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Transactional tax compliance requirements have become increasingly complicated and demanding over the years. The only practical solution is fully integrated, tailored to meet a given business’s specific tax needs. Powered by tax automation software, there’s no need to worry about the details of calculating VAT (or other similar indirect taxes) or preparing those tax returns because the heavy lifting is automatically done – in the background of every taxable transaction and at the end of the month.
It starts with the invoice. Every invoice has indirect tax implications, and it is every business’s responsibility to correctly calculate, collect, and remit the tax for each transaction. Tax authorities expect these calculations to be correct, and so do customers. If invoices are incorrect – whether too little tax is charged or too much – these seemingly small mistakes can create a cascade of other problems.
The wrong indirect tax calculations can hurt a business in any number of ways, including the cost and time wasted fixing the errors, government penalties, lost business momentum, damaged customer trust, and, in some cases, legal liability. The longer it takes to identify and fix a tax discrepancy, the more disproportionately expensive the resolution gets.
Indirect tax automation software and the need for ERP integration
Unfortunately, tax authorities are not making indirect tax calculations easier. Even seasoned professionals have difficulty keeping up with jurisdictional changes in rates and taxability, which only seem to be increasing in frequency.
The truth is that business taxes are a fluid, continuously evolving framework of rules and regulations that no single person could ever hope to keep up with. For companies of all sizes, the only way to remain tax compliant in this modern business landscape is to implement a centralised, automated tax engine fully integrated with a business’s Enterprise Resource Planning (ERP) system. ERP integration of tax automation software is important because it allows regulatory updates, jurisdictional changes, and other tax policy data to be added to the system and applied throughout an organisation from a centralised, cloud-based hub.
Tax automation also allows for the consistent application of tax policy throughout a company and its individual business units. With fully supported integrations and content-enabled tax software handling most calculations, any tax policy that applies to a business can be quickly captured and applied, providing a single source of truth for all tax calculations and reporting.
The benefits of cloud-based, centralised tax software
Centralised tax technology cloud platforms offer other benefits as well. Businesses expanding into new countries, territories, or other jurisdictions can instantly access applicable tax laws or policy changes that might impact tax automation. Likewise, businesses that operate in different territories would no longer need to constantly monitor tax changes in every country because the platform monitors and updates any changes to tax laws automatically. And because these systems are cloud-based, there are no geographical limitations – tax information is available to any qualified user anywhere, anytime.
Compared to an in-house, IT-based tax calculation infrastructure, third-party cloud-based tax solutions are more cost-effective, easier to implement and provide the speed and flexibility necessary to keep pace with the accelerating demands of modern business taxation. But not all tax calculation software is the same, and the difference often lies in the quality of the partnership a business develops with its chosen tax software vendor. Indeed, the level of experience and support a tax software vendor provides is just as important as the software itself because the two are inextricably linked.
When it comes to indirect tax integration, all vendors are not equal. When choosing a vendor, businesses should look for a partner with:
- Industry experience
- All major industries—energy, retail, healthcare, pharmaceuticals, insurance, etc.—are subject to numerous regulatory complexities that require deep knowledge of the tax issues involved. A vendor’s understanding of these issues is important because automated tax engines don’t run on magic. The only way the tax automation software can perform all the functions a business might need is if the company that developed and supports the product knows how to tailor it to address its specific tax situation.
- Seamless ERP integrations
- It’s essential to work with a vendor that understands your ERP systems and knows how to integrate their product into the business’s larger IT ecosystem. Developing a tax product is one thing, but knowing how to coordinate it with an array of different systems and IT infrastructures is another skill set altogether. Ensuring that the solution blends seamlessly across the enterprise into each business unit’s workflow is another level of expertise that not every vendor can provide.
- Flexibility, responsiveness, and accountability
- Flexibility matters, as well. Some companies have more experience with cloud-based tax automation software than others, and some want more control over the implementation process. A vendor that can adapt to provide whatever level of service and support a customer needs is also likely to be a vendor that knows how to listen and will make an effort to understand their customer’s unique challenges and capabilities. This is especially important if the software implementation requires an extra level of creativity, complexity, or diplomacy.
- Accountability and structure
- Direct lines of communication between a business and its tax software vendor are vital to their partnership’s success. Assigned roles and responsibilities take the guesswork out of communications, and a consistent, agreed-upon schedule for updates ensures that nothing is overlooked.
Fully integrated indirect tax automation software such as ONESOURCE Determination will minimise risk and significantly improve efficiency and accuracy, but only if supported by experienced, knowledgeable professionals who are completely dedicated to their customers’ success.