Complying with sales and use tax law is cumbersome, hard to understand and could lead to the overpayment or underpayment of tax. Proper planning of an integrated tax solution often takes a back seat to other IT priorities. From tax rates in a constant state of flux to understanding cryptic law that identifies products as taxable or exempt, there are numerous business needs to be compliant in the eyes of state and local taxing authorities. As a consequence, disparate organisations are forced to manually reconcile and consolidate tax from multiple applications for various functional areas. This results in business process inefficiencies and tax automation challenges. So how did these problems arise in the first place, and how can they be avoided?
Architecture of a Disconnected Tax System
Ecommerce websites, acquisitions and other company accelerators can lead to inefficiencies, and quickly entangle your financial reporting and tax compliance needs.
Tax Business Challenges
For most companies, a huge daily occurrence of transactions coupled with buying and selling different good and services globally means you need precise and intelligent tax calculations for each transaction, and therefore many business challenges arise. These challenges can become so severe, that they can often lead to stiff penalty payments due to the underpayment or nonpayment of taxes. Below is a summary of some of the main issues that can limit your company using manual or disparate tax systems for tax calculation, reconciliation and compliance:
- Manual Tax Activities: Companies with inefficient and disjointed tax processes increase the amount of filing errors and take time away from their more important core duties. Important processes such as order processing, invoicing, expense approvals, and fulfillment, to name a few, can take a lot longer to get completed, and are often erroneous from a tax perspective. For example, employees may be spending hours entering AP invoices and trying to determine if the proper tax amount was charged by the supplier based on the various shipping locations. Therefore, if any tax rate changes were made in the past month, your employees would not only need to know the new tax rate for the jurisdiction (for validation supplier charged tax) but would also need to know if any rule changes were made related to your company’s industry. Such labor-intensive and manual tasks reduce the proficiency that your company needs to grow.
- Integration Complexity and Cost: When tax and ERP systems are not integrated, you often times have multiple overlapping databases, and cannot easily export tax information for proper consolidation and reconciliation. Financial reports showing tax across your finance, sales, marketing, inventory, and procurement departments are crucial to giving you an integrated view of your company’s tax obligations. Most departments stop acquiring this information on a regular basis because of the amount of time it takes to source, export and analyse this data. Companies that can consolidate and integrate tax activities more effectively will spend less hours filing returns, and limit the amount of tax overpayments or underpayments.
- Research and Content: With so many disparate business applications, tax departments and IT waste an enormous amount of time and money on researching tax laws and compliance. Acquiring tax information and applying tax rules to the ERP systems can seem daunting because the information gets lost in translation so easily. Often times, new laws are put in to effect without the company’s knowledge, and even more setup and maintenance are needed to be performed for all the different business applications to calculate tax properly. Consequently, valuable IT time that could be used to make the business more productive is wasted and tax overpayments and underpayments continue to occur.
Advantages of an All-In-One Tax Platform
To continue your business expansion and maturity, it is essential to have your business applications talking to a single tax platform, where all research, reporting and automation can be configured in a single multi-layered application. The following are additional advantages for companies looking for an All-In-One Tax platform:
- Business Process Tax Automation: There are several key tax processes that you may encounter in your daily operations, such as order management, invoicing, procurement, expense approvals, and financial consolidation, to name a few. Automating business processes to contact a single system for tax compliance such as ONESOURCE, enables you to avoid manually-intervening in the tax calculation process and helps accelerate tax filing schedules.
- Tax Reporting: Real-time tax forecasting and reporting is important in making timely, informed decisions. When information can be accessed instantly from a single source, without consuming resources on data extraction and consolidating data from different sources together, analysts are better informed and can make more accurate, faster decisions. For example, by having all their tax data available in a consolidated tax application, a ONESOURCE customer and multinational software company, was able to complete their tax filing process in less than 1 hour.
- IT Resource Savings: With IT no longer having to maintain tax setups to business applications (with new changes to tax law), as well as the various integrations between them, a significant reduction in time and costs can be realised. The time savings enables IT to focus on automating and standardising business processes to communicate with a single-source of tax truth, such as ONESOURCE. Additionally, companies are able to reduce the amount of customisations introduced to their financial applications.
- Scalable and Flexible: The ONESOURCE suite of solutions acts as a scalable tax platform, whereby the capability to expand to multiple locations, and the inclusion to other business processes can be accomplished more efficiently because of the All-In-One tax research and content integration functionality. Companies can forecast and report more efficiently because of the improved visibility they obtain. For example, the same ONESOURCE customer (multi-national software company) that reduced their filing time to less than 1 hour, was also able to realise a tax cost saving of over 1 million dollars using company analytics and metrics.
- Holistic: Because tax policy can be implemented quickly from a comprehensive and universal tax suite, business applications are able to integrate more effectively for tailoring tax-relevant processes and applications in a way that improves performance. ONESOURCE tax solutions liberate tax-professionals, by enabling the tax experts to focus on strategic initiatives that can add value to the bottom line. Additionally, the ONESOURCE tax platform enables companies to meet their compliance needs and address the growing complexity of Sales & Use tax, VAT, GST and other country-specific tax around the world.
In every industry tax is more relevant than ever, and companies are still struggling to keep up with their growth and management of tax, which can reduce the bottom line. Managing tax effectively requires a universal tax platform with which all business systems can communicate. The ONESOURCE suite of solutions can transform how companies calculate and consolidate taxes for filing. Integrated tax solutions can also improve employee productivity and realise cost savings.