Leveraging Technology to Streamline the Return-to-Provision Process
Navigating Return to Provision - Part 3
In the first two blogs in this series we covered the fundamentals of the return to provision (RTP) process, explored the unique complexities Swiss companies face when operating across multiple cantons, and discussed the additional complexities introduced by the Pillar Two rules. In this blog we describe how redefining process and introducing technology can increase efficiency and decrease risk of error to reduce the burden of the RTP.
Modernising the RTP process is no longer optional—it's essential for efficiency and risk reduction. Companies that still rely on Excel for the income tax provision expose themselves to broken links, formula errors, and heavy manual work. This onerous approach increases the risk of mistakes and even financial misstatements. By embracing tax technology, organisations can transform the RTP process into a streamlined, reliable step in their financial reporting.
Dedicated tax provision solutions are replacing sprawling spreadsheets with controlled, auditable systems. These tools automate calculations, generate standardised reports, and assist with preparation of figures required for disclosure. Taking into consideration the time savings through preparation and audit, risk reduction and lower external fees, a tax provision solution has a typical return on investment of 2 years with ongoing savings of 30%.
Specifically in relation to RTP, such solutions can make it easy to reconcile provision and return figures by automating the comparison. They also provide a robust data foundation for downstream processes, further increasing the return on investment.
Integration with ERP and consolidation systems eliminates tedious data wrangling, improves data quality, and frees up valuable time for analysis and decision-making. This can be achieved either with a standalone tax provision tool or tax schedules built into the consolidation system. Instead of spending 80% of their time gathering data, tax teams can focus on making accurate decisions on tax treatment. Integration also ensures that as pre-tax numbers change the tax calculations can be refreshed quickly, supporting a faster close cycle, more accurate provisions, and smaller RTP adjustments.
A smooth RTP process depends on strong links between the tax provision and tax return steps. Too often, these are performed independently with little information sharing, leading to inconsistent data, incorrect assumptions, and overwhelming working papers. The result? Cumbersome reconciliations and large RTP adjustments—often a sign of poor data quality and rushed decisions at year-end—a red flag for auditors.
Technology bridges the gap between accounting and compliance teams, who often have different priorities but overlapping data needs. A centralised platform ensures everyone works from the same, accurate information and reduces miscommunication and gaps. Rule-based automation means tax treatments are applied consistently and that the deferred tax impacts of current tax adjustments are made reliably.
Relying on the consistent data in the solution, analytics can help to visualise effective tax rate drivers, identify unusual variances and track key tax metrics over time. For instance, a system might flag that a permanent difference in the RTP true-up is outside an expected range or could identify that a particular RTP adjustment repeats every year.
The complexity of today’s tax landscape, especially with new requirements like Pillar Two and the bidirectional interaction between current / deferred tax and Top-up Tax, makes manual processes even riskier. Integrated technology solutions can handle multiple regimes and RTP adjustments in one place, reducing the risk of misstatements and costly fines.
Companies that implement integrated tax provision technology have reported shaving days off the financial close and being able to file tax returns earlier by leveraging the clean, accessible data. The RTP adjustments are reduced to a minimum and can be done in parallel with the tax return filing.
How can organisations take action to modernise their return-to-provision process?
- Investigate: Map your current RTP workflow, identifying data sources, calculations, and bottlenecks. Recognise delays, such as late RTP true-ups, that cause year-end pressure. Identify and investigate the reasons for large RTP adjustments in the past, e.g. due to lack of data at provisioning, incorrect assumptions, incorrect tax treatments, incomplete provision due to time pressure.
- Design: Define a future-state process that spreads work throughout the year with pre-close provisions and interim true-ups, enabling smoother, timely adjustments. Align the income tax return process to the provision process to make the RTP step less significant.
- Integrate: Ensure that the tax provision and income tax return data is connected. This is achieved most easily with a central data store as a single source of truth, that is integrated into underlying data sources such as the ERP.
- Automate: A tax provision solution used for the year-end provision also provides functionalities for the RTP. Automated tax adjustments should flow both into the tax provision and the income tax return calculations. Reconciliation done at RTP time can be automated to allow more capacity for analysis.
The RTP process is a vital link between tax provision and compliance, but it is often hindered by data silos, manual workflows, and differing accounting bases. Done right, an automated RTP process can not only withstand the pressures of today’s environment but also add value to the organisation through improved compliance, efficiency, and strategic tax insight. The question for tax leaders is no longer why modernise, but how quickly they can navigate the change to emerge with a future-ready tax function.
