Don’t overlook tax technology when digitally upgrading your business

With the coronavirus disruption accelerating the need for digital transformation, company leaders must ensure that tax considerations are not left out of the planning. Now, more than ever, government entities will be looking for creative ways to recoup losses, and tax in the P2P process may be one of the areas that draws scrutiny.

This is a problem for companies both large and small that are facing choices about how to automate their operations. Procurement professionals are not always armed with enough tax knowledge or experience, nor should they be accountable to make the correct tax decisions on invoices for their organization. Tax technology can be a force multiplier by baking in that expertise into every transaction across the business, making it an important part of an organization’s procurement transformation.

In the first article in our look at tax issues and digital transformation, we noted that problems with tax transactions include overpayments or underpayments, penalties for not complying with the patchwork of regulations across state and national borders, the risk of audits and the lack of tax expertise in departments that handle technology — like IT, sales, finance and procurement.

Tax technology can curb these problems, add visibility and help businesses grow with confidence.

Let’s look at the three key points that will help you determine if your organization is behind in the race to Indirect Tax in Procurement Transformation.

3 signs you may be falling behind the Indirect Tax in Procurement Transformation

Let the tax team own tax decisions.

Prioritizing and including tax calculation technology along with your AP automation ultimately supports best practices, efficiencies and cost savings — all while protecting your organization. There are three tell-tale signs that your organization is falling behind in your Indirect Tax in Procurement Transformation.

1. How often does your team reach out to the tax team to verify an accurate tax charged by a supplier on an invoice?

The days of procurement professionals making tax decisions based on a tax-provided matrix or job aid should be a thing of the past. Third-party tax automation is the answer to your problems and needs to be at the top of your list of considerations at any stage of your procurement transformation. Employing a tax technology solution can alleviate the additional overhead for your AP clerks when trying to ensure that the taxes calculated on an invoice match the taxes paid.

2. When you break down your invoice-requisition-to-approval process, what are your procurement professionals focusing on?

If the answer is “They’re ensuring consistency or manual inputs of taxes,” then a more modern view needs to be taken. Tax teams need to own tax, which allows procurement professionals to focus their attention on their priorities.

As we discussed in the last article, indirect tax in procurement is complex and challenging. In general, most are comfortable with sales tax or output VAT, however, U.S.-based Consumer Use Tax or input VAT is much more challenging, even mysterious at times. The effort to transition the responsibility and more importantly automate tax decision-making can safely move from procurement teams to tax teams.

3. Are you partnering with tax teams?

Our global focus and goals are only going to exaggerate challenges we faced in the past. Tax and audits are no exception. Everything a company purchases for direct or indirect use is subject to some sort of tax, recoverability or accrual. Tax touches everything in purchasing, and it’s here to stay. The ramifications are endless but manageable if you partner early and often with tax teams to support automation.

3 key takeaways:

  1. Indirect Tax in Procurement Transformation is not a question of if, but rather when?
  2. Who owns tax in your purchasing process? More importantly, who should own tax in purchasing?
  3. Tax touches everything in purchasing. Are you partnering with tax early and often?

Next up

In the next article in this series, we’ll talk with a tax technology expert, Vertex’s Michael Bernard, to get insights into what businesses should consider when making a tech selection.

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