Digital transformation: More than a buzz word
The digital transformation had become a buzz word but today it is a way of life. Look at almost any organization, and you will see that it is a boardroom conversation. It is a top priority for CXOs today.
What exactly is a digital transformation?
Most simply put, digital transformation (DX) is the incorporation of digital expertise into all areas of a business. This means a fundamental change in how businesses operate, and customers served. Not limited to that, it also brings in a change in the overall culture. Services like online banking or ordering your favorite food using an app or booking tickets for movies or travel, shopping or for that matter even paying taxes. While this brings in possible every service to your fingertips, nothing comes without its own set of challenges.
When all that happens online, it means loads of data and thereby the risk of it being compromised. In times like these organisations worldwide are putting in a lot of resources in R&D to keep up with the ever-growing complex cyber threats in order to ensure data protection. Any such data theft leads to a huge loss, not just in terms of financial and reputation but all that comes with sensitive data about a company or an individual being available to a cybercriminal. But like every other business risk, this too is being addressed.
Organizations are transitioning from an on-premise software solution to cloud storage, which is not as simple as it sounds. According to a recent study by International Data Group (IDG), while 89% of companies plan to adopt a “digital-first” strategy, only 44% have actually taken the steps to do it. The research shows that by 2020, 83% of enterprise workloads will have shifted to cloud and by 2025, more than half of large companies will have adopted an all-cloud Software as a Service (SaaS) strategy.
So, if everyone is moving to cloud storage, what are the security glitches? Gartner in their article ‘Is the Cloud Secure?’ mentioned that “through 2020, public cloud infrastructure as a service (IaaS) workloads will suffer at least 60% fewer security incidents than those in traditional data centers.” However, many organisations in India are still of the belief that security on-premise can be better enforced. But on-premise security is only as reliable as the security policies implemented by the organisation. Even slight oversight can lead to data theft thereby leading to heavy financial losses and trust.
Cloud service providers understand that thousands of customers entrust sensitive data in their hands, and so they strive for meeting security requirements of the highest standards. With data becoming central to every kind of business operation, moving to the cloud becomes the next natural step towards digital transformation.
Enterprise IT and finance are poised for change
A little over a couple of years ago in July 2017, we saw a new milestone being achieved in taxation in India as the Goods and Services Tax came into effect. With the introduction of GST, it would impact a host of functions in an organization, including tax, business and IT, making it all the more critical to get prepared for this transition.
Companies that did not prepare well enough for processing GST and had to face a tough time. During this transition time, the GST compliance process was managed by the CFOs who were posed with additional challenges: increased regulatory compliance, technology up-gradation, and increased working capital.
During the GST implementation process, the finance and technology functions of an organization worked together to ensure a smooth transition.
The digital transformation of finance, led by GST, has impacted the roles and responsibilities of today’s CFOs. Now, it is not just enough for a CFO to simply cater to the financial aspects of an organization but to play a larger role in influencing strategic decisions to stay tax compliant.
So, how should one implement a digital transformation strategy for tax compliance? Key points to consider:
- Information Technology and finance departments in an organization must be clued in on the upcoming change
- Both departments should work together to lay the foundation for automated systems
- Technology upgrade, as a legacy system may not be able to withstand or work with advanced technology
- Corporate finance or accounting teams need to ensure that automation of operations is not just limited to employee salaries or company profits but reflect under tax compliance.
SaaS is best for indirect tax compliance
Numerous business processes benefit from cloud agility, but it is particularly well-suited to indirect taxes given their complexity and dynamic nature. Goods and Services Tax (GST), the principal indirect tax in India, is a transaction tax wherein compliances have been the cornerstone for its successful implementation.
Recently, the World Bank released a statement saying, ‘the Indian GST system is among the most complex in the world’. So, what can be done to uncomplicate an otherwise complicated system?
We are in a time where businesses need to figure out how new, digital era tax policies are changing the way they are carried out. The need of the hour is a dynamic, user-friendly software. While there are many software options that can help businesses to automate, each business needs to assess the software best suited for the same.
While selecting a cloud solution to handle tax compliances, it is important to consider the maturity of the solution. In GST, compliance is an area where updates need to be regular. It is critical to assess the capabilities of the solution, which should be able to accommodate the updates without interfering with the on-going tasks.
Cloud – a clear winner for managing small or large-scale tax automation
The pros of migrating to the cloud are tenfold. A cloud-based system will enable the organisation to prepare for future needs along with modernising the current IT base. Faster application implementation and deployment, disaster recovery and cost efficiency are some of the USPs. Cloud computing helps in shifting IT expenditure to a pay-as-you-go model. Though tracking and improving fundamental server software is time-consuming, it is an essential process that requires periodic and at times immediate advancements, which the cloud provider will take care of, be it database backup, software upgrades, and periodic maintenance.
It is high time organisations set their DX plan in motion and roll out an initiative that will enable them to be better equipped to cater to the digital way of doing business.
Author: Manjula Muthukrishnan, Managing Director, Avalara India
Source: Elets The Banking & Finance Post