Hello everyone and welcome to our webinar: The Total Economic Impact of Avalara. My name is Courtney, I'll be your host for our presentation. Today's webinar is based on a written report done by Forrester that covers the complexities of the tax compliance landscape today, but also the ROI that businesses can see from implementing a tax automation solution. We'll be sharing not only numbers from the studies today but also some customer success stories of what they've seen after implementing an automation technology.
Before we dive into the presentation, a few housekeeping items. A friendly reminder that on Avalara's side we cannot provide legal tax advice — everything we discuss today is for educational purposes only. But as always, we will do our best to answer any of your questions to the best of our abilities.
On your screen is our Safe Harbor policy — please take a moment to review this while I continue with some additional housekeeping items. As with many of our presentations, we are recording today's event, so if you'd like to listen to it again or share it with a colleague, you will receive a link to the recording within the next 24 hours — keep an eye on your email inboxes for that.
Let's review the console that we're looking at. All of the windows that you see can be completely customized — feel free to move them around or resize them to your liking. On the left-hand side of the console we have a Q&A box that you can use to interact with us today. We will be responding to questions individually as we're able to throughout today's presentation, and we also have some time set aside at the end for live Q&A with our speakers.
If you're interested in getting more individualized answers to your questions today, there's a box on the console where you can schedule time to speak with one of Avalara's tax automation specialists. We're not tax advisors, but we can provide you more information about your individual tax obligations and whether a tax automation solution could be the right thing for you.
We also have some related resources on the console where you can download a copy of today's presentation slides and other resources that dive deeper into the topics we'll be covering today, including a link to the written Forrester Total Economic Impact study.
Introductions
Today we're joined by a great lineup of presenters. First up we have Mang Lu, a Senior Analyst at Forrester. Mang has done comprehensive research and analysis of the fintech, compliance management, and finance automation industries, and he's going to share some of his key findings around the challenges of compliance for businesses today and how CFOs are keeping up.
Next we have Stephanie Slate, a Senior Consultant for Forrester. She was very involved in the Forrester Economic Impact study for Avalara, so she'll be sharing some of the key findings from that study.
And last but not least we have Christine Martin, a Senior Solutions Consultant here at Avalara. She has years of experience working with businesses to implement Avalara's automation solutions, so she's going to share some of her individual experiences and the benefits those companies see from using tax automation.
Presentation Flow
Mang is going to start us off by taking a look at how tax compliance automation is transforming finance. Then we'll pass it over to Christine who will give an overview of who Avalara is and why we wanted to work with Forrester for this study. Then we'll learn more about some of the pain points that businesses are experiencing with tax compliance today. Then we'll dive into the study itself and some of the results — the quantified and unquantified benefits of Avalara and the total economic impact of Avalara. And then we'll have some time for Q&A at the end.
Tax Compliance Automation — Mang Lu, Forrester
Thanks Courtney. I'm very humbled to be here today to share some of our latest findings about tax compliance automation and how that can transform the CFO office and finance operations.
I want to highlight three key reasons why tax compliance automation is so important for the CFO office.
The first key reason is that economic uncertainty has reminded CFOs of the importance of their bottom line — which is cash and cash management. Tax compliance automation is a very key component that can help the CFO team reduce their operating costs, save cash, and improve the forecast of their future cash flow by capturing all the data from tax and invoices. As we know, the recession concern is fading this year, however economic uncertainty is still there — inflation is still present and geopolitical tensions remain. For CFO and finance teams, maintaining their bottom line and cash is very important.
The second point is that tax compliance automation can bring more efficient and effective financial operations, helping the CFO team accelerate their finance transformation. Organizations across the globe are all going through digital transformation, and the CFO office also needs to transform finance operations. Tax compliance automation can help the CFO office significantly on that digital transformation journey.
The last but not least reason is that global tax compliance and invoicing compliance is going to become increasingly complex. Tax compliance in different jurisdictions is a prerequisite for many organizations to operate globally. Many technology and software companies are selling solutions globally very seamlessly because of the evolution of APIs and the cloud — however, they need to tackle different tax regulations, compliance requirements, and jurisdictional rules. We see increasing demand from end-use organizations for invoicing and tax compliance solutions.
The US Tax Landscape
In the US market, sales tax has quite complex regulatory requirements. For instance, there are 13,000 states and sales and use tax jurisdictions. In 2023 alone, we saw more than 11,200 sales and use tax rate updates in the US market, around 86,000 taxability updates in the US and Canada, and around 100,000 US sales tax holiday rule updates. If we look at international rate updates, there were over 300, and international taxability updates exceeded 6,000. These stats can be quite overwhelming for tax and finance professionals — if an organization is purely depending on human staff, it will be quite difficult to manage these very complex regulatory requirements.
The International Landscape
Looking at the international market, tax and invoicing compliance is even more complex. Invoicing mandates have been increasingly released in different countries and regions, especially after the pandemic. We've seen higher adoption of electronic invoices, but along with this adoption, many countries have issued new e-invoicing mandates. After 2020, every year we've seen double-digit increases in new invoicing mandates released in different countries, creating a lot of complexity for tax and invoicing compliance across different geographies.
Key Benefits of Tax Compliance Automation
The first key benefit is helping the CFO team tackle the complexity in invoicing and tax compliance. Human staff can always make mistakes and their capacity is limited — however, if we rely on more advanced software solutions, many of those challenges can be resolved seamlessly.
Secondly, tax compliance automation can significantly streamline and automate very complex tax calculations. Different jurisdictions have different updates, but tax compliance automation solutions can automatically calculate based on the latest updates to US sales tax regulations — and this can also be applicable to VAT in the European market and Asia Pacific.
The third key benefit is that it can provide visualized reporting and analysis of the financial implications of taxes and invoices. All the tax reporting and invoices are embedded with a significant amount of data, and tax compliance automation can capture all of that data — whether structured or unstructured — and create insights that help the CFO team make better planning decisions.
Key Market Dynamics
The SaaS model is gaining a lot of ground in the tax compliance automation space because SaaS solutions bring many benefits — they're more scalable than on-premises solutions, offer richer and continuously updated features, and can be more cost-effective based on usage. This has driven higher adoption of SaaS-based tax compliance automation solutions.
The primary challenge we hear most from Forrester clients is that disconnected systems create silos and inefficiencies, leading to integration challenges and communication issues. Organizations that select a tax compliance automation solution that can seamlessly integrate with their existing tech stack — invoicing systems, order management systems, procurement systems, banking systems — can address this pain point effectively.
Finally, in terms of key technology innovations, AI is definitely the key game changer for tax compliance automation. Generative AI has many use cases in this space — it can help tax and finance professionals automatically draft communications, answer questions about tax rate updates across jurisdictions, and augment existing chatbots or virtual assistants to make answers more intelligent and precise.
Beyond generative AI, predictive AI can help finance and tax professionals predict future cash flow based on analysis of tax and invoicing data. Prescriptive AI can also create timely and actionable recommendations for tax professionals, helping them improve their existing workflows and processes. All of these technologies can take tax automation to the next level — automating the last mile of manual, heavy tasks.
Who is Avalara — Christine Martin, Avalara
Avalara is here to help you execute your compliance game plan. We make it simple every step along the way so that you can focus on your business. We've built an industry-leading cloud-based end-to-end tax compliance solution to help you meet those goals.
You need information about what you sell and where you sell — but you need it to be readable and useful. You need to be able to manage exemption certificates both to your vendors and from your customers. You need to calculate tax in all of your systems, and then once you've collected or accrued that tax, you need a way to file those returns so that you're in compliance with all government agencies.
The Avalara Compliance Suite
Avalara has created a product portfolio to handle tax compliance across several key functions.
Avalara recognizes that all companies exist to make sales and purchases. Before they can begin transacting, they have to become compliant — registered and licensed. If you move into a new jurisdiction or reach a new nexus threshold, you'll need to register with the state and ensure you're properly licensed. If you already have nexus and didn't know you needed to register, we have a solution to help you assess the impact.
You may also have physical property or personal property inside spaces you're leasing — either way, there's another form of compliance needed, and that's property tax.
On the selling side, you're making sales to customers — you need to calculate and collect those taxes. In some cases your customers may be tax exempt, so you need to collect and manage exemption certificates. You need to file and remit taxes on those transactions. If you're selling globally, there may be requirements for e-invoicing. And there are other supporting functions — in-depth research to understand taxability, rates, and rules, as well as assigning appropriate HS codes for customs and duties if you sell globally.
On the purchasing side, your organization buys things — you've either been charged tax or you haven't, and you need to verify or approve the taxes on those purchases. In some cases your company may qualify to purchase tax exempt, so instead of collecting certificates from customers, you're sending them to vendors. You may also be receiving e-invoices, filing returns, and collecting W-9s or W-8 forms to ensure vendors are set up properly for a smooth 1099 filing season.
Avalara wanted a way to demonstrate this economic impact for our customers, and so we partnered with Forrester to put together the Total Economic Impact study. I'll introduce Stephanie, who will walk you through the project and the methodology.
The Forrester Total Economic Impact Study — Stephanie Slate, Forrester
So what is a Forrester TEI case study? It's a method to understand the total business value that a service or solution provides for an organization. The objective is to identify all of the factors that affect an investment decision. In a ground-up manner, we identify four key components:
Benefits — the business advantages an organization gains by implementing a service or solution
Costs — both licensing costs and indirect costs such as implementation and ongoing maintenance
Flexibility — what can an organization do cheaper or faster because of a previous investment
Risk adjustment — accounting for variability based on industry, number of tax returns, and other factors to create a conservative yet realistic view Methodology
First and foremost, we did our due diligence. I spoke with stakeholders at Avalara and worked with Mang to understand the industry landscape. I then spoke to six Avalara customers to understand why they chose to invest and what their experience was — they needed to have had the solution in place for at least six months. From their stories, I created a composite organization, which is essentially a representative fictional company that allows me to simplify the results and conduct the financial analysis.
Before I go further — a quick disclosure. The results I'm going to share are an abridged version of the full case study, which was commissioned by Avalara and delivered by Forrester Consulting. The customer names were provided by Avalara, but Avalara did not speak to the customers nor were they on the calls — I got to hear their candid stories directly. Forrester maintained full editorial control over the study, so Avalara could not change any metrics or findings.
Three-Year Impact Summary
The big takeaway is that for the composite organization — an anonymous representation of Avalara's customers — it receives a return on investment of 153%, benefits of over $770,000, and a net present value of $465,000.
One of my favorite quotes from the interviews: "When I'm not on Avalara, on a good day I'm only 25 to 30% compliant. But when I'm on Avalara, you're probably at 90 to 95 to 100% compliant — and that's a big difference for me."
The Six Interviewed Customers
We spoke to customers across a variety of industries, revenue sizes, and employee counts — spanning roles from CFO to CIO. This broad mix of industries is an important takeaway: the impact of Avalara isn't limited to one sector — it applies broadly across all industries.
Pain Points Before Avalara
Inefficient manual processes — tax-related tasks consumed a significant amount of time and resources
Tax exemption certificates were often missing information
Increased risk vulnerabilities with growth — companies couldn't reliably forecast costs and regulations that come with expansion, making growth decisions harder
Lack of expertise around tax laws and regulations — without continuous updates, companies were often in the dark
Poor exemption certificate management — binders full of certificates stowed in boxes, nearly impossible to locate during an audit
What They Needed in a New Solution
Improve productivity so the internal team can focus on value-added work
Improve data quality and accuracy
Access to highly skilled personnel with extensive tax expertise to ensure compliance as taxability grows
The Composite Organization
The composite organization is characterized by:
$300 million in revenue
1,000 employees
2,000 tax exemption certificates, adding 100 net new every year
400 managed annual tax returns
10,000 transactions annually
2 IT professionals dedicated to maintenance
Solutions implemented: AvaTax, Exemption Certificate Management, Managed Returns, and Tax Research
Five Quantified Benefits
Streamlining Tax Filing — Labor Savings: $83,000
Avalara's centralized system of record gives visibility on financial records, resulting in an 85% efficiency gain in managed returns. Time to collect documentation drops from 50 hours per month to just 7.5 hours. As one CFO of a medical device company put it: "Never in my life again will I have to file a state sales tax return. Before Avalara — 40 hours a month. Now — maybe an hour."
Tax Exemption Certificate Savings: $997,000
Avalara's system does not allow certificates to be uploaded with errors, eliminating the need to go back and correct incomplete submissions. The composite organization saves 1,248 hours over three years. Time to manage a certificate drops from about an hour to 30 minutes. This benefit is valued at $997,000.
Audit Preparation Efficiency: $210,000
With an 85% reduction in time spent on audit prep, the composite organization is able to avoid two penalties per year, and no longer needs an external auditor. Savings total $210,000 over three years as a result of having everything in one place, avoiding penalties, and eliminating third-party auditor costs.
Reduced Spend on Third-Party Services: $317,000
Organizations can eliminate spend on a dedicated tax professional or outside consultant once Avalara is in place. Savings of $150,000 per year on a consultant's annual rate translates to $317,000 over three years.
Tax Research Labor Savings: $63,000
Because of Avalara's continuous updates to tax rates, the need for additional research and calculations is reduced by 90%. Research time drops from 33–35 hours per month to only 3 hours, equaling $63,000 in savings over three years.
Unquantified Benefits
Beyond those five quantified benefits, nine additional qualitative benefits were identified:
Decreasing sales tax liabilities
Simplifying expansion into new jurisdictions
Gaining reliable access to tax expertise
Improving processes for salespeople validating certificates
Reducing shipping errors through address confirmation
Gaining credibility with customers through accurate answers
Shifting focus from tax decision-making to business value-added work
Enhancing confidence in tax compliance
Improving vendor data processes
Flexibility Benefits
Because of the investment in Avalara, businesses can be more nimble and agile in the future:
Enhanced global expansion — organizations can expand geographies with confidence knowing Avalara supports global tax requirements
Supported merger and acquisition activities — exemption certificate management technology helps newly acquired customers request appropriate certificates, easing the administrative burden as the organization grows Costs
Total risk-adjusted costs for the composite organization over three years: approximately $335,000, including:
$259,000 in annual licensing fees
$35,000 in implementation costs
$11,000 in internal labor to maintain and train on the solution
Final ROI Summary
Return on Investment: 153%
Total Benefits: over $770,000
Net Present Value: $465,000
Payback period: less than six months
Q&A Highlights
Is Avalara proactive with informing clients about new tax laws?
Yes — Avalara's tax research tool allows you to subscribe to updates so that every week or month, depending on your preference, you receive updates on new tax laws.
What about ROI for smaller companies with 3–10 employees and around $1 million in sales?
A great starting point is to ask your employees how much time they currently spend on tax-related activities — tax research, managed returns, audit preparation. Take that number, multiply it by 85%, and you'll start to see what the time savings could look like. Also consider that audit preparation isn't just one person — it often involves IT, accounts receivable, and sales. Thinking holistically about all the people and time involved across your entire team helps paint a clearer picture of the potential value.
Any tips for improving data hygiene before implementing Avalara?
It depends on the type of data — Avalara offers bulk address validation if that's a concern, or product and inventory-level data hygiene tools. The best approach is to connect with Avalara's team to understand which piece is most relevant to your business.
Where should a business start with Avalara?
It depends on your business. If you're a distribution company with a large volume of exemption certificates, starting with a certificate collection campaign may make sense. If you're acquiring a company, getting new exemption certificates for that acquired business might be the first step. It could also be a tax risk assessment — evaluating your data to determine if and when you created nexus and what your estimated liability may be. The right starting point varies by industry and what you're trying to solve for.
Closing Remarks
Thank you to all three of our presenters — Mang, Christine, and Stephanie — for the time you've spent on putting this presentation together and going over the findings of the report.
A final reminder: we recorded this presentation, so you will receive a link to the recording within the next 24 hours. The full Forrester Total Economic Impact report is available for download in the console. We also have upcoming webinars diving deeper into e-invoicing and international cross-border compliance — visit avalara.com/webinars to register.
Thank you everyone for spending the last hour with us. Have a great day.
