Many companies choose to invest in an Enterprise Resource Planning (ERP) system to unify business processes. An ERP system affords greater visibility and control over your business processes and ensures better compliance across operations. The centralization and automation of core functions means an easier way to monitor all aspects of business and lays a strong framework for compliance with an array of regulations. The result is greater efficiencies throughout the organization. But even the most robust ERP systems don’t always include a sales tax compliance option, leaving back-office staff to manage the host of sales tax rate, rule, boundary, and taxability regulations manually.
As much as we may want to think traditional methods (i.e. rate tables) are enough to handle tax compliance, the hard truth is that compliance is much more difficult than we think. Transactional tax compliance - which includes sales tax, consumer’s use tax, seller’s use tax, exemption certificate management, excise tax, VAT, and more - is going through some major legislative overhauls. Besides the thousands of rate, rule, and jurisdiction changes every year, there are new policies to deal with such as Streamlined Sales Tax and “Amazon Tax Laws” which have already taken affect in over a dozen states. The impact all of this change has on your business is profound.
Simply put, whenever a rate, rule, or jurisdiction changes, it must be reflected in your ERP’s rate tables, which can be a significant strain on time and resources and open your business up to potential error and audit risk. And that doesn’t even take into consideration the taxable transactions that are difficult to represent in traditional rate tables. What if there are multiple rates? Multiple tax groups? How will other departments know which one to choose? Take, for example, the sales order and invoice entry process. In the standard ERP set up, you are required to choose the tax tables to apply to a transaction. If you don’t know how tax should be applied, the risk of choosing an incorrect tax rate is highly possible. Add in the fact that 70% of businesses assign the responsibility of determining tax to the credit department, a department that typically has little to no tax background, and you’ve got a recipe for audit penalties.
So if traditional rate tables within your ERP aren’t the answer, what is? For an increasing number of businesses, it’s a hybrid approach. By combining the already robust capability of your ERP system with easy-to-install tax automation software, many companies are able to significantly reduce operational cost while ensuring complete accuracy – all within their existing ERP interface.
Automating the tax determination process in your ERP eliminates manual rate table updates and moves the tax determination process to the line-tem level at the point of transaction, ensuring accurate taxability, rate, and jurisdiction for every transaction. It also provides your business with accurate tax rates for more than 11,000 jurisdictions.
With the rapidly changing commerce climate, relying on an ERP alone to handle tax compliance just isn’t enough. The best answer is leveraging your existing ERP and integrating tax automation, to create a truly automated tax decision engine that protects your business from audit exposure and risk. Best of all, automating sales tax compliance frees up resources to focus on building the bottom line, which, after all, is the whole point of growing your business.
Manual sales tax compliance stunting your growth? Take the first step by reading the free whitepaper “Tax Compliance & the ERP System.”