Crunching the Numbers: Calculating the ROI of Compliance and Reporting Solutions

Jeroen Wensveen
May 7, 2018

Rapidly changing VAT compliance and reporting regulations sweeping across Europe are forcing companies to determine the best – and most cost-effective – way to minimize the risks and burdens of these measures. These companies need to evaluate three key areas – tax/finance, IT and implementation – to calculate the potential return on investment (ROI) of solutions.

If you are preparing a business case on compliance and reporting solutions to present to your board, ROI analysis should be one of the key elements considered.

After assessing whether you need a compliance and reporting solution, companies should review how they have previously handled VAT compliance and reporting, identify what needs to change and look for potential options. From Sovos’ experience, the majority of companies use one of the following three options:

  • Outsourcing – Third-party accounting companies manage the entire process.
    This option is not sustainable since governments in Europe are starting to require immediate submission of transactional data. Companies must ensure that their reports are consistent to avoid audits and ultimately penalties and fines.
  • In-house – Using existing employees or new hires to handle all aspects of IT, tax updates and change management, as well as tax reporting and compliance activities.
    This option may seem appealing to companies that have finance and accounting, tax and IT shared services, but it is extremely resource and infrastructure intensive.
  • Outsourcing technology to enable in-house compliance and reporting– Integrating purpose-built, cloud-based software within existing ERP systems to automate tax compliance and government reporting.
    This option synthesizes the best of the two previous options. It frees IT and tax teams to focus on value-added tasks and projects, and at same the time gives companies visibility and control over their tax data and obligations in an efficient and effective way.

Once companies have identified potential approaches, the next step is to examine the selection criteria and costs associated with each of the following distinct categories:

  1. Tax and Finance
    If you are handling all regulatory research and VAT preparation, generation and submission in house, ask:

    • How many full-time equivalents (FTEs) are dedicated to these activities
    • How many hours per month do they spend doing them?
    • If you outsource any of these functions, what is your total annual cost for those vendors?
  2. IT
    IT staff must translate VAT regulations into the software your company uses, and maintain and make updates to the software as rules evolve, which is frequent.
    • How many FTEs are involved in these activities, and how much time does it take them?
    • How much cost is associated with deploying a solution? Consider FTEs if managed internally, or implementation pricing and project management, as well as IT and VAT internal resources, if managed externally.
    • How much of your ERP spend is related to VAT compliance?
    • What is the cost of storage and on-premise hosting of your current VAT solution?
  3. Project implementation:
    Regardless of the option that you pursue, you need to budget dedicated time and resources necessary to manage or implement the project. Often, companies do not include this crucial point, and common misconceptions about VAT compliance and reporting solution implementation can hinder progress.

To make a well-informed decision, determine the ROI for each option. Sum the applicable components (including the penalties and errors that you will avoid) and compare them against to the total investment (CapEx and OpEx) made in each of the options.

Moving to a tax reporting and compliance technology solution, like the Sovos Intelligent Compliance Cloud, can reduce the costs incurred managing compliance in-house or outsourcing to third-parties. In fact, our clients reduced the time spent preparing a VAT return by 50% and maintenance costs by 80%, while gaining greater accuracy in controls and verifications to minimize the risk of audits and penalties.

Take Action

Sovos can help analyze your business case and ROI of moving to a VAT compliance and reporting solution. Contact us to get started.  

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.


Jeroen Wensveen

As Principal of Indirect Tax Solutions at Sovos, Jeroen is responsible for building out and managing the VAT line of products and solutions available on the Sovos Intelligent Compliance cloud platform. Jeroen is a tax lawyer with over 20 years of international VAT experience, beginning his career as a consultant for PwC before serving as VAT director for Rockwell Automation, a global leader in industrial automation. Jeroen also co-founded VAT Resource, a successful VAT services and technology company, that was acquired by Sovos in 2014. Jeroen holds a master’s degree in tax law from the University of Leiden, The Netherlands.
Share This Post

Sales & Use Tax United States
June 17, 2019
South Dakota v. Wayfair One Year Later – Retrospective and Look Ahead Webinar

Since the groundbreaking Supreme Court decision in South Dakota v. Wayfair last June, tax compliance requirements of sellers have undergone a seismic shift. In recent months, we have also witnessed a series of after-shocks directed at setting the foundation for U.S. sales tax compliance in the modern age. In a live webinar and Q&A, “South […]

United States
June 14, 2019
Sovos Again Named a Top Workplace Based on Employee Satisfaction

Earlier this week, the Star Tribune (Minneapolis, MN) released its annual list of Top Workplaces. The newspaper compiles this list based on employee satisfaction scores for companies across Minnesota. Sovos has once again been named to this list as a national standard setter of leading workplaces because of the actions we take to put employees […]

E-Invoicing Compliance EMEA
June 13, 2019
French VAT Fraud Prevention Package to Include a New Attempt to Mandate B2B E-invoicing

The French Minister of Public Accounts and Action, which has authority over all tax matters, has taken advantage of the process that is required to transpose the EU E-Commerce Directive to launch a number of initiatives to curb VAT fraud, including a renewed attempt to create a system of mandatory e-invoicing. Going from B2G to […]

June 13, 2019
Knowing When and How to Reclaim IPT

An insurer may need to reclaim insurance premium tax (IPT) from a tax authority for many reasons. These include a policy cancellation or mid-term adjustment, an administrative error or issuing a no claims bonus. In each case, it’s important to be aware of the issues involved ahead of any reclaim to ensure taxes are recovered […]

Sales & Use Tax United States
June 7, 2019
Marketplace Sales Tax Collection Rules and Current State of Affairs

Marketplace sales tax laws are being used by states as an additional means to collect more sales tax revenue from remote sellers on marketplaces like Amazon, eBay, Etsy, and WalMart. These online marketplaces and the rules being introduced to compel marketplace tax compliance have introduced new sales tax collection and remittance questions and complexity. According […]