The role of technology in tax is changing rapidly. The tax ecosystem is currently at a turning point — the tax industry itself is currently faced with a wide range of issues, new layers of complexity, and regulatory pressure.
A new synthesis between taxation and technology is emerging and is establishing a new taxation parading that has been adopted by enterprise organizations and small businesses alike.
The new frontier of taxation is the digital realm. The adoption of digital tax accounting practices is a highly disruptive trend that brings real-time analytics, real-time access, and enhanced visibility to business owners, tax consultants, and accountants.
New technologies such as blockchain and artificial intelligence have opened new doors in the taxation ecosystem — AI-based optical character recognition, for example, is transforming the way in which businesses log and store expense information. Blockchain technology delivers interoperability between traditionally siloed tax data structures, dramatically streamlining compliance and reporting.
The most profound way in which technology is changing the tax ecosystem, however, is the rise of cloud accounting.
What is Cloud Accounting?
Cloud accounting allows businesses to eliminate the need for expensive local financial data storage, which presents security risks and take advantage of powerful taxation software and services based on remote servers.
Cloud accounting services include payroll, accounting, invoicing, accessibility, and third-party integration features, and can significantly reduce the overheads associated with executing an effective tax strategy. Businesses that use cloud accounting services benefit from a cost reduction in hardware maintenance, and an improved user interface.
A major advantage offered by cloud accounting is the ability to share financial data with team members regardless of location or time zone. Cloud accounting enabled data sharing allows accountants team members to instantly access highly accurate financial data at any time, paired with detailed AI-driven insights.
The use of cloud accounting has dramatically increased over the last decade. Data published by Forbes demonstrates that 80 percent of major enterprise organizations now operate critical financial software on cloud-based platforms that significantly improve overall business efficiency.
Getting cloud-based tax and accounting software set up at your business is relatively simple, but it’s best to enlist the help of accountancy services to ensure you’re collecting data and reporting in a compliant manner.
What Can Technology-Driven Cloud Accounting Do for Your Business?
Cloud accounting and other tech-driven tax solutions can deliver a wide range of advantages to your business regardless of size. The primary advantage offered by cloud accounting is the ability to automate otherwise time-consuming tasks.
By leveraging cloud accounting technology, businesses are able to automate the invoicing process and automatically generate invoices that are autonomously sent to customers and clients with minimal micromanagement.
Other time-consuming accountancy tasks can be automated by cloud software. The generation, management, and storage of profit and loss accounts, bank statements, and accounts receivable can all be executed via hosted software solutions that provide customizable permission levels for individual team members.
Payroll management and employee benefits can now be automatically calculated, while third-party application integration into major cloud accounting software suites allows businesses to automate other financial obligations such as expense approval or financial forecasting.
The third-party integration offered by cloud accounting platforms are extremely flexible — many online merchants, for example, accept digital currencies such as Bitcoin as a payment method. Traditional taxation software can struggle to track cryptocurrency payments, whereas third-party applications are able to provide full reporting functionality designed specifically for digital assets.
Another modern tax tech is able to assist with the complex nature of cryptocurrency tax reporting. Major cryptocurrency exchanges can work to keep customer data extremely secure and private, which can make it difficult to track trades for capital gains or income tax reporting. By providing cryptocurrency-specific tools, cloud-based taxation technology establishes a future-proof foundation for cryptocurrency adoption and tax strategy.
Tax Tech Delivers Real-Time Insight
Maintaining a real-time view of the current financial status of your business is essential to success. An effective financial strategy necessitates the collection and analysis of accurate, up to date data — without real-time insight, businesses are unable to make accurate predictions and plans.
Cloud-based tax and accounting software provide businesses with the ability to generate and analyze real-time reports on the financial status of their entire business operation. The streamlined user interface of cloud-based tax software provides rapid, actionable insight that covers outstanding invoices, debts, and cash flow data, in simple charts.
The real-time insight provided by the future of tax technology allows businesses to remain highly situationally aware, assisting in the avoidance of common financial pitfalls and cash flow restrictions.
Cloud-Based Tax Services Keep Your Data Safe
Data breaches are extremely costly for businesses of all sizes. Both large and small-scale enterprises are often the target of hackers that attempt to steal sensitive financial data. A single breach can incur a heavy cost — data published by IBM reveals that the average data breach costs businesses almost $4 million, with each individual breached record valued at over $150.
Cloud-based tax solutions and accounting software keep your business data safe with enterprise-scale security, eliminating the threat of data breaches.
Key Takeaways
Many small businesses — and some large businesses — operate under tight budget constraints that do not leave much room for professional full-time accounting staff. Performing localized tax and accounting tasks can quickly incur overhead expenses such as hardware maintenance costs and increased payroll obligations.
Cloud-based tax tech reduces the total amount of time businesses must direct toward financial strategy and tax reporting, freeing up capital that can be reinvested into the business itself. As modular, customizable services, cloud-based solutions allow businesses to pay only for the services they need.
The future of tax technology allows businesses to streamline accounting tasks, keep financial data secure, and minimize expenses with minimal effort.
