How do you make indirect tax interesting? Revolutionise it!
As published in the Tax Technologist – specialist newsletter.
After I had done my part on a recent Oracle R12 presales presentation, I received the comment “I usually find tax really boring but somehow Andrew made that enjoyable to listen to”. In fact, I always get a fantastic engagement when I talk about our indirect tax solutions in Oracle ERP systems (Oracle R12 and Fusion or Oracle Cloud as it is now known). The reason for this is simple, we are trying to make a difference and change the indirect tax process status quo.
We understand indirect tax and we are experts in Oracle, so we perfectly translate between the two. The majority of solutions we see usually fall well below what should be an acceptable solution. Maybe 90% either are or are considered at risk of being non-compliant as they rely almost entirely on a manual solution.
Compliance should be the primary reason to have a fully automated and functioning indirect tax process but many do not realise the huge efficiency savings that can also be received with the right solution. The amount of time that is wasted across the company when it comes to indirect tax is substantial. Most indirect tax solutions will at best default a tax code form the supplier or customer and then allow a user, often with minimal or no tax training to then override the tax code. ‘There is no tax, must be the GB ZERO rate right’? To many users, Exempt, Zero rated or Out of Scope are the same thing but the actual percentage of the tax rate is only part of the requirement – most tax logic should be amount determining the correct rate so that the correct reporting can take place. A poorly designed tax solution leads first to increased time in the data entry, then the amount of time to find the issues is increased before the pain of the VAT reporting comes around because the quality of the data is not there. Did we recover the correct amount of tax, was that goods or a service, who posted directly to the tax GL account are just some of the issues you will have. And the process for indirect tax for many companies has not changed in the 40 years since VAT was introduced. Month-end takes place and then near the end of the following month the tax team start the process of the tax returns, running GL based reports and so have minimal information to see if the transactions are compliant or not, and if they do find issues, the month has been closed off and so manual journals are made to accommodate the corrections, often not referenced properly and the links lost when that VAT audit comes around in 5 years!
The current process for indirect tax is poor. Most solutions out there revolve around compliance tools that look at your existing data but rubbish in, rubbish out so they can only ever do so much.
So how do you revolutionise the Status Quo? The second step (yes second) is to change the process from being reactive to proactive. The use of sophisticated tax reports can only do so much as users still need to run them. On a recent project, the client stated that even though they know how important the reports were, they would only run them at the end of the month. It’s human nature not to create extra work for yourself and let’s face it, running the reports and then analysing the data takes time. So that’s why we developed our Oracle Real Time Analytics that will tell you in 5 seconds of a transaction being entered if there is a potential issue. No more reports needed, well not until the end of the month! Your tax team are being told of the issues as they happen. Users can even be stopped in their tracks from creating too much damage, educated then made to correct the transactions before they have been accounted or even paid. A Tax department that no longer has to look for the needle in a haystack because the needles are being pulled out one by one and put on a plate for you.
So the first step – you first need to make sure your indirect tax solution is correctly configured. Oracle ERP provides a fantastic tax engine but if you’re on any other ERP solution then you are likely to need to use a 3rd party tax engine. The problem however with the Oracle eBTax solution is that it takes a long time to set up – which is where we come in again. With our eBTax Rapid install tool, we recently saved a client 98% on configuration time because we had the solution pre-packaged, pre-tested and pre-documented! The main point however is that we built a multi-layered global tax solution so that we can have the extra level of detail, all automated, with which to perform our Tax Analytics. That’s why an indirect tax solution done correctly can have a return on investment in well under a year!
Change the indirect tax status quo and make tax interesting again, be 100% compliant and be more cost effective in the process.