Choosing an ERP system for an organisation rarely involves consideration of the tax capabilities of the software. As a result, the tax manager has to use any tax reports the system supports, or default back to the always trusted Excel spreadsheet. Finding technology that is indirect tax or even just VAT specific requires the tax manager to justify the investment and convince the powers that be of its value. Below are six considerations you can use as a tax manager when choosing VAT technology:
Maturity of VAT understanding and knowledge within the organisation
The biggest challenge an organisation faces is the lack of understanding of VAT rules and the application thereof when processing transactions. The lack of maturity and understanding of the applicable rules may result in more errors during processing. Having the right VAT technology enables the tax manager to identify areas of weakness and be at the forefront of improving the tax knowledge and application of tax rules within their organisation. It should also be enforced that this tool is not to find a scapegoat but rather a test to plug the gaps and assess how well this is working.
Ability to analyse and test large volumes of transactions
Every transaction entered into will have a VAT implication that needs to be taken into account. In larger organisations the volume of transactions processed on a monthly basis is substantial, making it difficult to find errors or incorrect application of the VAT rules in the transactions. ERPs are all about preventative controls but none offer any detective controls; it is not their design. Analytics within the VAT environment that analyses all your data will allow the tax manager to identify those transactions where there is an issue without having to go through all the transactions individually. Furthermore, having access to a tax knowledge base or community will assist with more complex tax issues.
Using a reputable and reliable technology service provider
Selecting the right technology provider will ensure that you have a seamless transition into a more tech savvy VAT space. However, these decisions need to be based on fact and proven competence and not swayed by a smooth talking sales person. Things to consider include:
- Reach – number of clients
- Support structure
The advent of smart technology has led to more people wanting easy-to-use technology that makes their lives easier. This has never been more applicable than in the complex world of indirect tax. VAT is complicated enough, without having to now also learn how to use complex new technologies above your already busy day.
Being more prepared for an audit/ review
Wouldn’t it be nice to be prepared for an audit before SARS even begin to initiate one? We all know it’s coming, and in most cases, it is more likely a matter of WHEN instead of IF. Getting ready for an audit is time-consuming and requires a lot of manipulation and interrogation of those Excel spreadsheets to get the appropriate sample before you even begin putting together the relevant documentation. Having technology to process the large volumes of transactions and pull the correct and appropriate sample would give a tax manager more time to focus on other important tax matters.
Up to date legislative changes
Being based on the wrong legislation will materially affect your VAT return. Thus, you need software that has planned updates in response to VAT changes such as the recent tax rate change.