Why utilities should reimagine their Tax and Finance functions

That last point is also important considering the tremendous potential of GenAI. Among all respondents, 87% believe that the technology will help drive increase effectiveness and efficiencies within functions in the next three years — a dramatic increase from the 15% who said so in 2023. In the next three years is worth emphasizing, as P&U organizations likely have foundational issues with managing data that must be addressed first.

“The sky is the limit with AI, but P&U organizations must have the right data in the right format to leverage it effectively — or else it could be garbage in and garbage out,” said Terry Huggins, EY US P&U Tax Sector Leader.

Yet 67% of US P&U Tax functions say IT does not treat them as a key stakeholder in data and technology strategy and implementation efforts. Of that total, 57% report that they are consulted, but it is typically too late to influence the key decisions, while 10% say they experience minimal or no integration. These findings are in line with overall results across sectors and regions.

With stretched resources and increasing regulatory complexity, and generally lacking a seat at the decision-making table, only 10% of US P&U respondents say their top priorities include becoming a stronger value-added business partner in their organizations — less than half of the 23% figure cited across all respondents. Meanwhile, among all respondents, 86% say that they plan to reduce their tax and finance budgets. These are warning signs that should merit serious discussion.

“In the vicious cycle of doing more with less, it is increasingly challenging to deliver value, through AI or otherwise, and one rapidly becomes a cost center,” Huggins said. “Tax leaders must reorient the discussion around where your resources are most effective for the business’s overall strategy, and how you can leverage partners and technology to handle the rest.”

4. Find the right balance. The shifting regulatory landscape and sudden technological advances can be a struggle to keep up with in a cost-effective manner: addressing the needs of today with an eye toward tomorrow in back-office functions risks fraying your focus or requires costly investment. Finding the right balance of what to own and what to outsource or co-source enables flexibility so an organization can scale up or down as needed, in response to growth plans or challenging periods.

Getting the most out of a third-party provider requires understanding where in-house resources are best positioned to add value and where their capabilities may be lagging. The options available exist on a spectrum: many companies will decide a hybrid approach is right for them, where they decide to continue to own some Tax and Finance functions they consider to be critical, while co-sourcing others.

5. Maximize your data. Data is a core component to capturing value from an operation model redesign: how many sources of it you have access to, how much it’s integrated into the operating model through automation, and what level of governance supports the integrity of the data and how well it’s used. Bringing together data with fresh thinking in a co-sourcing or outsourcing arrangement can be a powerful driver of value, and naturally GenAI is a large part of this discussion as well.

A value driver

Ultimately, the right mix of top-quality people, greater efficiencies through technology and a forward-looking operating model can provide more time and ability to expose value across a company.

For P&U companies specifically, opportunities exist in virtually all areas of tax, such as sales taxes and property taxes and beyond — as well as getting plugged into renewables and e-mobility offerings, for example — along with risk reduction and mitigation.