Why tax must shape ERP modernization early on

Enterprise resource planning (ERP) modernization in a business is often viewed by company leadership through the lenses of technology, efficiency and digital transformation. However, as a recent Harvard Business Review Analytic Services (HBRAS) report highlights, one often-overlooked consideration that can significantly influence the success of ERP initiatives is the integration of a company’s tax function.

As detailed in the HBRAS report, Building Tax Determination into ERP Modernization, organizations that delay tax considerations until late in an ERP implementation often face added costs, compliance risks and operational complexity. These points are emphasized by one of the report’s contributors, Robert Clarke, Grant Thornton’s Global Indirect Tax Solutions Leader.

Throughout the report, Clarke emphasizes the importance of integrating tax requirements into ERP modernization efforts at the beginning of that process. Clarke states that organizations often encounter unnecessary costs and complications when tax technology considerations and requirements are added after a system implementation is already underway.

As Clarke states in the report, “It’s a best practice (for the tax calculation engine) to get upgraded at the same time as some other big technology change.” By contrast, when tax software is only considered and put in place after an ERP implementation, Clarke states that this “patchwork” approach often is delayed by slower-moving components and lack of anticipated budget, particularly when retrofitted to older ERP systems.

By aligning tax transformation with ERP modernization, Clarke writes, companies can increase efficiency by avoiding duplicative work, increase accuracy by improving data quality and create a stronger foundation for ongoing compliance through better visibility into the process. In the report, Clarke also reflects on the increasingly strategic role tax plays in helping organizations navigate evolving regulatory requirements while supporting broader business objectives.

The report makes clear that as global tax regulations become more complex and governments demand faster, more detailed reporting, a business’s tax function can no longer be treated as an afterthought in technology transformation projects. To learn more, download the complete HBRAS report (PDF - 379.36KB).

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