Digital tax transformation: Adding tax compliance services to benefit your accounting firm and clients

Across the business and accounting world, a digital transformation (DX) was already under way, and 2020 simply accelerated that shift. For accounting firms deemed essential services, it was critical to adopt practices to enable a continuation of services for clients. While many firms modified their operating practices, it became apparent that by embracing technology, accounting practices could avoid service disruption as well as remain relevant and competitive.

A DX strategy in sales tax services supports client growth, efficiency in resourcing, and remote working while still supplying exemplary service. In addition, many firms are looking to add services to attract new clients while establishing client lifetime value, all without increasing staff and overhead.

At the same time, market forces are pushing your clients to outsource many basic operational functions. Much like payroll, sales tax returns can be managed by an accounting partner, freeing up valuable employee time while increasing accuracy and minimizing risk of errors. Due to the rise in economic nexus laws and the expansion of ecommerce sales internationally, the burden and complexity of managing global tax compliance has increased significantly for many businesses — while time and energy have not. Clients see great value in partnering with a single service provider for multiple accounting functions, prompting firms to enter the sales tax returns preparation and filing space. 

Automating the returns process provides a solution that enables your firm to offer these services without staffing a specialized team, scale as you take on more clients, and improve customer satisfaction and retention.

In the past, manual sales tax filing services were offered in response to client demand and didn’t serve as a profit center or high-value service for firms. Accounting firms struggle to keep up with client demand for these services, as well as staying up to date on shifting requirements, state-by-state legislative changes, and regulatory complexity on a global scale. These factors made it challenging to grow their client base and profit margins due to increasing complexity and the reliance on manual processes. However, to remain competitive, firms must consider how automation helps transform sales tax services into a highly profitable, recurring revenue source, increasing client stickiness and fostering trusted client relationships.

As IDC analyst Danielle Hernandez tells Forbes, “Now is the time for digital transformation to shine, helping organizations multiply the value they produce with automation, intelligence, and connectivity because that’s what is key to a faster economic recovery.”

Sales tax preparation and returns services are labor-intensive, manual processes, which is why many clients are increasingly looking to outsource these tasks to a trusted accounting partner.

Since the South Dakota v. Wayfair, Inc. ruling in 2018, clients have seen a rise in sales tax obligations, compliance requirements, and sheer complexity as a result of states’ evolving economic nexus laws. Further, the dramatic move to ecommerce in response to a global pandemic resulted in businesses racing online to continue serving customers and reach new markets as in-person sales became more limited. The combination pushed many businesses to consider how firms’ compliance services can help them manage it all.

Accounting firms offering sales tax services encounter similar challenges, with manual processes being a drain on resources and lacking the necessary scalability to turn services into a profitable offering. Modern, growth-oriented firms can no longer remain dependent on staff to track, manage, and deliver these client services. Employing cloud-based technologies to handle returns preparation, filing, and remittance enables firms to free employees from repetitive, time-consuming tasks to focus on more critical aspects of client tax compliance services. To address the realities of client urgency and demand, firms must identify and embrace technologies that increase efficiencies with process and enable staff to be more productive and attentive to clients.

Accounting firms of all sizes continuously look for opportunities to grow their practice and provide additional value to clients. In order to grow without increasing overhead, firms need to move away from manual processes that limit capacity and adopt current technology solutions that scale returns services to more clients without adding staff. This shift in mindset is the key to growth and increased profitability. Thinking a few steps ahead, consider how modernizing your returns service to an automated, digital solution can improve process while also supporting growth for the firm and increasing client satisfaction.

Existing clients will seek your counsel and additional services, so they can focus on growing their businesses. As a trusted advisor, adding automated returns services to your portfolio helps clients feel confident that your firm can expertly and efficiently handle their sales tax compliance needs, wherever business growth takes them.

The successful growth of any accounting firm relies on the ability to create long-term client relationships and provide an experience that’s better or more valued than that of your competitors. Firms of all sizes are ever mindful of client retention, but what does it take to maintain these valued relationships for the long term? Becoming a full-service accounting practice offering comprehensive services for clients, including cloud-based returns automation services, only helps increase retention and revenue per client. For any additional value your firm provides and the more intricate your involvement with your client’s complex compliance scenario, the less likely it is for them to move their business elsewhere. Further, building out these services in-house provides an opportunity for your firm to meet the full needs of your clients.

The increased physical distancing between client and firm has forced many accounting practices to provide services remotely. Without face-to-face meetings or employees in the office, clients need confidence that their needs are still being met without delays or the possibility of missing a filing deadline. If your firm is still taking an analog approach to managing client services, this disruption may well impact both the service you provide, and your bottom line. By employing digital solutions for traditionally manual processes or services, clients can rest easy knowing your accounting firm continues to manage their services, regardless of remote working scenarios. In addition, with client data held securely in the cloud, accounting professionals can continue to analyze data and anticipate client needs, including expanding sales tax requirements or additional registration, filing, and remittance to support compliance with changing sales tax obligations.

To maintain a competitive advantage and weather times of uncertainty, accounting practices need to enter the world of digital transformation. Implementing automation solutions for sales tax returns provides the opportunity for your firm to gain efficiencies, grow your tax compliance services business, increase profitability, and improve client satisfaction and retention.

Avalara Managed Returns for Accountants provides the cloud-based tools, tax content, and support required to efficiently add sales tax return preparation to your firm’s service offerings. Designed for accounting firms, Managed Returns for Accountants leverages the same technology Avalara uses for its own compliance operations, handling over 2 million returns and preparing $8.4 billion of taxes for remittance in 2019.