Why automating tax returns filing saves time and money

Filing value added tax (VAT) returns is a crucial business responsibility, but it’s often a time-consuming, error-prone process. Multiple deadlines, changing regulations, and large volumes of documentation raise the stakes for businesses already facing pressure to file accurately and on time. And easily made errors can result in costly penalties.

By adopting automation, businesses don’t have to rely on error-prone manual tasks and can boost their compliance — all while saving time and money.

• Automation can help reduce costly VAT errors by validating data in real time.
• Reducing manual work can help to free teams to focus on strategic tasks instead of repetitive admin.
  
• With seamless system integration and global coverage, Avalara can help businesses file accurate VAT returns as they grow.

Changing regulations

VAT rules and rates vary across markets. Even within the European Union (EU), member states have leeway to set their own rates, deadlines, and filing frequencies. Familiarisation with, or even mastery of, the rules in one market does not guarantee you’ll hit the ground running in a new one and operate without compliance hitches.

While major changes such as standard rate adjustments typically happen every few years across European countries, minor changes can occur several times per year. These include changes to reduced rates such as those for food, digital services, or renewable energy products, temporary rate reductions or exemptions for specific sectors, and new product classifications or reclassifications that change the applicable rate.

Rule changes are continuous. Place-of-supply rules, reporting obligations, invoicing requirements, and ecommerce thresholds require constant monitoring. Manually keeping up with these updates can be a huge challenge, and one that takes time and invites mistakes.

VAT errors and their impact

Even small VAT errors can lead to rejected filings, financial penalties, and audits. A single data entry error can cause significant disruption to your operations. Such errors — defined by His Majesty’s Revenue & Customs (HMRC) as failures to take “reasonable care” — can carry penalties of up to 30% of the underpaid VAT. Other common sources of errors stem from misinterpretation of tax rules (particularly when operating in multiple markets) and inconsistent processes across departments.

Time-consuming processes

Manually reconciling data from multiple systems — especially if spread across locations — verifying invoices, and calculating liabilities can take days out of each month. That’s valuable time that could be better used on more revenue-generating tasks and projects. It’s also much harder to track the filing process, spot inconsistencies, or produce audit trails when requested when not using the assistance of automated tools.

Reduce VAT errors through real-time validation

Getting a second pair of eyes on something can be helpful, but it isn’t fail-safe. The right automated tools can validate tax data against current rules before submission, flagging inconsistencies and even the smallest of errors that could prove costly further down the line.

Streamline data collection

Instead of manually gathering and consolidating data from ERP, accounting, and ecommerce platforms, automation can integrate these sources directly for instant reporting and make them more easily manageable within a centralised dashboard.

Stay ahead of regulatory changes

Automated platforms are continuously updated with the latest market- and product-specific rules, helping to ensure every filing meets current compliance requirements with minimal manual intervention.

Generate reliable audit trails

Automated tools can provide built-in records of every transaction. Being able to retrieve documents and records easily and quickly helps to make audits faster, easier, and less stressful.

Save time and costs

Using automation can cut filing preparation time by reducing manual data handling and associated errors. By preventing VAT errors and missed deadlines, automation reduces financial risk. And with less time spent on repetitive administrative tasks, teams are freed up for more strategic (or enjoyable) work.

Taking a methodical approach is key to making the transition from manual processes to automated tax return filing. You’ll need to ensure you select the right solutions, implement them correctly, and train your team. The essential steps are:

1. Assess your current process

Map out your existing tax return process from start to finish, and identify every touchpoint where data is collected, processed, and validated. Take note where VAT errors most often occur – is it through manual data entry? Are you struggling to stay ahead of rule changes? By documenting your pain points and inefficiencies, you’ll have a clearer baseline to measure the impact of automation later.

2. Choose the right automation solution

Like any other product, not all automation tools are the same, and some may not cater to your compliance needs. Take note of each solution’s regulatory coverage, real-time validation capabilities, and scalability. It’s also essential to check how easily the solution can integrate into your systems.

3. Train your team for effective use

Even the best automation platform won’t deliver results if your team doesn’t understand how to use it effectively. Create a structured onboarding plan that covers how to input, review, and approve data before submission, how to interpret system-generated error flags, and how to run compliance reports and generate audit trails.

4. Monitor, measure, and optimise

Regularly review your filing process to ensure accuracy and efficiency are improving. Track metrics such as reduction in VAT errors compared to your manual processes, time saved in preparing and submitting returns, and cost savings from reduced risk or freed resources.

Manual tax return filing is not only tedious and time-consuming, but risky too. Avalara automation can help businesses streamline their processes, strengthen compliance, and focus on growth rather than paperwork.

Reduce VAT errors with real-time tax calculations
Avalara cloud-based solutions automatically calculate VAT for every transaction, applying the correct rates for each market you operate in and validating data before submission. This significantly reduces the risk of errors caused by manual entry or outdated tax rate tables.

Stay compliant with changing regulations
The Avalara platform is continuously updated with the latest tax rules across multiple countries, so you can file returns with confidence knowing they meet current regulatory standards.

Integration with your existing systems
Avalara integrates directly with popular ERP, ecommerce, and accounting systems, pulling data automatically to prepare and file returns. This eliminates the need for repetitive manual data transfers and reduces the chance of inconsistencies.

Global coverage for expanding businesses
Whether you’re filing in one country or managing VAT across multiple markets, Avalara can help support your compliance needs with scalable automation that grows as you do. You can hit the ground running in new markets without having to adopt localised solutions with their own implementation processes and maintenance requirements.

Speak with Avalara today about making the transition from manual to automated returns filing.

What causes VAT errors in tax return filings?

VAT errors often occur due to manual data entry mistakes, outdated tax rate information, inconsistent reporting formats, or misinterpretation of country-specific rules. They can also stem from failing to reconcile data across multiple systems before submission.

How can automation help prevent VAT errors?

Automation can reduce VAT errors by validating data in real time against the latest tax rules, integrating directly with accounting and ERP systems, and automatically reconciling transactions.

What are the consequences of VAT errors?

Consequences can include financial penalties, interest charges, rejected filings, delayed refunds, and audits. Even minor VAT errors can disrupt business cash flow.