VAT reporting isn’t just a compliance problem — it’s also a data problem

VAT reporting feels like a compliance challenge. Returns need to be accurate, deadlines need to be met, and regulatory requirements need to be followed. It appears to be about understanding tax rules and submitting the right information to the right authorities at the right time.

But for the finance and tax teams responsible for making that happen, the challenge often starts much earlier. With data.

As businesses expand into new markets, add new entities, and manage higher transaction volumes, VAT reporting becomes increasingly difficult to scale. What worked across a handful of regions often becomes difficult to sustain as reporting requirements, data sources, and compliance obligations grow.

The issue is that most systems weren’t designed to turn transactional data into compliant VAT reports across multiple countries.

That’s why many VAT reporting challenges have less to do with understanding tax rules and more to do with extracting, validating, transforming, and reconciling data before a return can even be prepared.

Key takeaways

• VAT reporting challenges often stem from fragmented data and disconnected systems, not just complex tax regulations.
• Manual data extraction, validation, and reconciliation can significantly increase the time, cost, and effort required to prepare VAT returns across multiple jurisdictions.
• Standardising VAT reporting processes can improve efficiency, reduce manual effort, and help organisations build a more scalable approach to global VAT compliance.

VAT reporting happens between systems

Many organisations assume VAT reporting should be a straightforward output of their ERP or finance system.

In reality, VAT reporting is a workflow that sits across multiple systems.

ERP platforms capture transactions. But producing a compliant VAT return often requires data to be extracted, validated, reconciled, transformed, and formatted according to country-specific requirements.

Finance teams frequently find themselves filling the gaps between systems — pulling data from one platform, validating it in another, reconciling differences in spreadsheets, and manually preparing information for reporting.

In a study conducted by Hobson & Company, customers consistently described spending significant time extracting, validating, reconciling, and preparing data before VAT returns could even be generated. Those manual activities — not the VAT rules themselves — often became the biggest operational bottleneck.

Consider a business operating across multiple regions. Sales transactions may originate in one system, customer information may sit in another, and country-specific reporting requirements may require data to be presented in entirely different formats. Before a VAT return can be prepared, information often needs to be gathered, reviewed, validated, transformed, and checked again.

What sounds like a reporting process quickly becomes a data management process.

And the more countries a business operates in, the more complex that process becomes.

The challenge goes beyond simply understanding VAT rules, to ensuring the right information is available, accurate, and reporting-ready when deadlines approach.

Where the model starts to break down

Data extraction isn’t VAT-ready 

Most ERP systems are designed to support business operations, not VAT reporting.

As a result, the data needed for compliance often isn’t available in the format required by tax authorities. Teams may need custom extractors, manual exports, additional spreadsheets, or support from IT just to prepare reporting data.

What should be a reporting process becomes a data-preparation exercise.

This challenge is particularly common in organisations operating across multiple countries, where reporting requirements vary. Even when transactional data exists within the ERP, it may still require significant manipulation before it can be used for reporting purposes.

According to research conducted by Hobson & Company, organisations that standardised their VAT reporting processes significantly reduced the time and effort spent on integrating ERP for data reporting. Rather than relying on custom extractors and manual data preparation, they created a more consistent and scalable reporting process. One Avalara customer described the impact after standardising ERP data imports: “Coming from a competitive solution, we still save over 20% of the time each day uploading data from SAP to the VAT system because Avalara’s automated upload process is very straightforward.”

Validation becomes manual

Even after data is extracted, the work isn’t finished.

Finance teams still need to verify accuracy, identify inconsistencies, investigate exceptions, and reconcile differences before returns can be filed.

In many organisations, these checks are repeated every reporting period. Confidence that the underlying data is correct is not guaranteed.

This becomes increasingly difficult as transaction volumes grow and reporting requirements become more complex. Even small inconsistencies can trigger additional reviews, rework, or follow-up questions from stakeholders.

As a result, many finance teams build additional controls into the process. While these controls help reduce risk, they can also increase the amount of effort required to prepare each return.

Putting a sensible safeguard in place can gradually evolve into a reporting process that depends heavily on manual reviews, experienced personnel, and institutional knowledge.

The process works — but often only because key individuals know where to look for problems before a return is submitted. The Hobson & Company research found that organisations reduced the time spent on compliance reviews, data validation, and manual checking by standardising reporting workflows and automating validation activities. Instead of repeatedly checking data, teams could focus their effort on resolving exceptions. As one Avalara customer explained: “Three FTEs manage all the VAT reporting including compliance reviews, validation, preparation and filing — tasks that the local 60 FTEs managed previously. Avalara does all the work for us now; otherwise, we would need in-house experts to interpret the filing requirements for each country and to validate the data ourselves.”

Reporting becomes fragmented

As businesses grow internationally, reporting requirements multiply. Different countries require different formats, different submissions, different validations, and different deadlines.

Without a standardised process, finance teams often end up managing multiple parallel reporting workflows simultaneously.

Each market develops its own reporting process. Different teams may use different approaches. Additional spreadsheets and local workarounds emerge to bridge gaps in existing systems.

The system appears to work. But often it only works because people are compensating for its gaps.

The hidden inefficiencies inside VAT reporting

When organisations think about VAT reporting, they tend to focus on the end result: the return.

What often gets overlooked is the amount of effort required to get there. At scale, VAT reporting doesn’t become difficult because the rules are impossible to understand. It becomes difficult because finance teams spend increasing amounts of time moving, validating, and managing data. The inefficiencies are rarely dramatic. They’re embedded in day-to-day activities, such as:

• Extracting data from multiple systems
• Transforming data into reporting formats
• Reconciling discrepancies
• Managing handoffs between teams
• Repeating validation processes every reporting cycle
• Maintaining separate workflows across jurisdictions

Individually, these tasks may seem manageable. Collectively, they create a reporting model that consumes more time, effort, and resources than most organisations realise.

The result is a process that scales poorly as the business grows.

This is often why VAT reporting remains a pain point even in organisations that have invested heavily in technology. The issue is rarely a complete lack of systems. Instead, inefficiencies emerge in the spaces between them.

Teams compensate through spreadsheets, manual reconciliations, additional review cycles, and workaround processes that become embedded within day-to-day operations. Over time, these manual steps become accepted as “the way reporting works.” Because they’re embedded in day-to-day operations, organisations often underestimate how much time, effort, and cost they consume until they evaluate the process more holistically.

Every manual touchpoint adds time, effort, and cost. The more markets, regions, entities, and transactions a business manages, the more pronounced these inefficiencies become.

What may have been manageable at five countries can become difficult to sustain at 20.

The shift from fragmented workflows to standardised reporting

The goal isn’t to replace existing ERP or finance systems. It’s to create a standardised reporting layer that connects them — automating data ingestion, improving consistency, and helping finance teams scale VAT reporting without continually adding manual effort.

Leading organisations are increasingly adopting a standardised reporting approach that sits across existing systems, creating consistency in how VAT data is collected, validated, and reported.

Instead of relying on manual processes to bridge gaps between systems, they create a structured workflow that standardises reporting across jurisdictions.

This helps organisations:

• Automate data ingestion from ERP systems
• Standardise reporting outputs across countries
• Reduce manual validation effort
• Improve visibility across jurisdictions
• Create more consistent reporting processes

The result isn’t simply faster reporting. It’s a reporting model that can scale alongside the business.

Rather than asking finance teams to act as the connective layer between systems, organisations create processes that reduce reliance on manual intervention and make reporting more repeatable.

What changes operationally?

One of the biggest differences is where teams spend their time.

Before standardisation, finance teams often act as data integrators, validators, and process coordinators. A significant portion of their effort goes into preparing data rather than analysing it.

After standardisation, much of that effort is reduced. Data movement becomes more automated. Validation becomes more consistent. Reporting processes become more repeatable.

Teams spend less time managing workflows and more time focusing on higher-value activities.

Hobson & Company research highlighted examples of organisations managing reporting across multiple markets with significantly less effort after standardising reporting processes and centralising activities.

The benefit wasn’t simply efficiency, but also greater consistency, improved visibility, and increased confidence in reporting outcomes.

The research found that organisations were able to manage reporting with significantly less effort after standardising reporting processes. Rather than spending time moving and validating data, finance teams could focus on managing expectations and supporting the business as it expanded. One organisation shared how standardising VAT reporting changed day-to-day operations: “Paying for a Big Four accounting firm was much more expensive than the two FTEs we now have in-house working with VAT Reporting.”

What the ROI actually comes from

When organisations evaluate VAT reporting transformation initiatives, conversations often focus on software costs. But the strongest business cases are built around operational efficiency.

Hobson & Company research shows that organisations using Avalara VAT Reporting achieved between 200% and 500% ROI over three years, with a payback period of approximately 3.3 months.

Importantly, those results weren’t driven by a single improvement.

Value came from measurable operational improvements, including:

• Less effort integrating ERP data
• Less time spent validating and reviewing transactions
• Faster preparation and submission of VAT returns
• Reduced reliance on external accounting providers
• A reporting model that scales more effectively as their business grows

This is an important distinction. Many VAT reporting initiatives are evaluated purely through the lens of compliance, making them difficult to justify internally. However, the research suggests that the value extends far beyond reducing filing risk.

Improvements in data quality, process efficiency, reporting consistency, and operational scalability all contribute to the overall business case.

Rather than creating value through one dramatic change, organisations realise benefits through a series of smaller improvements that compound over time.

Reduced preparation effort, fewer manual interventions, improved visibility, and less reliance on external support.

Together, these improvements create measurable financial impact. The cumulative effect can be significant — not only in terms of cost savings, but also in the ability to support growth without continually increasing reporting effort.

VAT reporting doesn’t have to be this difficult

VAT reporting often feels complex because it exposes the gaps between systems — not because the rules themselves are unmanageable.

Many organisations already have the systems they need. What they lack is a consistent way to transform data from those systems into accurate, compliant VAT reports.

Purpose-built VAT returns and reporting solutions can help organisations connect existing systems, standardise reporting workflows, and reduce the manual effort required to prepare compliant returns across multiple jurisdictions. As per Hobson & Company research, one Avalara customer explained: “We now have a clear overview of where we should report the different tax codes… If an auditor were to ask for a list of all of the supporting documents in one of the VAT return boxes, it would be very easy to extract that information from Avalara.”

The organisations achieving the strongest results are often those that stop viewing VAT reporting solely as a compliance exercise and start treating it as a data and process challenge.

When data flows more effectively, reporting becomes easier. When reporting becomes easier, teams spend less time managing complexity. And when complexity is reduced, growth becomes easier to support.

Businesses often don’t need more systems. They need a more consistent way to connect existing systems, standardise reporting processes, and reduce the manual effort required to transform data into compliant returns.

That’s where the greatest opportunity often lies. Not in replacing what already exists, but in making existing systems work better together.

Explore the full business case

Download the Hobson & Company ROI study to see how organisations quantified the operational, financial, and compliance benefits of modernising VAT reporting — and how they built a business case for change. You can also speak with Avalara to discuss your VAT challenges.

FAQ

Why is VAT reporting considered a data challenge?

VAT reporting relies on accurate, complete, and consistent data from multiple business systems. As organisations expand, finance teams often need to extract, validate, reconcile, and transform data before it can be submitted in the correct reporting format. This makes data management a critical part of the VAT reporting process.

Why do ERP systems struggle with VAT reporting?

ERP systems are designed to manage business operations, not country-specific VAT reporting requirements. While they capture transactional data, additional work is often needed to extract, validate, and format that data to meet the reporting requirements of different tax authorities.

How can businesses improve the efficiency of VAT reporting?

Businesses can improve VAT reporting by standardising reporting workflows, reducing manual data preparation, automating validation where possible, and creating a consistent reporting process across jurisdictions. This helps reduce manual effort while improving visibility and reporting accuracy.

What are the benefits of modernising VAT reporting?

Organisations that modernised their VAT reporting processes achieved improvements including reduced ERP integration effort, less manual validation, faster VAT return preparation, lower reliance on external providers, and a return on investment of between 200% and 500% over three years.