Are Inaccurate Fuel Invoices Putting Your Business in Jeopardy?
- Sales and Use Tax
- March 10, 2015 | Avalara
No ethical bulk fuel supplier would purposely generate inaccurate invoices. But it really doesn’t matter whether it’s intentional or not – erroneous invoices can incur the wrath of everyone from your customers to a multitude of government agencies.
Besides the potential damage to reputations and the possibility of enormous tax liabilities down the road, invoice inaccuracy is a documented problem. Across the fuel industry, errors of $15 or more occur on roughly 25% of all invoices. In fact, it’s not uncommon to see error rates as high as 55%!1
Miscalculations such as these can impact your margins, generate unnecessary operational costs, result in back taxes, penalties and fees and, worst of all, erode trust and potentially cost you business. So, why do they continue? Well, for starters, the incredibly complex system of indirect taxes levied by the federal, state, county and municipal governments is an ever-moving target. The number of separate changes to fuel excise tax throughout the U.S. rose 106% between 2011 and 2013.
Additional factors contributing to invoicing complexity – and thus the potential for error – include:
- Delivery diversions
- Price volatility
- Incentives related to the sale of alternative fuels
So what can you do?
How can you protect yourself from the risks to your finances and your reputation that can accompany invoicing errors? These three elements are the cornerstone for ensuring correct invoices:
- Source data accuracy – Appoint an owner within your organization for each data element from Bill of Lading to Contract Terms. Establish goals, accountability metrics and a feedback loop to drive continuous improvement. Track, classify and report all errors to source data owners.
- Change management process – An effective process fosters visibility, accountability and risk management. To succeed, your process must include all stakeholders in its development, address simple and complex changes differently and require vigorous testing prior to rollout.
- Tax Automation – Solutions with fuel tax update services, can dramatically reduce invoicing errors. And by automating tax identification and calculation, you can easily test a wide range of use cases and data sets. It’s worth noting that commercial software for fuel tax automation is widely available, and it’s almost always more reliable and efficient than “home-grown” systems.
Invoice accuracy is an issue that demands proactivity. Once your customers – or the government – discover errors in your invoices, irrevocable damage may already be done. For more detailed information on managing the challenges and risks of fuel invoicing, download How to Generate Accurate Bulk Fuel Invoices from Avalara.com.
- FuelQuest. Accurate Invoicing: Building Trust Between Fuel Supplier and Buyer, 28 June, 2013. Web.
© Avalara 2015.