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Reduce costs & improve acccuracy with a VAT automation solution

  • Sep 19, 2015 | Jason Moore

Reduce costs & improve acccuracy with a VAT automation solution

You’ve heard about the challenges multinational companies face in managing their VAT compliance, as well as some of the capabilities that automated VAT solutions provide. Now, let’s discuss the successes that have been achieved by organisations that have implemented a VAT management solution.

In a recent Aberdeen study, survey takers indicated that the amount of resources they dedicate towards VAT compliance and determination outweigh all other organisational tax initiatives. As organisations attempt to transform their finance departments by reducing costs and centralising resources, a VAT automation solution has a positive impact on workload and costs. Organisations with VAT automation spend 42% less time on ERP configuration for VAT per month and 26% less time on VAT compliance per month (Figure 1). Think about all of the additional work that could be completed in these extra hours, and how much money could be saved.

Figure 1: Automation Reduces Work

Organisations with a VAT automation solution are reaping real benefits. Those businesses with these solutions in place rate themselves higher in compliance and in the effectiveness of their technology environment (Table 1). Beyond these self-assessments, organisations with VAT automation solutions also saw greater results on important, measurable KPIs. These organisations are spending less time addressing tax errors, which indicates that they are completing determinations correctly the first time and spending less time overall. Further, these organisations have more accurate financial reports. Ultimately, the improvements reduce costs and improve profit margins while making compliance easy and reducing the likelihood of costly audits.

Table 1: VAT Automation Performance

Performance VAT Automation No VAT Automation
How well do solutions meet indirect tax needs (1-10) 8 7.2
Compliance (1-10) 8.8 8.2
Improvement in time addressing tax errors over past two years 21% 18%
Percentage of accurate financial reports 88% 86%
Improvement in the cost of audits over the past two years 5% 3%

Source: Aberdeen Group, March 2015

The value proposition of a VAT automation solution is the improvement in compliance and the reduction of associated costs. This value is achieved as the automated solution allows organisations to reduce the hours spent on research, automatically calculate VAT, file more efficiently, and avoid costly audits. Beyond these quantifiable benefits, it is important to note that effective VAT management can improve relationships with your extended enterprise. VAT management is an extremely complicated process because the laws around VAT change frequently. ERP systems alone cannot keep up.

Written by Nick Castellina of The Aberdeen Group

Avalara Author
Jason Moore
Avalara Author Jason Moore
Avalara helps businesses of all sizes get tax compliance right. In partnership with leading ERP, accounting, ecommerce, and other financial management system providers, Avalara delivers cloud-based compliance solutions for various transaction taxes, including sales and use, VAT, excise, communications, and other indirect tax types. Headquartered in Seattle, Avalara has offices across the U.S. and around the world in the U.K., Belgium, Brazil, and India.