Tax management is an extremely important, but complicated process. Effective sales and use tax management requires understanding geographically varied laws, tax collection, reporting, remittance, and recovery. Unfortunately, in today’s regulatory and business environment, it is impossible for employees to stay up on codes and complete tasks without help. What’s more, the average cost of employees dedicated to managing sales and use tax (SUT) on a yearly basis is over $63K for small companies, over $67K for midsize companies, and over $393K for large organizations. Therefore, the modern approach to tax management has evolved to more heavily rely on technology. Organizations that want to improve their sales and use tax performance should heed the following recommendations:
- Identify the costs (hidden and unhidden) of preparing for tax compliance. You can’t manage what you can’t measure. Identify the efficiencies that can be gained related to tax compliance and implement capabilities and technologies that address these needs.
- Investigate cloud solutions for tax management. Leaders are 33% more likely to have a cloud solution dedicated to tax management. These solutions can provide functionality designed to support compliance, are constantly updated, and can be accessed by employees across the organization, no matter where they are.
- Automate. Automation ensures that standards are set and followed in order to minimize mistakes and hasten processes. As such, Leading organizations are 3.3 times as likely have automated workflows for tax preparation, filing, and remittance / recovery. This includes streamlined processes for calculating taxes across multiple geographies.
- Track and measure. In order to prepare for audits as well as quantify their impact, organizations must understand the impact that noncompliance will have on the organization. Organizations with cloud tax solutions are more likely than All Others to track the costs associated with negative audit results as well as assess the potential risk of receiving those results.
- Integrate. Creating a “one stop shop” for tax information is essential for automation. Half of all respondents have integrated business solutions that create a complete and auditable system of record. Further, Leaders are more likely to integrate ERP with additional tax point solutions, such as rate calculation, that can utilize the data contained within ERP to make tax management easier.
To learn more, read the full report: The Costs of Compliance: Strategies for Automating Tax Management in the Cloud and Avoiding Hidden Costs.