology function, so primarily working to deliver the technology that supported our global compliance offerings. I spotted an opportunity to help clients directly, and ended up leaving PwC as the Head of their Tax Technology practice in the UK, focused on the mid-markets, trying to help take the technology that we had developed for the largest organisations and make that work for the mid-tier.
I am now the Head of the Tax Technology practice here at BDO, building a new practice, but focused on seeing how we can help organisations use the technology available more effectively, rather than developing enterprise solutions in-house. I firmly believe technology firms are best placed to develop and support the leading tax technology solutions and I want to help clients select the right option from the available solutions. Tell us a bit more about the work you do with clients. Please could you provide us with an example of how working with tax technology has really benefited a client.
Yes, of course. I think when I came to BDO, I wanted to do things a little bit differently. I’ve been really lucky, I’ve made lots of mistakes, in the last 23 years, and this is an opportunity to learn from some of those and do things a little bit differently.
I came here to build a business that I’d be proud of, underpinned by a key philosophy that there has to be a better way of doing things with technology.
"Obviously we have the perks of not having to commute and managing our own day and flexi-time but that still can leave people feeling isolated with remote working. So when we're looking at the culture aspect it's really key that we’re making sure everyone's happy, everyone's together"
Primarily, with clients it’s finding the ways to do things cheaper, faster, better. I wanted BDO to be completely independent. I wanted us to be client focused, need driven, and I wanted to be the trusted advisor and say when I didn’t know how to do things.
I didn’t want us to be a software house. I think there are better software houses out there and I think we come at it from a slightly different perspective. Yes, we may have some ideas or we may have some better insights into what clients are asking for but professional services firms sometimes can be a bit naïve in thinking that they’ve got the ability to deliver or execute the technology better than proper technology houses. So, when we look at how tax technology for BDO should work, and I’ll get into an example in a minute, but it’s around a simple philosophy of, we do three things. We look at a client’s existing systems and see how they can be made more effective, from a tax perspective and, before clients go ahead and start spending money, what have they already invested in? There’s a horrible term in the industry called ‘sweating the asset’, but that’s exactly what it is. You’ve spent money, let’s make it work for you and let’s make it work for tax.
The second part I wanted to focus on was the market. There are some really good third party products out there, some leading vendors that have produced some brilliant solutions that clients don’t necessarily know about. Some really big name vendors, some really small vendors and some young kids in a garage straight out of school who have come up with a wonderful idea. I think my job today is to demystify that market, help clients understand what third party products are out there and which ones would actually work for them. So, we’re approved implementers for all of the leading third
party products and we’re keeping an eye out for the innovations that are coming through from start-ups and out of universities and everything else, as well.
The final box for me is ensuring we are looking at innovation. That we are looking at little things, little bits of robotic process automation, bits of AI, how can some of the “off the shelf” technology help in some of the things that we’re doing? And then, how does that manifest itself with clients? If we take some simple examples that organisations have done for years,something like the tax provision process. This has predominantly been done in-house by organisations on large spreadsheets which is why the technology hasn’t moved on for a lot of groups from the Lotus 1-2-3 days. Ultimately, for a lot of organisations, they’re still using a spreadsheet that’s been written by Dave and Dave’s left the organisation five years ago and he’s the only one with the password to be able to unlock some of the cells. Organisations don’t realise that there’s actually some really good stuff out there that wouldn’t cost the Earth, that helps reduce the risk, helps increase the efficiency. They may already have licenses for some simple automation technology in finance.
Let me give an example. A Head of Reporting was leaving an organisation and a lot of her knowledge was leaving with her. People are moving jobs more frequently than they ever used to, and I guess you’ll be seeing that in your line of work, as well, James.
Yes – we absolutely do see that Ian. So, what we did was we looked holistically at the year-end close process. We looked at what worked and what didn’t. We helped identify the data sources that they hadn’t necessarily recognised, so, identifying the shadow tax function.
Who in finance is doing a lot of the work to get to the basic information? Once some of that was understood, the easy bit, ironically, was the technology.
We were then able to help them design and implement the right solution for them. What that means in reality is a 60% cost saving, in terms of the time it takes to produce the year-end numbers. A 60% cost saving in training, in terms of being able to speed up the process that’s there, move from doing the year-end process from once a year to being able to do monthly information so that the cash tax forecasting position for the organisation is far closer to real time and less about estimates than it ever was. Being able to reduce the drain on some of the junior staff, doing jobs that nobody liked doing. So, they’ve gone from a position where everybody was working weekends and everybody was working late at key points of the process, to a position where it is more business as usual and more seamless. The tax function’s now able to start adding more additional value.
For them, it’s no longer around just crunching numbers and having one chance to put the adjustments through. You can put the adjustments through every couple of hours, because they can take a fresh pull of data, run it through the system and it gives them an indicative number. Once that starts netting off to zero then we’re in a really good place. You know, it has just transformed the way of working and the technology was the easy bit. The technology was really simple - it was a plug and play but being able to get to the heart of where they spend their time was the important bit. Where are the problems and did you realise we had 20 data sources when they actually thought they had one?
Some significant cost savings and benefits there. Tell me a bit more about your team and does it comprise qualified tax professionals or accountants? Do you generally recruit people with a technology background?
Yes, yes, and yes.
I thought that’d be the answer!
Indeed the perfect Tax Technologist’s is pretty difficult to build and they tend to be quite expensive, as well.
You need to be all of those things. You’ve got to be able to speak the language. Technology’s actually more about how the tools are used. It’s more about change management. It’s more about people being able to speak tax, accounting and IT. But for me, trying to find people who’ve got practical experience, who’ve worked in that environment. What I’m looking for is a team of problem solvers and solution creators that understand tax and accounting objectively but are also willing to not just do things the old way. It’s trying to find effective ways to drive technology efficiencies and, essentially, question everything in the current process. So I love practical people and I like problem solvers. I like people who’ve got in-house experience, because they’ve had to make it work. I think the biggest criticism of professional services firms is sometimes the advice they give comes from a place of good, but it’s sometimes a bit ivory tower advice and it’s not grounded in reality. I love it when I’m able to attract the talent that’s had to live with that. I’m an Engineer by trade. Before I saw the light, my world was fixing things. I think that mindset does help because the mindset is one of fixing things, caring and problem solving and that’s what you need in this industry, as long as you can speak the language and you’ve got that fixing things mentality.
How many people work in your team at the moment?
So, I’m really lucky, BDO has been hugely supportive. We have five or six very senior people who know this area well and all started at roughly the same time. We also have a good international network of tax technology people with similar skills in various key locations.
We are currently utilising the wider BDO teams to help with project delivery and focussing on identifying the good young talent. We are looking to grow by a further 10-15, in the next 12 to 18 months. But it’s not just a bums on seats type business. The tax technology market is around how can you
innovate with other ways of doing things? How can you create partnerships with people who are better at stuff than us and not necessarily thinking that we are always going to be the best at everything. So, we’re trying to do things slightly differently. BDO has been fantastic in supporting that innovation.
What is your opinion of the key benefits of tax technology for an accountancy firm and how can it give a firm a real edge over one that’s not fully embracing tax technology?
What the benefits are specifically for a firm like BDO. It’s about can I make the job more interesting? Can I make the ways of working more interesting? Can I make people coming to work a bit more excited and interested? There’s absolutely a point around upskilling people within the firm for what the new world order looks like and to enable us to be ahead of the curve. It’s also around pricing our services more effectively, so people are actually paying for value and not administration and data processing time. That’s just not valuable either. That’s not where qualified tax people or qualified accountants should be. In crude terms, for an accountancy firm, there’s top line revenue generation, but there’s also huge bottom line savings, in terms of how they can deliver things more effectively.
It’s going to play a key role for all firms and it’s something we’re having to embrace. How can a firm get a real edge over this if it isn’t embracing it? You know, we’ve touched on some of that. I think what I’ve been really impressed with at BDO is that they’ve recognised the need for change and it’s that entrepreneurial spirit, that willingness to embrace change, that is so fundamental when you’re looking at technology. You know, I joined and there was already a huge amount of working groups that were doing some really good thinking around what the future needs to look like in terms of our people and our technology. We’re currently positioning ourselves so that it’s a technology led approach and that hopefully, is manifesting itself with clients.
Our team arrived just pre COVID. In that time I’ve had access to both the UK and Global Tax Leadership teams looking at ways BDO can get better. For years I’ve been helping clients transform and improve how they do things but BDO asked directly what they could learn from clients. We should be following our own advice in this area. A proportion of what we do is compliance and there’s an opportunity to reduce the cost
of delivery and pass those savings back to clients and add some additional value. The leadership team has been fantastic in terms of embracing that and looking to the future. Our UK Chairman uses a term, ‘slow thinking’ and that isn’t about doing things slowly it’s the opposite, it's considering all possibilities before moving forward quickly and correctly.
How do you see tax technology developing over the coming years?
Globally, it’s going to be a bit of a mixed bag, because we still haven’t got a single tax technology solution that covers everything.
I hope it’s going to be around less point solutions and more reusability. In my simple world, you look at something like the statutory financial statements, tax provision and the corporate tax return - they’re ultimately the same process. They’re the same calculation, it’s just a different set of adjustments. So, holistically, how do you actually look for where the synergies are in the process? With transfer pricing, look at what we’re doing in indirect tax, because it’s transaction line level analysis, it’s company recharge, it’s cross-border. There’s an opportunity to look for synergies in the process and therefore, tax processes need to embrace technology to meet this need. In the UK, we’ve seen a huge acceleration in legislation. 2009 was probably a turning point, in terms of the SAO legislation. Then we’ve seen the PAYE, the RTI stuff in 2012, which was the first pilot in terms of making tax digital. The first wave of making tax digital has obviously started, probably a little bit watered down from the initial genesis, because of the world moved, because of EU exit, because of COVID and everything but the thinking has set the agenda for the next few years.
The drivers, in terms of a more data led approach, are fairly clear and the trend is global. If you look at Russia, Brazil, Spain and Norway, it’s all around getting data directly from systems and the revenue authorities provide a real time examination on what the numbers look like.
On the final point, I guess that you couldn’t really finish this off without mentioning it, but just the usual stuff that you’ve seen in the press around AI, robotic processing automation, etc. It's less around job replacements and more around task augmentation and taking advantage of the processing power that’s there, but you need to understand your processes.
"Technology’s actually more about how the tools are used. It’s more about change management. It’s more about people being able to speak tax, accounting and IT. But for me, trying to find people who’ve got practical experience, who’ve worked in that environment. What I’m looking for is a team of problem solvers and solution creators that understand tax and accounting objectively but are also willing to not just do things the old way."
Are there any particular apps or technology that you would recommend to other accountancy firms?
For me, it’s to not try and build your own solutions and embrace some of the really good things that you perhaps already have but you aren’t using that effectively. So, there’s a lot of great innovation out there. You need to start with an overall strategy and work out where you could add most value. If you’re an accountancy firm, where do you add value to the process and how can you innovate? You know, technology’s there to help speed up the process. If I was to be pushed into a corner, for me, I would get the accountancy firms to look at the data visualisation solutions that are out there, to help with some of the data insights. Looking at where the likes of Microsoft and others are investing significantly in these types of tools and don’t try and recreate your own. Take advantage of the billions that other people are spending on optical character recognition and everything else to provide data visualisation. That’s where the value add comes.
If you think about it, 20 years ago, when I first started doing these things, everything was done in Excel. And you would spend days looking at tables of data and putting in a pivot table if you were good at Excel and then trying to think of what a pretty graph and a chart looks like to be able to show some insight into what that data’s telling you. If you go onto Office 365 today, you right click on a bunch of data and it will suggest to you the best graph to display that data. It will give you those kinds of insights. As a junior, I’d spend days trying to make the graphs look pretty. I’d spend days trying to interpret what the data was saying. A lot of the larger firms such as Oracle and Microsoft and IBM are all giving you these things for free, in terms of being able to give you easier ways of doing that and producing it. Microsoft Power BI, Tableau, Qli, Alteryx type solutions are doing data automation, data clean-ups and data insights and are really powerful and are fairly low cost for a lot of small accountancy firms. There is real value in those.
They’ll have licences for a number of these things. They need to look at the tools that are there to help bring data together and augment it. Look at the tools that are there that enable greater data visualisation and look at some of the big names, because they perhaps already have them for free as part of their wider licence, before they start spending money. Think about how
you might add your secret sauce to that mix in terms of where can you add most value to the clients? How can you show benchmarking information? How can you show true value insight and stuff that isn’t just regurgitated? People expect you to get the numbers right and then they are looking for what value you can add to that compliance process. That’s where the value comes from.
What do you think’s the best way for an accountancy practice to start using tax technologies and do you think a practice can adopt this tech? Can a smaller practice adopt this technology or is it limited more to the larger firms?
I think for me, you need to look at your own compliance requirements and make them more efficient. There’s no better story to sell than one that you’ve lived yourselves. So is technology limited to the big firms? Absolutely not - the move from technology to the cloud has brought the price point right down. I think the main difference in where BDO does have a slight advantage over some of the slightly smaller firms is the ability to customise and put those standard processes into the technology and then innovate around the secret sauce. However it is not only the big boys that can do that because the technology is there for all.
You need to look at what you have already, what’s out there and then how do you bring that whole ethos of what I do with clients in the transformation space. Can we fix what you’ve already got? Then look at the third party solutions and look at how you innovate around them. Have a look at those. There isn’t a single client where tax technology wouldn’t help them do things cheaper, faster, better. The exact same is applicable for all accountancy firms as well. You’ll be experienced at doing things the same way, using the same spreadsheets and the same processes and that works really well, but it’s not necessarily adding additional value that clients are asking for and expecting these days.
Finally, how do you think COVID-19 will impact the future of technology and how might that be related to the world of accountancy and tax?
We learnt a huge amount in 2008/09 with the banking crisis and the post Covid world will create even more challenges. What we saw was increased regulation and more liquidity and
stress testing done internally by businesses. Governments will want their money back and tax will not be excluded from those demands. Businesses will need to produce more real time reporting to show the financial health in the first instance and secondly some businesses will be getting used to working without access to key resources and finding ways of working. You’ve effectively got a point here where those that have embraced the jump to the cloud and those that have embraced the technology are going to have more time to spend on doing the things that add value. Technology and technology automation will help businesses cut costs and get back up and running.
Now, BDO, overnight, was able to get the entire workforce working remotely and it’s some of those simple, basic elements that means you’re in a position to be able to run. Some businesses who have had manual labour intensive processes for years will be finding it tough. There will be gaps and it will get worse the longer this situation goes on.
That isn’t to say we are not all missing the office discussions and the weekend adventure stories, but COVID’s, quickly identified points of failure in people’s processes.
I am not suggesting that a global pandemic is the way for organisations to test their business continuity plans. But organisations are being tested in terms of their cash reserves and their plans. It’s going to test a company’s culture and its heart. I personally don’t want to be part of a company that’s profiteering from the suffering that’s out there. You want to be part of a company that helps everyone get through this together and people remember people who help them in these difficult times. Technology gives you a chance to do more with less but you’re seeing the fact that homeworking is being embraced and people are finding ways of doing it but you’re having to do that using simple technologies. You’re seeing Google Meet and WebEx and Skype calls etc are becoming the new normal. It’s becoming harder to do the old processes in the old way.