We get it. Tax planning can be a huge headache, especially for small to medium-sized businesses without a dedicated tax team. After all, few things are worse than staring down the barrel of those year-end tax deadlines, feeling anxious and burnt out by the constant bottlenecks (that even make some of us want to grab a bottle of our own come February!).
But tax planning is worth it for any business owner who truly wants to be tax efficient–because who doesn’t want to lessen their tax burden and keep more of their hard-earned money?
In our experience, some of the biggest obstacles standing in the way of easier, more effective tax planning are entrenched, manual processes that date back to the early 80s–and nothing symbolises that better than the ubiquitous spreadsheet.
Despite all of our advances in technology, the way we do our taxes remains antiquated, which forces us to manually fill out those spreadsheets as we try and navigate the cells and formulas that can confound even the best of us.
4 things everyone hates about tax spreadsheets
Anyone who claims they don’t hate tax spreadsheets is likely lying (or they’ve convinced themselves otherwise by mastering hundreds of obscure shortcuts, formulas, and formatting hacks).
You might be surprised how many businesses still run their taxes on spreadsheets–but then again, if you’ve worked in the industry long enough, you’re probably (unfortunately) all too familiar with it! And while spreadsheets are an amazing tool for many purposes, when it comes to taxes, they’re absolute torture.
At this point, you might feel like spreadsheets are an inescapable part of business, regardless of industry, as many see spreadsheets as a necessary evil that must be accepted because ‘it’s the way it’s always been done’.
Still, if you’re like us, you’ve probably found yourself squinting at a spreadsheet until your eyes water as you think to yourself, “There HAS to be a better way”. And you’re not alone, as various studies have shown anywhere from 50 to 90 percent of businesses still rely on spreadsheets for critical functions such as tax planning, budgeting, and reporting.
But if spreadsheets are so widely used, then why don’t they work for tax planning? Well, here are four of the most common reasons why spreadsheets and taxes are a match made in hell. (Sidenote: How many of these reasons can you relate to?)
1. Spreadsheets are a pain to update
Tax rates keep changing but those spreadsheets often don’t get updated along with it, either because it falls between the cracks, it’s too complicated, or the spreadsheet is so old that nobody has ownership of it anymore.
Nobody wants to be ‘that person’ who changes a single cell and then accidentally breaks the entire spreadsheet. Even though “Ctrl + Z” is a thing (or Command + Z for Macbook users), it can be a daunting task to update an old spreadsheet. This is why so many spreadsheets used for tax planning don’t get updated with the latest tax rates every year–which brings us to reason number 2.
2. Versioning aka “Final copy.2.0.finalfinal.version” syndrome
Have you ever been in a situation where there are 200 versions of the same spreadsheet because everyone in the organisation or department made their own version? Then, when it comes to actually doing those taxes, nobody knows which one is the latest version, which can turn into a soul-destroying bottleneck for the unlucky person who has to fix it.
Double checking and reconciling everything into a single source of truth is a nightmare that we wouldn’t wish on our worst enemies. And that’s not even mentioning the productivity and hours that would be lost fixing it!
3. Tax planning is complex
The complexity of tax planning often scales with the size of your practice and after a certain point, relying on a simple spreadsheet and calculator just won’t cut it anymore. Besides, taxes are about more than just the figures because truly effective tax planning must consider the client’s financial goals.
Numbers without any context don’t mean much on their own, and considering your client’s goals provides that valuable context and ensures that your calculations are relevant and valuable to the client.
4. High risk for human error
Manual data entry is a menial, repetitive task that requires an extreme attention to detail with huge potential consequences for any mistakes. You can probably imagine how a misplaced decimal or summation error can affect a company’s financials, which then affect its reputation and potentially even its stock price–just look at the UK fashion retailer who lost a third of their market cap due to a spreadsheet error!
But the risks of human error go far beyond typos and data entry mistakes as using the wrong formula can have equally devastating effects–not only could it cost your client a lot of money, but you could even lose the client due to bad advice!
Taxes are a burden but tax planning doesn’t have to be
Using spreadsheets for tax planning is a common trap for many practices, full of manual calculations and data entry for bespoke personal taxes. While the spreadsheet may have been capable during the early days (or the only tool available at the time), the spreadsheets didn’t grow with the practice and they have now become a significant limiting factor that drains time, resources, and morale.
Top challenges of manual processes
- Time-consuming
- Prone to errors and inconsistencies
- Manual updates require constant attention
- Lack of collaboration and visibility across the firm
- Higher risk of missed opportunities for tax optimisation
The biggest problems with spreadsheets for taxes
At its basis, spreadsheets are optimised for storing, organising, and analysing data. This means they weren’t designed for tax planning, which requires multiple data sources, scenario planning, and complex, personalised calculations that vary depending on every client.
The fact that so many businesses try to use spreadsheets for tax planning is akin to jamming a square peg into a round hole until you force it to stick–with many thinking it’s not a perfect fit but as long as it holds, it’s good enough. But it’s not good enough, not anymore, and it hasn’t been for a long time (if ever).
The trap here is that spreadsheets can often handle some, or even most, of what you need them to do. But they work just enough that they don’t count as broken, so you don’t have to worry about fixing it. And then next year, it’s simply rinse and repeat.
Spreadsheets: Most Common Complaints and Pain Points
- Outdated data: Requires manual updates, leaving room for error.
- Lack of automation: No way to automate repetitive tax tasks or forecasting.
- Lack of visibility: Hard for firms (and their clients) to see the big picture or multiple scenarios at once
- Increased risk: Human error can lead to costly mistakes or missed opportunities in tax efficiency.
Enter Tax Torch: A light in a dark tunnel
As accountants ourselves, we have witnessed first-hand the many frustrations firms and clients have experienced when tax planning and the problems of over-relying on spreadsheets to do it.
It’s why we created Tax Torch to change the game of tax planning, with special features that address the many problems we just covered.
Here’s what you can expect from Tax Torch:
- Cloud-based planning:
- Empowers you to manage the tax planning process from data entry to scenario analysis.
- Works proactively to keep you current as you plan for the future.
- Means no more looking backwards for personal taxes.
- Scenario planning:
- Allows you to easily model multiple best and worst-case tax scenarios to future-proof your firm.
- Enables you to tailor tax planning to each client in less time.
- Collaboration:
- Centralises data in a unified platform to foster collaboration and greater visibility within the business.
- Ensures accurate, faster results for bespoke personal tax planning.
- Efficiency gains:
- Reduces the time spent on tax planning, so founders/directors can focus on running the business, not managing spreadsheets.
Ditch your tax spreadsheets for good with Tax Torch
With built-in automation, scenario planning, and collaborative tools, Tax Torch makes tax planning easy with greater accuracy, time savings, and the ability to scale.
Discover how to deliver bespoke personal tax planning without the headaches. Join the waiting list today and be the first to see for yourself just how easy it is to leave the spreadsheets behind!
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