Managing the intersection of business automation and CTC compliance: A guide for indirect tax professionals
Highlights:
|
In the ever-evolving landscape of global commerce, Continuous Transaction Controls (CTCs) have emerged as a pivotal element in ensuring compliance and enhancing business automation. Kirsty Kerr, Director, Product Management, Thomson Reuters and Nazar Paradivskyy, Director Regulatory Affairs, Pagero, part of Thomson Reuters, spoke at Synergy 2024. They introduced CTC mandates and how they are reshaping the way businesses manage their financial operations.
This blog explores the dynamic intersection of business automation and CTC compliance, offering indirect tax professionals insights into optimising operational efficiency and risk management.
What are CTC mandates?
CTC mandates represent a significant shift in regulatory compliance, requiring businesses to provide real-time transactional data to government entities. Initially focused on business- to-business invoicing, these mandates now encompass a broader spectrum of transactional information, including procurement and post-sales activities. As governments worldwide implement these controls, businesses must adapt to meet these evolving requirements. This is achieved through the implementation of e-invoicing and other digital reporting requirements.
Business automation, on the other hand, refers to the use of technology to streamline and enhance business processes, including accounts receivable (AR) and accounts payable (AP) processes. The convergence of these two domains is revolutionising the way businesses operate, making it essential for tax managers to understand the impact of CTC compliance on their business automation strategies.
The impact of supply chain on AR and AP processes
The supply chain consists of five key components: sourcing, procurement, manufacturing, shipping, and sales. When a government introduces CTC regulations, it typically starts with B2B invoicing on the manufacturing and sales side of the supply chain. However, as governments evolve, they are requesting more transactional information from businesses in real-time, including procurement and shipment data. This requires businesses to have a digital footprint that can validate transactions, making it essential to integrate CTC compliance within business automation processes.
For example, in the healthcare sector, electronic orders may be regulated, requiring businesses to receive an order, issue an invoice, and provide the government with information on the shipment of goods. This information is used to monitor whether the orders and invoices match, ensuring that there is no overspend from the government budget. The naming conventions for this process vary by country, with some jurisdictions referring to it as an “e-way bill” or “dispatch advice.”
Impact on people and processes
The implementation of CTC compliance has a significant impact on people and processes within an organisation. It’s not just about technology; it’s also about understanding the regulations, translating them into actionable steps, and working with various stakeholders across the company. The key to success lies in:
- Understanding the obligations and requirements of CTC compliance
- Identifying gaps in current systems and processes
- Working together as a team to implement changes
- Developing a project methodology with key metrics, timelines, and sign-off from all stakeholders
- Continuously evolving and updating processes to ensure future-proofing
Some of the key people-related aspects to consider include:
- Skill set: Do you have the necessary skills to implement CTC compliance?
- Stakeholders: Who are the key stakeholders that need to be involved in the implementation process?
- Communication: How will you communicate the changes to the rest of the organisation?
- Training: What training is required to ensure that employees understand the new processes and regulations?
Consequences of non-compliance
The consequences of non-compliance with CTC mandates can be severe, including:
- Penalties and fines
- Increased operational expenses due to manual processing
- Impact on profitability due to delayed or denied VAT deductions
- Inefficient supply chain processes leading to worsening working capital
- Shutting down of business operations in non-compliant countries
- Negative impact on company reputation
- Potential imprisonment of line managers in certain jurisdictions
The future of CTC
CTC mandates are here to stay, not just in the EU, but globally. It’s essential for businesses to understand their profile, gather information, and prepare for the implementation of CTC compliance. Some key takeaways include:
- Work with other stakeholders to develop a strategic approach
- Get a budget and plan for data cleansing and process automation
- Map out AP and AR processes early and start automation invoicing reception and issuance
- Continuously monitor and update processes to ensure future-proofing
- Consider the impact on people and processes, and develop a plan to address these challenges
The convergence of business automation and CTC compliance is transforming the financial landscape. By understanding the key components of business automation and CTC compliance, businesses can better manage the new landscape and ensure compliance while streamlining their processes. Remember, CTC mandates are not just a regulatory requirement; they are an opportunity to transform your business and improve operational efficiency.
 |