In any large company, the idea of achieving greater “efficiency” is really an ongoing effort to increase profitability by finding ways to modify various systems, processes, and workflows in order to save time and money. Tax departments must also take into account external factors such as inflation and rising interest rates, which add pressure to contain costs and minimize leakage.
After all the obvious fat has been cut, however, there comes a point when finding additional process and cost efficiencies is a matter of drilling down and re-evaluating in minute detail the efficacy of existing systems and processes. Are you underpaying or overpaying some taxes? Are you spending too much time fixing errors? Are rapid regulatory changes catching your team by surprise? Are manual processes slowing you down? Are your systems 100% reliable, and if not, how much is down-time costing the company?
In many cases, such questions can’t be answered—and certainly can’t be fixed—without using tools that are specifically designed to identify and address these very issues.
The perfect tax tool
Today’s best-in-class tax engines are centralised, cloud-based platforms built from the ground up to provide efficiencies and cost savings throughout the corporate tax environment. Such cloud-based software solves most of the problems associated with maintaining legacy IT systems, and provides an ideal tax vehicle for companies that want to position themselves for success in the global tax infrastructure of the future.
A best-in-class tax engine saves companies money by:
- Automating routine, day-to-day tasks
- Reducing error rates on invoices
- Eliminating overpayments and penalties
- Automatically updating tax rate and code changes
- Accelerating speed to market on new products/services
- Improving IT system up-time and reliability
- Freeing tax teams to focus on more strategic, high-value activities
- Reducing IT time spent on infrastructure up-keep
Left unaddressed, any one of the issues above can cost a company both money and time. Taken together, they represent the additional cost of doing business with systems and processes that are not optimized for today’s rapidly changing tax environment.
Independent research and confirmation
To objectively test the many ways in which a best-in-class tax engine saves money for corporations, Thomson Reuters recently commissioned Forrester Research to conduct an independent study of its ONESOURCE Determination tax engine and evaluate the platform’s effectiveness.
Overall, the study found that for a company with $5 billion in revenue and 28,000 employees, ONESOURCE delivered $2.1 million in net-positive benefits over three years, representing a return on investment of 120%. Furthermore, the system paid for itself in a mere 15 months.
In terms of efficiencies gained, Forrester found that the ONESOURCE tax engine:
- Reduced invoice error rates up to 75%
- Helped compliance teams gain efficiencies of up to 50%
- Help tax teams gain efficiencies of up to 50%
Note: To determine how these savings rates might apply to your organisation, try the Thomson Reuters Total Economic Impact (TEI) Estimator.
How are these savings achieved?
The answer is simple: inefficient and inaccurate systems and processes contain wasteful, costly sources of friction that are baked into the systems themselves. By definition, these friction points can’t be eliminated by the system that creates them—they can only be overcome by using a system that doesn’t have them in the first place.
One example of how ONESOURCE saves time and money is invoice error rates. Every time an invoice error is detected, or invoices don’t match, someone on the tax team must spend time tracking and correcting the error. If manual systems operating on legacy infrastructure are involved, IT may also need to get involved.
In Forrester’s research, actual ONESOURCE customers were asked what their invoice error rate was prior to implementing ONESOURCE, and the average was 3%. After switching to ONESOURCE and automating the day-to-day invoicing process, users reported a drop in errors from 3% to less than 1%, virtually eliminating errors altogether.
Now, according to a survey conducted by the business trade publication Industry Week, manual invoice processing costs an average of $30 an invoice, and correcting invoice errors costs an average of $53.50 per invoice. If a company processes thousands of invoices per week, and has an error rate of 3% or more, it’s not hard to see how the costs can pile up. By contrast, processing invoices with a fully automated system costs an average of $3.50 per invoice and reduces error rates to 1% or less.
Clean data leads to accurate results
For example, ONESOURCE eliminates invoice errors by creating a centralised, cloud-based repository for all of a company’s indirect tax reporting data, minimising data silos and bottlenecks. ONESOURCE then ensures that the data going into the system is clean and reliable, and uses a sophisticated tax engine to automatically calculate invoices accurately.
Indeed, according to Forrester, ONESOURCE users realised an average savings of $2.6 million over three years by reducing their invoice error rates alone. The improved overall efficiency of the ONESOURCE system resulted in additional gains for both tax and compliance teams, freeing up time for more value-added tasks, analysis, and strategic planning. The same clean data that reduced invoice error rates is also used to populate returns and reports, making them exponentially more accurate as well.
The above scenario is only one example (see others here) of how a more elegant, accurate, and streamlined tax system can produce myriad efficiencies and cost savings that a legacy system burdened by its own internal limitations is unable to achieve.
So if your company is looking to improve its current systems and workflows, it maybe time to trade in the old system for one that runs on better, faster, more reliable technology.
Click here for more information on how Thomson Reuters ONESOURCE platform can help your company save time and money.