Seven Key Benefits of Automating VAT Determination

⇨ Tax teams often struggle to keep pace with changing government regulations and initiatives.

⇨ Automating VAT determination workloads can save time and money while improving processes.

⇨ Organizations should ensure that their tax teams have control of tax automation solutions instead of their IT departments.

Tax teams face an increased workload as governments expedite digital tax administration initiatives like e-filing, B2G/B2B/B2C invoicing, and real-time transaction level reporting. These initiatives take more effort to remain compliant with their requirements for transparency and granular level data for reporting.

While any new regulation can be difficult to manage, some are more time-consuming than others. The SAPinsider Global Tax Management 2023 Benchmark Report found that 42% of tax teams said regulatory updates to VAT/GST compliance affected their workload. While still high, this is a much lower figure than in 2021, when 58% of respondents struggled to accommodate updates.

One reason for the decrease may be due to automation. The research report found that “increased automation across Sales & Use tax and VAT/GST compliance has resulted in positive business outcomes and organizations are continuing to prioritize investments in tax technology across the indirect tax lifecycle.”

To take a deeper look at how automation can benefit tax teams as they manage VAT determination, the tax experts at Meridian Global Services highlighted seven key benefits of automating SAP VAT determination.

Cost

The benefits associated with automating SAP VAT determination tend to fall into three categories – reducing costs, saving time, and improving processes.

Automation reduces costs in a number of different ways – it cuts down on overhead like training, administration, and IT staff. It can also reduce the costs of auditing. Beyond just the savings, highlighting the reduced TCO may be the most important point to highlight when making the business case for automating VAT determination.

Time

Automation streamlines several key parts of the VAT determination process, saving time and effort from several parts of the company. This also frees up workers to spend their time on other value-add tasks.

One of the significant time-saving benefits of VAT automation that Meridian Global Services highlighted is the ability to respond to business and legislative changes. Meridian wrote that automation “removes the need for constant manual updates to stay abreast of VAT regulatory and company developments.”

Automation also cuts down on the amount of work that IT teams must do for the VAT determination process. With automated features, IT departments will not have to customize or hardcode systems to determine VAT.

Perhaps one of the most arduous parts of the VAT process is manually changing purchase orders and invoices. This process can also be automated, which not only reduces time investment and frustration, but also minimizes the opportunities for human errors in the process.

Process Improvements

In addition to the time and money saved, automation also improves several key aspects of the VAT determination process within SAP. Accuracy in VAT determinations is key, as companies are keen to avoid audits while also minimizing their tax burden. Automation logic determines the correct VAT, regardless of how complex a transaction is, or how many countries are involved.

Automation also benefits the reporting process. By ensuring that VAT data is correct the first time, companies can file reports with more confidence.

When implementing automation solutions, companies can also gain improved control, agility and scalability. Solutions like the Meridian VAT Add-on ensure that tax teams have control over the system, rather than IT departments. This maximizes the benefits of these systems, as tax teams know the best ways to leverage them. Putting VAT tax professionals in charge of the system allows them to make changes and scale as needed.