CFOs are continuing to address company technology needs, while balancing those needs against tightening budgets, talent issues, and the financial systems that have been impacted by recent events.
In payments service provider Stripe’s 2023 Insight Report, 62% of surveyed finance leaders said tax and compliance have become a bigger priority, as many companies look to reduce costs and/or avoid penalties.
The desire to push automation isn’t just to lighten the workload of executives and their teams, but to free up space for new approaches. According to Stripe findings, finance leaders wish to redirect their efforts towards more strategic work such as compliance initiatives, and away from more operational, non-growth-related tasks that can be automated.
For finance executives who feel as if they’re behind on compliance strategy, Stripe’s head of information Emily Glassberg Sands told CFO the catalyst isn’t a plug-and-play tech product. Rather, an internal audit of the progress and outlook of revenue and cash flow data through a compliance lens is paramount prior to seeking an answer for compliance via technology.
“The first step is spotting sources of friction,” said Glassberg Sands. “Are your books getting harder or taking longer to close, or is your global tax compliance becoming more challenging? Is the use of multiple vendors accelerating or stalling key compliance processes? Software can help, but it’s important to identify the root of the complexity.
“From there, companies should identify which revenue and financial management tools can best automate processes across multiple systems and business lines simultaneously,” Glassberg Sands said. “Even for the biggest or most complex revenue operations. Interoperability between systems and accessing high-integrity data should be key pillars when selecting tools that can help businesses stay compliant.”
Only 13% of C-suite executives surveyed said they wish to automate calculations and sales tax reporting. Rather, more executives said automation in invoicing B2B payments (35%), revenue reconciliation and accounting (29%), and billing and quote to cash (22%) duties would be better completed with automation.
“Taxes are hard,” said Glassberg Sands. “There were nearly 600 changes to sales tax rules and rates in the U.S.’s over 11,000 tax jurisdictions last year, and 20 changes to VAT in the EU. With an average of 30% interest charged on past-due tax in the U.S., it is a costly issue to get wrong.”
For companies with products that sell in mass on a global scale, reliance on software for international tax compliance is a must. According to Glassberg Sands, a good tax product helps solve these problems. “OpenAI is using Stripe not just to sell its ChatGPT Plus and DALL-E subscriptions, but to automate sales tax calculation and reporting as it sells globally,” she said. “That means they spend less time on tax and more building AI.”
Finance leaders want to consolidate their SaaS partners for a variety of reasons, including more than a quarter (28%) saying it would positively impact streamlined data management, while the same amount looks to implement consolidation in their cost-cutting initiatives.
On top of this consolidation, some companies have made efforts to develop software in-house to avoid paying a SaaS provider. According to Glassberg Sands, this is something CFOs must be wary of when being pitched on how to reduce excess tech spend.
“Beware the cost of homegrown software,” she said. “I hear time and again from businesses that they think building their own tools to manage their financial processes will be cheaper than using a third party, but it’s so often not the case.”
According to findings, 50% of survey respondents who built their own payments or financial management software regret the time and cost involved. Nearly three-quarters (75%) said their in-house products led to reduced conversion or higher operating costs.